Inventory procurement, storage and management is associated with huge costs associated with each of these functions.

These costs are called as inventory costs. In simple these are the costs that require and arise in the process of inventory management and control. Types of inventory costs ordering costs fixed variable inventory carrying costs quality value out of stock costs & capacity costs FACTORS AFFECTING INVENTORY COSTS
SALES

INVENTORY COSTS

FACTORS PRODUC TION

MARKET

Techniques Just in time (JIT) Standardization and variety reduction Material requirement planning(MRP) JUST-IN-TIME(JIT) JIT is a broad philosophy of seeking excellence and eliminating waste in the manufacturing process. It includes: People involvement Total quality control

 JIT production People involvement includes: team work discipline supplier involvement Total quality control is the achievement and improvement of quality in JIT company. It includes: The immediate customer Quality at the source A culture, not a program JIT Production The two factors considered under this are: 1.Insidious excessive queues 2.Queues are a waste that JIT fights. Major objective: To have items only at the right place at the right time Standardisation and variety reduction A separate group is organised to study material standardisation, variety reduction, rationalisation and codification. Some cases this department may comes under designs and development activity A number system is used to reduce the number of sizes or ratings to which a family of products should be produced to cover the full range. Example: Electric motors between 10HP to 1000HP can be considered as 10,33,100,330,1000 in 5 sizes. Material requirement planning(mrp) MRP is a technique of working backward from the scheduled quantities and need dates for end items specified in a master production schedule, to determine the requirements for components needed to meet the master production schedule. It determines What components are needed How many are needed & when When they should be ordered, so that they are likely to be available when needed.

MRP usually is a computer system, that as the name implies , plans when material & other components will be required. Classification and codification of materials Yyyyyyyyyyyyyyyyy?????????? For easy & quick identification To avoid confusion Reduction in sizes and varieties To help in standardisation Used as a base for setting up different stores To maintain accurancy in entries Quick and easy access to items. meaning Classification Act of forming into classes or distribution into classes. Codification System of rules and regulations. >>>>>>> Certain colour or combinations to identify. Principles of c&c Should cover the entire range Principle of consistency (unchanged) Principle of mutual exclusiveness ( only one code) System should be simple, easily adaptable by any person. Methods of c&c of stores USAGE NATURE How much qty is used ? Raw materials Components Consumable stores Spare parts Tools Packing material W-i-p Finished goods Motors Gear box CKD(Completely Knocked down)