INVENTORY MANAGEMENT

NVENTORY MANAGEMENT

According to the American production and inventory society (APIS). “Inventory management is the branch of business management concerned with planning and controlling the inventory”.

Inventory means all the materials, parts, supplies, tools and in process or finished products recorded in the books by the organization and kept in its stock, warehouses or plant for some period of time.




Classification of inventory

1. Direct inventory: Direct Inventories are those items that play a direct role in the manufacturing of goods and services. Direct inventory includes – raw material, work in progress and finished goods.

2. Indirect Inventories: its cover those items that are not the part of finished products but are necessary in the process of production. Following are the different types of indirect inventories.

(a) Transit or Pipeline Inventory: These are the pipeline inventory and required to transport from one point to another. Longer the distance between two points, longer is the transit inventory e.g. work in the process is a transit inventory. Size of the transit inventory is determined by the plant layout and plant design.
(b) Buffer Inventory: Buffer stocks are the inventory that help in preventing the stock out condition that may occur due to demand and supply fluctuation i.e. buffer inventory help in handling the situation when actual demand of certain item exceed their original demand.
(c) Lot size Inventory : These are the inventories that help in reducing the ordering and setup cost by placing the order in lots. Such a policy can help in availing discounts from the supplier.
(d) Decoupling Inventories: Those inventories that serve the function of decouple operation in a production system. These inventories help to perform various production activities independently we don’t want to depend on the schedule of other production activities.

3. Maintenance repair and operating inventories and services: This category includes office and general supplies i.e. Xerox paper, pen, towel, and light bulb.