Assignment of operation research Topic- analysis of inventory control system

SUBMITTED TO:- Mr.Aditya Mishra ASSISTANT PROFESSOR

MECHANICALDEPARTMENT

SUBMITTED BY:-Himanshu chauhan UID k-11579BRANCH-

MECHANICAL

TABLE OF CONTENTS Introduction Objective of inventory controlTypes of inventory control Procedure/workingEOQ Advantages/disadvantages Conclusions

introduction The term inventory means the value or

amount of materials or resource on hand. It includes raw material, work-in-process, finished goods & stores & spares.

Inventory Control is the process by which inventory is measured and regulated according to predetermined norms such as economic lot size for order or production, safety stock, minimum level, maximum level, order level etc.

Objective of inventory control Maximize the level of customer

service by avoiding under stocking.Promote efficiency in production and

purchasing by minimizing the cost of providing an adequate level of customer service.

Types of inventory control ABC Classification (Pareto Principle)A Items: very tight control, complete and

accurate records, frequent review B Items: less tightly controlled, good

records, regular reviewC Items: simplest controls possible,

minimal records, large inventories, periodic review and reorder

process of inventory control Def. - A physical resource that a firm holds in

stock with the intent of selling it or transforming it into a more valuable state.

Raw MaterialsWorks-in-Process Finished GoodsMaintenance, Repair and Operating (MRO)

Inventory Positions in the Supply Chain

RawMaterials Works

inProcess

FinishedGoods

Finished Goodsin Field

Models for Inventory Management:EOQ EOQ minimizes the sum of holding

and setup costsQ = 2DCo/Ch

D = annual demandCo = ordering/setup costsCh = cost of holding one unit of

inventory

EOQ graph

Order Quantity Size (Q)

Cos

t (R

s.)

EOQ

Tc (Total Cost)Carrying

Cost (Q/2)H

DS/Q (Ordering Cost)

Advantages Ensures an adequate supply of materialsMinimizes inventory costsFacilitates purchasing economiesEliminates duplication in orderingBetter utilization of available stocksProvides a check against the loss of

materialsFacilitates cost accounting activities

disadvantages Proper standardization & codification of

inventory items needed.Considers only money value of items &

neglects the importance of items for the production process or assembly or functioning.

Periodic review becomes difficult if only ABC analysis is recalled.

conclusion In any business, make it big or small, we must

understand that taking good care of our inventory is very important. If we as managers do not understand the concept of good inventory management, we must learn to be familiar with it and its applications. One of the reasons for the failure of a business is its inventory management.