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Inventory Management Of
Steel
Introduction
Inventory consists of Raw materials Work in progress Finished goods Inventory in transit
Benefits of holding inventory a) Benefits in production b) Benefits in purchase c) Benefits in sales
operations
The firm can forecast accurately its annual requirement Usage of inventory is steady
inventory carrying cost Both costs are constant for the given inventory level
Calculation of EOQ
Limitations
a) Accurate forecast of annual requirement difficult.
b) No time gap between ordering & supplying of raw materials
assumed, which may not be the case. c) Demand for a product may not be uniform throughout the year. d) EOQ of manufacturing firm may not be economical for the supplier. e) Better discounts may be offered by the supplier for placing orders higher than EOQ.
(GOLF) Analysis
rods, cold rods and galvanized tubes. Tubes division uses Just In-Time purchase system . A look at the chart indicates though in the last four years sales has remained same or decreased , the stock of raw material has increased. This is due to the fact that price of raw material has increased but company is not able to increase the price due to stiff competition. Increase in inventory may also be due to wrong estimation of orders. The chart of WIP shows that both cost of goods produced and WIP have increased during the period. work in progress holding period also has gone up which the company must look into.
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