In this PPT, A Detailed view on Inventory control and Recent trend in PPC are discussed,

1. Inventory control and recent
trends in PPC
Unit-4

2. Inventory control
• Inventory Control is the supervision of supply, storage and accessibility of
items in order to ensure an adequate supply without excessive oversupply.
• It can also be referred as internal control - an accounting procedure or
system designed to promote efficiency or assure the implementation of a
policy or safeguard assets or avoid fraud and error etc.
• Inventory control may refer to:
– In economics, the inventory control problem, which aims to reduce overhead cost
without hurting sales
– In the field of loss prevention, systems designed to introduce technical barriers
to shoplifting
– It answers the 3 basic questions of any supply chain:
1. When?
2. Where?
3. How much?

3. Types of Inventory
• Inventory are classified based on the material
flow
1. Raw Material inventories.
2. Brought out parts inventories.
3. Work in process Inventories.
4. Finished goods inventories.
5. MRO Inventories.

4. Types of Inventories Based on
Nature of use
• Anticipation inventories.
• Fluctuation inventories.
• Let size Inventories.
• Transportation inventories.

5. Purpose of holding stock
• Safety stock is the amount of inventory a business
carries over and above their calculations for actual
need. ie, a packaging company maintains enough
plastic to manufacture packaging ordered by
customers in the amount needed until their next
shipment of plastic arrives.
• But, because orders vary and shipping times vary,
the company decides to keep 5% more on hand than
likely to be needed. This extra 5% is safety stock.

6. Inventory Control
• Inventory Control may be defined as the
scientific method of determining what to
order, when to order, how much to order and
how much to stock so that costs associated
with buying and storing are optimal without
interrupting production and sales.

7. Function of Inventory Control
• Effective running of the stores- It includes the
problems of the layout utilization of storage
space, storing media (Shelves, bins, etc.,)
receiving and issuing procedures.
• Technological responsibility for stage of
merchandise- It consist of methods of storing
maintenance procedure, maintaining
procedure, studies of detoritation and
obsolescences.

8. Inventory Control
• Stock Control- It functions include stock
taking, stock level record, ordering policies
and procedures for stock replenishment.

9. Objective of Inventory Control
• The main objective of inventory control are:
1. To ensure continuous supply of materials so
that production should not suffer at any
time.
2. To maintain the overall investment in
inventory at the lowest level, consistent with
operating requirement.

10. Cost Associated with Inventory
• Ordering Cost.
• Carrying Cost.
• Shortage Cost.
• Purchase Cost.

11. Cost Associated with inventory
• Ordering cost- Ordering Cost are the cost
associated with the placement of an order for
the acquistation of inventories.
• These cost are known by the names
procurement cost, replenishment cost, and
acquisition cost.

12. Cost Associated with Inventory
• Holding cost- Inventory holding cost is
associated with holding the level of inventory
on hand.
• The holding cost includes-
1. Cost for storage facilities.
2. Handling cost.
3. Deprecation, taxes and insurances.

13. Cost Associated with Inventory
• Shortage Cost-
when the stock of an item is depleted and
there is a demand for it, then the shortage cost
will occur, In simple terms shortage cost is the
cost associated with stock-out.

14. Cost Associated with Inventory
Cost
• Purchase cost- Purchase cost are the cost
incurred to purchase produce the item.
• these cost include the price paid or the labour,
material and overloaded charges necessary to
produce the item.

15. Terms used in Inventory
• Demand.
• Order Cycle.
• Lead Time.
• Reorder time.
• Safety stock.
• Reorder quantity.

16. EOQ
• Economic order quantity (EOQ) is the classical inventory model for stock
held on cycle with assumptions of known demand and production lead
time. The objective is to select an order quantity that minimizes the
marginal annual costs for holding inventory and placing orders.

17. EOQ
• The amount of materials produce in
Production cycle is known as EOQ
• Types of Inventory system-
1. Fixed-order quantity models (Q model)
2. Fixed-time period models (P Models)

18. Fixed Order Quantity

19. Two bin system
• Two bin system is used for the material
control.
• It is that technique of material control in
which we have two bins, one is used for
in use minimum stock and second bin is
used for reserve stock or to keep the
remaining quantity of material.
• This system of inventory control is also
called in USA kanban.
• First bin is utilized for issuing
the material for production and then,
second bin is used. Its record is done on
bin cards and store ledger card.

20. Fixed Time Period Model
• The Fixed time period model are referred are
as the periodic system, periodic review
system, fixed-order interval system and P-
Model.
• In a fixed-time period system, periodic review
of inventories are made an order is invariably
placed in that period.

21. Fixed Time Period Model

22. Effect of demand of inventories

23. Effect of Demands in Inventories
• In Order to Realize the dynamics and
significance of inventory management, one
has to understand the effect of demand
fluctuations on the desirable level of stock.
• Illustration:
1. Step-1 Producing component from the raw
materials.
2. Step-2 Producing minor assemblies from
components.

