Inventory Management

at
Shreem Electric Ltd.

Submitted by:
Submited to: Sumit patel 18BSP3354
Aarushi sharma 18BSP3968
Neha Ma’am Manali Pandya 18BSP3070
Sai Krishna Koona 18BSP3225
Aditi vyas 18BSP0048
Aseem attri 18BSP2924
Ajinkya Bhosale 18BSP2854
 • It is incorporated on January 2nd 1976 in Kolhapur (Maharashtra)
• One of the leading manufacturer of electrical and electronics power transmission equipment in the country.
• Annual turnover Rs. 4650 million.

• Exported its products to 36 countries across the globe.

• It has a market leadership of 40% of market share in manufacturing high tension and low tension capacitors.

• The government of India had envisaged a capacity addition of 78577 megawatts and 86500 mw during the 11 th and 12th plan.

• According to company some o the raw material available locally by some of the raw materials had to be imported from chaina

and other countries and they took more than 45 days(lead time) to get this raw materials in the hand.

• Having excess inventories imported rm is not the feasible solution as it was huge inventory cost and they have limited storage

space
 Inventory management
• Inventory management is the management of inventory and stock.
• As an element of supply chain management, inventory
management includes aspects such as controlling and overseeing ordering
inventory, storage of inventory, and controlling the amount of product for
sale.
 What are the consequences of over investment & under
investment in inventory?

Both over investment and under investment in inventory is undesirable as both have consequences.

Following are the consequences of over investment:

1)Unnecessary blockage of funds in inventory

2)Excessive storage is required to store the inventory.

3)Excessive insurance cost.

4) Risk of liquidity: Value of the inventory reduces due to the long holding period as the inventories
once purchased are difficult to dispose off at the same value.
 Contd..
• Following are the consequences of under investment:
1)Under investment in the inventory may cause frequent interruptions in
production process.

2) Insufficient stock of finished goods may create problems in meeting

customers’ demands and they may shift to the competitors.
 Reasons or motives of holding inventory:

1. Transaction motive
2. Precautionary motive
3. Speculative motive
 Objective of inventory management:

The objectives of inventory management are mentioned below:

1. To supply the required materials continuously
2. To minimize the risk of under and over stocking of material
3. To maintain systematic record of inventory
4. To reduce losses, damages and misappropriation of materials
5. To minimize the cost associated with inventory
6. To make stability in price
 2nd question: Techniques of inventory management

a. Economic order quantity

b. ABC analysis (always better control)
c. Two bin techniques
d. VED analysis (vital essential desirable)
e. HML classification (high medium low )
f. SDE classification (scare difficult and easy )
g. FSN classification (fast moving , slow and non moving )
h. JIT (just in time)
 EOQ
ECONOMIC ORDER QUANTITY is the deal order quantity a company
should purchase for its inventory given a set of production, demand rate and
other variables.
 Karnataka Company has an expected usage of 20,000 units of a product during the next year.
The cost of processing an order is Rs. 15 and the carrying cost per unit is Re 1 for a year. The
lead time on an order is 8 days and the Company has a policy of carrying a reserve supply of 3
days’ usage. Calculate the economic order quantity and the re-order point.
 Re-order level
• Reorder level (or reorder point) is the inventory level at which a company
would place a new order or start a new manufacturing run.
• Reorder Level = safety stock +Lead Time in Days × Daily Average Usage
 Example

1) Minimum daily requirement 800 units

2) Time required to receive emergency supplies 4 days
3) Time required for refresh supplies one month(30days)
 • reorder level= (minimum daily or weekly requirement or monthly usages
*lead time )+safety stock*
= (800*30)+0 = 24000 units

*NOTE: Here company said that they had to Maintain the 4 days emergency
supplies , so that company need to maintain 4 days requirements needs.
So, one day consumption is 800 given so four days = 800*4 =3200
Rol = 24000+3200= 27200. units
 ABC analysis
• ABC analysis is a method of analysis that divides the subject up into three
categories: A, B and C. Category A represents the most valuable products or
customers that you have.
 Safety stock
• Safety stock is an additional quantity of an item held in inventory in order to
reduce the risk that the item will be out of stock.

• Safety stock acts as a buffer in case the sales of an item are greater than
planned and/or the supplier is unable to deliver additional units at the expected
time.
 3. Suitable inventory management techniques
for shreem electric
• So as per the consideration ,shreem electric should opt the ROL techniques ,
• Because comp need to take lead time as 45 days .
• In this ,company need to identify that their per day consumption of
inventory so that it is easy to calculate the total requirement of inventory for
45 days
• So for the meeting for such requirements for 45 days company need to keep
maintain the buffer stock, so that their production will not hampers.