Page 261 - DCOM303_DMGT504_OPERATION_RESEARCH

Operations Research Tanima Dutta, Lovely Professional University

Notes Unit 13: Inventory Control

CONTENTS
Objectives
Introduction

13.1 Right Quantity of Raw-material
13.1.1 In the Absence of Quantity Discount
13.1.2 In the Presence of Quantity Discounts

13.2 Right Time
13.3 Inventory Control System in Practice
13.3.1 ABC Analysis
13.3.2 VED Analysis (Vital. Essential and Desirable Items Analysis)
13.3.3 FSN Analysis (Fast-moving, Slow-moving and Non-moving Items
Analysis)
13.4 Summary
13.5 Keywords

13.6 Review Questions
13.7 Further Readings

Objectives

After studying this unit, you will be able to:

 Discuss the significance of inventory management
 Analyse the decision regarding right quality and right time
 Learn about the inventory control system in practice
 Describe various methods of inventory control

Introduction

Material cost shares a large portion on investment. Out of the total cost of production, material
cost tunes up to 60-70%, sometimes even more than that. Hence, it calls in for a proper, timely
and systematized Materials Management, Inventory Management in itself is an area of
specialization. The concept of ‘Material Planning’ calls in for preparation of policies like: purchase
policy, storage policy and usage policy. Further framing and execution of these policies consist
of activities like:

Purchase Policy

1. Purchase procedure
2. Determination of quantity of raw materials

3. Centralised and decentralized purchasing

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