4. Three general motives for holding inventories
Transaction
motive
•Maintain
inventories to
facilitate
production
Precautionary
motive
•Holding of
inventories
Speculative
motive
•Increase or
reduce
inventory
5. Maintain a large size of inventory of raw material
Maintain a minimum investment in inventories.
Ensure continous supply of raw material
6. To manage inventories efficiency,owner should
be sought to the following two questions.
How much
should be
ordered
When should it
to be ordered
Relates to
EOQ
Relates to
uncertainity
7. Major inventory management problem :
how much inventory should be added when inventory is
replenished. These problems are called
Order quality problem
8. Determining an optimum inventory level
involves two types of costs:
• Include cost of raw materials
like :
• transporting
• Inspecting
• receiving
Ordering cost
• Include cost of maintaing level
of inventory like :
insurance
• taxes
• storage cost
Carrying cost
9. (annual requirement x per order cost)
order size
Total carrying cost=
average inventory x per unit carrying cost
Total cost= total carrying cost +
total order costs
10. ABC control Just In Time control
Maintain several types of inventories delivery of material is
Not possible to keep uniform control synchronised
Classify inventories according to lot eliminate carrying of large
Classify as GROUP A,GROUP B, GROUP C inventories
