05-07-2013, 12:37 PM
A STUDY ON INVENTORY MANAGEMENT
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ABSTRACT
In any organization the inventory of materials plays vital role in working capital
management. A small saving in the inventory will reflect a vital margin in profit of the
organization. Inventory control means the availability of right materials of right quantities
coordinated with lead time. Each and every component of inventory is important and
managing the inventories to keep in an optimum level is a must. Being an auto ancillary
industry IPPL is facing a stiff competition in the market. Since inventory is the major part
of their cost of production there is a need for inventory control by way of reducing cost and
optimum utilization of materials. Though the company is having certain policies regarding
this, still it requires through study of their policy and systems to some extent to understand
the inventory management.
INTRODUCTION
Business motives are to produce, sell and make profit. Inventories are playing vital role
in every business whether industrial unit are trading organization. Inventories are very
broad term and include the elements whose values are always very high, in any industrial
unit. Inventory constitutes major parts, approximately 40% to 80% of gross working
capital depending upon the nature and size if the industrial unit. Inventory can be any form
which consists of raw material, consumables, and spares, work in process, finished goods.
Effect of control at raw material
Since, cost of raw material consists of more than 25% of the cost of production in any
industry, it requires constant control. The adverse control of raw material leads to stock
outs. Losses in materials are wastage and consequent to which the cost of production will
be increased. Thereby chances of incurring losses are more. So, the necessary control of
raw material at the initial is very essential to minimize the losses. Thereby non interruption
of continuous production is possible.
STORAGE FOR INVENTORY
If the company was to produce certain percentage of whole years output within
in shorter time, they would need to tremendous labour and materials. So they
need lot of materials with in shorter period. The goods they can get only from
material inventory instead, they may produce in slower schedule and stock them
as inventory. Some type of organization may carry inventory to ensure promptly
delivery to customers.
Inventory Decisions
The important decision that every company has to take regarding inventory is
order the right quantity at right time with minimum cost. Right quantity means
how much quantity to be ordered keeping in view the demand, supply and cost
aspect.
The time of order will be considered on the basis of lead time, carrying cost,
consumption level and working capital positions.
CONCLUSION
Inventory control means the availability of right materials of right quantities
coordinated with lead time. Each and every component of inventory is important and
managing the inventories to keep in an optimum level is a must. Being an auto ancillary
industry IPPL is facing a stiff competition in the market. Since inventory is the major
part of their cost of production there is a need for inventory control by way of reducing
cost and optimum utilization of materials. Though the company is having certain policies
regarding this, still it requires through study of their policy and systems to some extent to
understand the inventory management.