JAIPUR NATIONAL UNIVERSITY, JAIPUR

School of Distance Education & Learning

Internal Assignment No. 1
MBA O Ist YEAR
Paper Code:

MBA O 107

Paper Title:

INVENTORYMANAGEMENT.

Last date of submission:

Max. Marks: 15

Note: Question No. 1 is of short answer type and is compulsory for all the students.It
carries FIVE marks.
Words limit: (50-100 Words)

Q. 1. Answer all the questions.

i.

Name different types of Inventory.

Types of inventory
RAW MATERIALS
WORK-IN-PROCESS
FINISHED GOODS
TRANSIT INVENTORY
BUFFER INVENTORY
ANTICIPATION INVENTORY

DECOUPLING INVENTORY
CYCLE INVENTORY
MRO GOODS INVENTORY
THEORETICAL INVENTORY
ii.

What do you understand by the term Inventory Control.

Understanding inventory control is essential for optimizing your supply chain, increasing
workflow and improving profitability. Knowing what stock you have on hand, how long
and how much it costs to re-supply, and how your operation compares in the market is
needed to maintain a competitive edge. If simple ideas such as FIFO (first in, first out)
are not followed by a retailer of perishable goods, the result will be loss of profit, wasted
goods and customer dissatisfaction. Keeping up-to-date in terms of cutting-edge logistics
and top suppliers can mean the difference between you and your competition getting the
business.
iii.

What is HML analysis?

Items are classified into three groups labeled as High Medium Low.
The HML analysis is very similar to the ABC Analysis, the difference
being instead of usage company uses its discretion and judgment to
decide the cut off lines for deciding the value, the price criterion is
used. In their classification, the items used by the company are
arranged in descending orders of their unit price.
iv.

Name two limitations and two advantages of MRP.

Limitations

The time required for planning and implementing an MRP system is generally very long.
Data entry and file maintenance requires considerable inputs in the form of training and
education of the personnel.
Advantages

Reduced per unit cost of production thus enabling an organization to price its products
competitively
Low inventory levels, especially for in-process materials

v.

What is meant by perpetual inventory system?

A method of accounting for inventory that records the sale or purchase of inventory in
near real-time, through the use of computerized point-of-sale and enterprise asset
management systems. Perpetual inventory provides a highly detailed view of changes in
inventory and allows real-time reporting of the amount of inventory in stock, hence,
accurately reflecting the level of goods on hand.
Under the perpetual inventory system, an entity continually updates its inventory records
to account for additions to and subtractions from inventory for such activities as:
Received inventory items
Goods sold from stock
Items moved from one location to another
Items picked from inventory for use in the production process
Items scrapped

Answer any two questions.Each carries FIVE marks.

Q.1

Words limit: (500 Words)

What is ABC analysis in inventory control? Discuss its advantages/disadvantages.

ABC Classification
Inventory in any organization can run in thousands of part numbers or classifications and millions
of part numbers in quantity. Therefore inventory is required to be classified with some logic to be
able to manage the same.
In most of the organizations inventory is categorized according to ABC Classification Method,
which is based on pareto principle. Here the inventory is classified based on the value of the
units. The principle applied here is based on 80/20 principles. Accordingly the classification can
be as under:
A Category Items Comprise 20% of SKU & Contribute to 80% of $ spend.
B Category Items Comprise 30% of SKU & Contribute to 15% of $ spend.
C Category Items Comprise 50% of SKU & Contribute to 5% of $ spend.
The above is only an illustration and the actual numbers as well as percentages can vary.
Example: Table of Inventory Listing by Dollar Usage Percentage.

