Page 282 - DCOM303_DMGT504_OPERATION_RESEARCH

Unit 13: Inventory Control

week’s time or so will not stop the production activities are known as desirable spares. Even Notes
though some spares have negligible monetary value, they may be vital for the production
activities. Hence, VED Analysis helps in effective and useful classification of materials/spares.

13.3.3 FSN Analysis (Fast-moving, Slow-moving and Non-moving Items
Analysis)

Comparing the turnover of different kinds of materials becomes essential in order to find out
which items are fast-moving, slow-moving and non-moving, in turn to enable to avoid blocking-
up of capital in such stock. Generally, a low-turnover ratio is an indicator of slow-moving items
leading to obsolete materials and unnecessary piling-up of stock. On the contrary, ‘a high turn
over ration indicates the fast movement of stock and less investment on them. If the turnover is
zero, it indicates that item has not been used during the period and there is a high chance of the
material getting deteriorated. These items cause anxiety over exercising control over them
because they increase the cost of material due to boosting up of carrying cost along with the
material losses. The loss arising out of slow-moving stock can be reduced by reducing the
quantum of material to be stored. While storing such material, the rate of consumption and the
lead time should be considered.
In order to reduce the losses arising out of dormant items, only materials of absolute necessity
are to be purchased. To avoid deteriorations, such materials are to be disposed off at the earliest.
Thus, this classification and a periodical review of such items would help in exercising control
over such materials.

Did u know? Besides ABC, VED and FSN analysis there are also a number of other techniques
such as HML (high, Medium and Low), XYZ, SDE (Scarce, Difficult and Easy to obtain),
GOLF (Government, Ordinary, Local and Foreign sources) , SOS (Seasonal and Off-seasonal)
methods of selective inventory control.



Case Study Ashok Distributors Ltd.

shok was really pleased with the 1995 operating results of Ashok Distributors
Ltd. In spite of generally weak economic conditions throughout the country,
AAshok Distributors Ltd., had enjoyed its most successful year. The firm was now
the largest distributor of machine parts in India, with substantial sales in other countries.
Its warehouses in Delhi & Mumbai had shipped over ` 50,000,000 worth of items in the
year 2005 and would probably do even better in 2006.
As Ashok Pondered over his plan for 2006, he decided that something must be done to
alleviate on the Delhi warehouse. The firm has so many items in stock that the warehouse
was running out of storage space. Some items in stock that the warehouse was running out
of storage space. Some items were piled in aisles and other items could not be unloaded
from railway wagons since the wagons are based on daily basis, the company was incurring
costly fees for the use of wagons as storage facilities.

Ashok decided to focus on a single item to see it his firm was overstocking or understocking
inventory. He selected roller bearing 42Z. Ashok distributors was the major distributor
for this particular item which is used as replacement part for a number, of industrial

Contd...

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