Inventory means all the materials, parts, supplies, expense
tools and inprocess or finished products recorded on the
books by an organisation and kept in its stocks,
warehouses or plant for some period of time.
4. Inventory control is concerned with
achieving an optimum balance between two
1. Minimizing the investment in inventory.
2. Maximizing the service levels to customer’s
and it’s operating department.
Reference: Subrahmanyam C.V.S; Inventory management In
“Pharmaceutical Production and Management” e.d.-first 2005 reprint 2009;
8. Inventory categories- special
Based nature of the items on the -
1. Production inventories.
2. MRO inventories.
(Maintenance, repairs and operating supplies)
3.Work in process inventories.
The inventory either waiting in the system for
processing or being processed.
4. Finished goods inventories.
10. Relevant costs in inventory
For identification relevant costs it is observed that there
are many factors whose costs affects the size of inventory
directly either to decrease the size of inventory or
suggesting an increase in the inventory size.
Ali Dr. Mohammed;Gupta Jyoti; Inventory Control In ‘Drug Store and
Business Management’ e.d. first 1996; p.p. 118-121
11. The relevant costs are explained below
A. Costs that encourage to have larger inventories:
1. Setup costs or ordering costs
2. Procurement costs
3. Depreciation costs
4. Loss due to non–fullment of demand and delay in
5. Direct material and labour costs
12. B. Costs which encourage smaller inventory:
1. Inventory carrying costs
2. Storage costs
3. Deterioation, obsolescence and pilferage
14. ABC Method/ABC Analysis
ABC method means “Always Better Control” method.
And it is based on the concept “Thick on the best and
thin on the rest”
In any organisation, it becomes essential to have stock and
keep track of large number of items of different kind. The
investment in such items is substantial and record keeping
This selective analysis based on annual inventory value.
Annual usage value = Annual requirement
multiplied Per unit cost.
17. Better control over costly items.
Scientific method of controlling inventories
Maintaining the stock in a better way.
Maintaining enough stocks of group A, B and C items.
Reducing the storage cost.
18. VED Analysis
VED analysis means Vital, Essential and Desirable
analysis. This system is based on the utility of the
Vital materials are the most essential items for
production. Without these materials production is
stopped for a period of several days or even months.
Since the cost of material is high and so it takes longer
time to purchase and replace materials.
19. Essential items are the one which are very essential for
production. Without this material, production is stopped
only for few hours or a day. Since the material is not so
costly and hence it can be purchased and replaced easily.
Desirable items, these are needed by an organisation
but do not cost any effect on its performance.
20. VED analysis can be better used with ABC
analysis in following pattern
“V” items “E” items “D” items
and regular flow
21. Perpetual inventory control system
Proper examination with regards to reciept, issue and
balance of material in hand is done every time when the
stock is handled and moreover the entire stock is
Hence this enables the manufacturer to know about the
material available without physical stock verification.
23. Lead time
This is the time gap between placement of an order and the
time of actual supply or the time interval between the
placing the order for purchase of certain items to the time,
the materials are actually received in the stores.
It has three components namely,
Lead time = Servicing time +
Delivery time + Receiving time
24. Safety or Buffer stocks
The demand and supply rates can never be assessed exactly.
A firm has to keep adequate safety stock as well as
ordinary stock. Overstocking goods are known as safety
This minimum level of inventory to cover some un for
seen and uncalled for situation is known as safety stock
or buffer stock.
It is a risk factor for any organisation.
25. Minimum and maximum stock level
A) Minimum stock level
The stock of any items should not be allowed to
fall below the lower limit.
Minimum stock level = Reorder level – normal
consumption per week multiplied by average time taken
to receive fresh supply.
26. B) Maximum stock level
The stock of any item should not be allowed to
raise beyond the upper limit.
Maximum stock level = Reorder level – Minimum consumptions
C) Reorder level
It is the stock position between minimum and
maximum stock level.
Reorder level= minimum consumption per week into maximum
time taken to receive fresh supplies
28. Economic Order Quantity (EOQ) method
EOQ method is used to find out how much of the inventories
(goods) are to be ordered.
The correct quantity to be ordered is determined by
considering the following factors:
1. Ordering cost and
2. The inventory carrying cost
Leon lackmann, Herbert A. Liberman;Pilot plant scale-up and production management;In ”Theory and Practice
of Industrial Pharmacy” e.d.fourth; Roop k khar; SP vyas; Farhan j ahmed; Gaurav k jain; p.995
A = annual requirement
S = ordering cost
I = carrying cost or storage cost
U = per unit cost
“Economic Order Quantity(EOQ) is the order quantity
that minimizes total inventory holding costs and ordering
Lackmann leon, Liberman A, Harbert;Pilot plant scale-up and producton management;In ”Theory and
Practice of Industrial Pharmacy” e.d.fourth; ; p.995-996.
Company which doesn’t have inventory management system will get
problem and go into loss.
Benefit of inventory management is to list out the database of the storage
by different techniques. The most important system in a pharmaceutical
indusrry is Material requirement planning(MRP).
There are also many softwares are available which is for inventory
management. These are as follows:
1.ERP Cloud based with scaleup production software
2.Inflow management software.
1) Roy madhumita, Sharma Dr Padmini and Gaikwad
Atika , “Materials management in pharmaceutical
industry” word journal of pharmaceutical research ; 3
2) Subhramanyam CVS, “Pharmaceutical product and
management published” by vallabh prakashan; 268-292
3) Arnold J.R. Toni, Chapman stephan , “Introduction to
material management” pearson publication; ED(5) 2-10