Item

Annual Usage in
No. Units

Unit
Cost-$

Usage in
Dollars

Percentage of Total
Dollar Usage

5,000

1.50

7,500

2.9%

1,500

8.00

12,000

4.7%

10,000

10.50

105,000

41.2%

6,000

2.00

12,000

4.7%

7,500

0.50

3,750

1.5%

6,000

13.60

81,000

32.0%

5,000

0.75

3,750

1.5%

4,500

1.25

5,625

2.2%

7,000

2.50

17,500

6.9%

10

3,000

2.00

6,000

2.4%

$254,725

100.0%

Total

Advantages of ABC Classification

This kind of categorization of inventory helps one manage the entire

volume and assign relative priority to the right category. For Example A
Class items are the high value items. Hence one is able to monitor the
inventory of this category closely to ensure the inventory level is

maintained at optimum levels for any excess inventory can have huge
adverse impact in terms of overall value.
A Category Items: Helps one identify these stocks as high value items
and ensure tight control in terms of process control, physical security as
well as audit frequency.
It helps the managers and inventory planners to maintain accurate records
and draw managements attention to the issue on hand to facilitate instant
decision-making.
B Category Items: These can be given second priority with lesser
frequency of review and less tightly controls with adequate documentation,
audit controls in place.
C Category Items: Can be managed with basic and simple records.
Inventory quantities can be larger with very few periodic reviews.

Example: Take the case of a Computer Manufacturing Plant; the various items of inventory can
be broadly classified as under:

SKU Description

Classification of
Inventory

Remarks

Processor Chips

A Class

Kept under High Value Storage/Asset

Tracking / Access Control required

Memory Chips

A Class

Kept under High Value Storage/Asset

Tracking / Access Control required

Hard Disk /
Storage Media

A Class

Kept under High Value Storage/Asset

Tracking / Access Control required

Software License

A Class

Kept under High Value Storage/Asset

Tracking / Access Control required

Disk Drives

A Class

Normal Storage / Access Control

Required

Cabinet / Case

B Class

Normal Procedures

Battery Pack

B Class

Normal Procedures

Monitor

A Class

Normal Storage / Access Control

Required

Keyboard

B Class

Normal Procedures

Training Manuals

C Class

Minimal Procedures

Mouse

B Class

Normal Procedures

Stickers

C Class

Minimal Procedures

Screws & Nuts

C Class

Minimal Procedures

Power Cord

C Class

Minimal Procedures

Starter Assembly
Pack-Instructions

C Class

Minimal Procedures

Disadvantages

Inventory Classification does not reflect the frequency of movement of

SKU and hence can mislead controllers.
B & C Categories can often get neglected and pile in huge stocks or
susceptible to loss, pilferage, slackness in record control etc.

Q.2
Q.3

Write short notes on : a. Feed back inventory information system.

b. Economic production quantity.
What are the factors which are considered in warehouse selection? Discuss.

JAIPUR NATIONAL UNIVERSITY, JAIPUR

School of Distance Education & Learning
Internal Assignment No. 2
MBA O Ist YEAR
Paper Code:

MBA O 107

Paper Title:

INVENTORYMANAGEMENT.

Last date of submission:

Max. Marks: 15

Note: Question No. 1 is of short answer type and is compulsory for all the students.It
carries FIVE marks.
Words limit: (50-100 Words)
Q. 1. Answer all the questions
A.
B.
C.
D.
E.

Explain the basic EOQ model of inventory management.

How lead time analysis is carried out?
What do you understand by stores documentation?
Name applications of linear programming in inventory management.
What steps can be taken to reduce cost in transportation of inventory?

Answer any two questions.Each carries FIVE marks.

Q.1

Words limit: (500 Words)

A company requires 20,000 units of a certain component annually. The unit price is
Rs. 2 per unit and the cost of ordering is Rs. 200 per order. The average inventory
carrying cost is 5% per year.
Find a. EOQ

b. Total cost of inventory including materials cost.

c. If the company works for 300 days in a year and the procurement of
inventory time is 10 days; safety stock is 500 units; find the reorder point the
minimum,maximum and average inventories.
Q.2

Discuss stores management with reference to layout,location, storing of materials.

Q.3

Discuss (JIT) inventory management. What are the advantages of having JIT
inventory. Give a few examples of JIT inventory management in industry.