INVENTORY CONTROL.

Inventory is stock of physical items such as materials, components, Work in progress, finish goods etc held at specific location at specific time. Inventory control is technique of maintaining & monitoring the size of the inventory at appropriate level, so that the production and distribution takes place effectively.

Inventory Control is achieved by :

Purchasing items at proper time & price, & in right quantity. Provision of suitable storage location with sufficient space. Maintaining appropriate levels of stocks. Adequate inventory identification systems. Up-to date & accurate record keeping. Appropriates requisition procedures.

INVENTORY CONTROL TECHNIQUES

There are several techniques of inventory control. Some of the commonly used techniques are as follows:

1. The ABC (Always Better Control) Classification:

It is the most popular technique of inventory control. Under this technique, items are classified into three classes: It is the most popular technique items are classified into three classes: A. A Class items are high in value & therefore, low quantity to be maintained B. B class items are moderate in value & therefore, moderate quantity to be maintained. C. C class items are low in value & therefore high quantity may be maintained. Strict control is maintained on A Class items through accurate records of receipts & issue & by coordination of incoming materials with production requirements. On the other hand C class items may simply be ordered in large quantities covering several months requirements. No record is made of their issue to manufacturing section.

2. High medium, and low (HML) classification :

In this case, the items of inventory are to be listed in the descending order of unit value. For instance, the manager may decide that all items above Rs 5000 per unit be classified as high inventory items, Rs 3000 to Rs 5000 per unit as medium inventory items & below Rs 3000 per unit as low inventory items. The HML classification helps to check the consumption of items at departmental levels & also plan the purchases.

3. Vital, Essential & Desirable (VED) Classification :

The inventory items are classified as vital, essential & desirable. In case of vital inventory items, high stock is maintained, & in the case of desirable inventory items, low stock may be maintained.

4. Fast Moving, Slow moving and non-moving (FSN) Classification :

Under this technique, the inventory manager classifies the inventory into three groups : (a) Fast moving items are those items which are regularly required for production. (b) Slow moving items are those items which are required occasionally. (c) Non-moving items are those items which are rarely required.

5. Economic Order Quantity (EOQ) :

In this case, the fixed order quantity of materials is ordered when the stock on hand reaches the re-order point is the inventory level at which the stock should be recorded for the smooth flow of production.

6. Material Requirement Planning (MRP) :

It is the technique for planning the ordering & the use of materials at various levels of production. MRP helps to monitor the level of inventory. Therefore, it is a technique of both inventory control & scheduling of materials. It is includes three components, i.e; Master Production Schedule, Inventory Status File, Bill of Materials, in order to determine inventory for the purpose of scheduling and ordering. MRP involves following steps : Determining the gross requirement of finished Products Determining the net requirement of finished products. Preparation of Master production schedule. Determination of gross requirement of materials. Determination of net requirement of materials Schedule the order of materials. Placing the order. Follow-up of orders.

7. Just in-time (JIT) Technique :

The JIT technique is also referred as zero inventory production system (ZIPS). In this case, the firm may hold absolutely no inventory at any stage of production. The exact required amount of inventory is purchased or organised as and when required at each stage of production. In other words, there is no warehouse for inventory. The firm maintains special tie-up with suppliers.

8. Maximum-Minimum System :
This technique is used in the case of manual inventory system, The manager decides the minimum inventory plus the optimum lot size.

9. MAPICS :

It stands for Manufacturing, Accounting & Production Information System. It is software programme that was developed by IBM. In April 2005, MAPICS has been acquired by Infor. MAPICS (now infor) provides best in-in-class software that address the essential challenges faced by manufactures & distributors in key areas such as enterprise resource planning (ERP), supply chain management & much more. These software solutions are built around the business processes of manufacturing-from design, planning g & production to sales, delivery & after-market service & support. Benefits: It improves the overall performance of the firm. Improves factory throughput Reduces inventory levels. Lower scrap & waste. Better equipment uptime (Reduces equipment downtime) Greater on-time delivers performance. Faster payments of receivable to suppliers.

10.

CARDEX System :

In this system, cards are vertically arranged in a tray & kept in cabinets. Posting in these cards may be done manually. However, nowadays computers are taking over the place of manual posting. The cards known as Stock Control Cards are of different types- sizes & colours. The cards indicate the position of stock which includes: Stock of items ordered Stock of items received from suppliers. Stock of items issued. Balance of stock.