Page 134 - DMGT525_MATERIALS_MANAGEMENT

Unit 9: Inventory Control

consumptions pattern of the items under analysis. This analysis is useful in case of obsolete Notes
items previous years issues is the guiding factors for FSN analysis. Previous two three years are
taken into consideration for a decision whether the items stocked in the storehouse are fast
moving slow moving or non-moving. If there are no issues during past few years naturally they
will be classified as Zero issues items and under this method of analysis these items will be
classified as N items. Similarly up to certain limit a says 10-15 issues in a year may be classified
as S items. Items being issued more than 15 times a year may be placed in F category. Certainly
such analysis and limits of issues vary from one organization to another. However this method
of analysis is useful in locating and identifying the obsolete items.
Whatever may be the tools of inventory control in the hands of materials manager, he aims at
selective control having an eye over the value of consumption, value of inventory cost of
obsolescence and the value of performance. He always aims at effective control at every level
and at every stage. He selectively but effectively applies his energies to the problem areas in the
department so that optimal use of his efforts may result. It is natural for a materials manager to
make best use of the tools made available him. He should avoid preferences to one of the tools
instead he should be guided by a tunnel vision while making use of one of the tools. It is
advisable that a materials manager should go for a tool which in his opinion is the best in the
given circumstances and with the help of which he may be expecting the desired result.

9.4.4 X.Y.Z. Analysis

XYZ analysis is one of the basic supply chain techniques, often used to determine the inventory
valuation inside a store. It is also strategic as it intends to enable the Inventory manager in
exercising maximum control over the highest stocked item, in terms of stock value. Those items,
whose inventory investments values are high, are called as X items. Y items consist of those
items whose investment inventory values are moderate. While Z items are those items whose
investment inventory values are low. Normally XYZ analysis is used along with either the ABC
analysis explained in unit 2.

Self Assessment

Fill in the blanks:

11. VED analysis is used primarily for control of………………… .
12. The spares which are essential for the production to continue are known as …………..
spares.

13. The …………. is based upon the availability of items and is very useful in the context of
scarcity of supply.
14. The SDE classification is vital to the ……………. analysis and in deciding on purchasing
strategies.
15. FSN analysis is based on ……………. of items in the store house.

9.5 Logistics Management & Its Link with Inventory Control

Logistics involves the coordination of the movement and storage of inputs and outputs in order
to satisfy customer demand in the right place at the right time at the lowest cost. Hence it
concerns the analysis of the costs, efficiencies and feasibilities of the various modes of transport
and temporary storage needed to move goods to their destinations, safely and with minimal
pilferage and materials loss.

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