24. Effect of Demands in Inventories
• Step-3 Producing Major assemblies from
component and minor assemblies.
• Step-4 Assembling the final product.
Obliviously production system, the stores at all
stages should hold inventory/ stock of items as
well as stocks of raw materials.

25. Effects of Demand increase of 20%

26. Effect of Demand Increase by 20%

27. Effect of Demand decline by 20%

28. Selective Inventory Control
• The principle of Selective Inventory control
recognize that it is impossible to manage and
control every item in inventory holding in the
same way and still meet the objective of
1. Bringing down the level of investment in
inventory.
2. Avoiding stock-out of critical items.

29. ABC Analysis
• ABC Analysis classification system is a widely
used method of categorizing inventories
according to value and qualities.

30. ABC ANALYSIS

31. ABC analysis
• The ABC analysis is a business term
used to define
an inventory categorization
technique often used in materials
management. It is also known
as Selective Inventory Control.
Policies based on ABC analysis:
• A ITEMS: very tight control and
accurate records
• B ITEMS: LESS TIGHTLY
CONTROLLED and good records
• C ITEMS: simplest controls possible
and minimal records

32. Procedure for ABC Analysis
1. Identify all the items being used, list them
and estimate their annual consumption in
units. It may be done for each category of
then like raw materials, component, spare.
2. Collect cost data of individual items.
3. Find out annual usage/ consumption in
rupees for each items. It may be multiplied
annual stage in units by unit price of the
item.

33. ABC Analysis
4. Starting from highest annual usage value,
arrange the items in descending order of annual
consumption in value.
5. Calculate cumulative annual usage and
express it in percentage of total annual usage.
Also express number of items into cumulative
item percentage.
6. Plot cumulative usage % against cumulative
item % and Segarate into A,B,C and Category.

34. Computerized Production Planning
and control
• Some of the common manufacturing
subsystem that completes a PPC System
includes.-
1. Product-structure Processor.
2. Material requirement.
3. Product costing system.
4. Inventory Management system.
5. Master Production scheduling system.

35. Computer integrated production
planning

36. Computerized Production Planning
and control
• Product Structure Process-
It Sub System Includes data of end product
and its subsequent breakdowns known as Bill of
materials. A programme reads the bill of
material files and interact with the main
production planning system as per the logic
created system.

37. Computerized Production Planning
and control
• Material requirement Planning- This
Subsystem performs periodical calculation for
entire material plan, Updating of data can be
incorporated from the inventory status file.

38. Just in Time Production system
• Just in time (JIT) is a management philosophy
that strives to eliminate source of
manufacturing waste by producing the right
part in the right place at the right time.
• Other names Short cycle manufacturing,
stockless production and zero-inventory
manufacturing.

39. Objective of JIT
• Zero defects.
• Zero setup time.
• Zero inventories.
• Zero breakdowns.
• Zero lead time.
• Lot size of one.

40. The Seven Wastes
• Waste of over production.
• Waste of waiting.
• Waste of transportation.
• Waste of processing itself.
• Waste of stocks.
• Waste of motion.
• Waste of making defective products.

41. JIT

42. JIT manufacturing

43. JIT manufacturing

44. MRP-II
• Manufacturing resource
planning (MRP II) is
defined as a method for
the effective planning of all
resources of a
manufacturing company.
Ideally, it addresses
operational planning in
units, financial planning,
and has a simulation
capability to answer "what-
if" questions and extension
of closed-loop MRP.

45. MRP-II
• MRPII is an integrated information system that
synchronize.
• MRPII system coordinates sales, purchasing,
manufacturing, finance and engineering by
adopting focal production plan and using one
unified database to plan and update the
activities in the all system.

46. JIT

47. Enterprise Resource Planning
• Enterprise resource Planning is a new system
concept in which every enterprise function is
integrated in a seamless flow of information.
This system integrates all facts of business
including sales and order entry, engineering,
manufacturing.

48. Features of ERP System
• ERP is a software architecture that integrates
all the function of the enterprise.
• ERP System requires a seamless flow of
information.
• The seamless information flow in ERP is
achieved through-
1. Common database.
2. Instant sharing of information which is
common and simultaneous.

49. Implementation of ERP
• Identify the needs of ERP Implementation
Package.
• Evaluate the existing business situation.
• Make decision regarding desired situation
through benchmarking.
• Reengineer business processes to achieve the
desired results.
• Evaluate Various available ERP Package.

50. Implement of ERP
• Choose the suitable best ERP Package.
• Install necessary hardware and networks.
• Finalize the ERP consultant.
• Implement ERP in placed manner.

51. Modules of ERP
• Finance Module.
• Manufacturing Module.
• Distribution Module.
• Service Module.
• Transportation Module.
• Process Module.
• Project Module.

52. ERP Packages in India
• SAP.
• JD Edwards.
• Mfg/ Pro.
• BPCS.
• Oracle financials.
• BaaN
• MAMIS.

53. ERP-Enterprise resource planning