INVENTORY_AND_ABC_ANALYSIS.pdf - 1 INVENTORY CONTROL...

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1 INVENTORY CONTROL TECHNIQUES AND ABC ANALYSIS MASTER OF BUSINESS ADMINISTRATION BY KSHEEROD SHRI TOSHNIWAL (MBA/25008/20) BIRLA INSTITUTE OF TECHNOLOGY MESRA, JAIPUR CAMPUS 2020
2 CONTENT Pg.No. Introduction ………………………………………………… .3 Objective of inventory control ……………………………… 4 Benefits of inventory control ……………………………… ..4 Techniques of inventory control …………………………… .5 ABC analysis ……………………………………………… ..5-6 Why use ABC analysis? ......................................................... 7-8 How is ABC analysis done? ................................................... 8-9 ABC analysis examples …………………………………… ..10-12 Advantage of ABC analysis ………………………………… 13 Disadvantage of ABC analysis ……………………………… 13 Conclusion ………………………………………………… ...14 References ………………………………………………… ..14
3 INTRODUCION The term inventory is defined as the itemized list of goods with their estimated worth specifically annual account of stock taken in any business. All the materials ,parts, suppliers, expenses and in process or finished products recorded on the books by an organization and kept in its stocks, warehouses or plant for some period of time. Inventory control is the technique of maintaining the size of the inventory at some desired level keeping in view the best economic interest of an organization. ABC analysis is derived from the term “The Pareto Principle” named after an Italian economist Vilfredo Pareto, also called 80/20 rule. This principle suggests that 80% of the total output is generated only by 20% of the valuable efforts. When it comes to stock or inventory management, ABC analysis typically segregates inventory into three categories based on its revenue and control measures required: A is 20% of items with 80% of total revenue and hence asks for tight control; B is 30% items with 15% revenue; whereas ‘C’ is 50% of the things with least 5% revenue and hence treated as most liberal. Any particular company’s numbers may be different but have a similar distinguishable pattern. This analysis aims to draw managers’ attention on the critical few (A-items) and not on the trivial many (C-items) and focusing its inventory control efforts on those particular items where it will have the most significant effect.
4 OBJECTIVE OF INVENTORY CONTROL To reduce investment in inventories and made effective use of capital investments. To supply drugs in time. Efforts are made to procure goods at minimum price without bargaining the quality. To avoid stock out and shortages. Wastages are avoided. Inventory management is essential to maintain a large size inventory for efficient and smooth production and also for sales operation. BENEFITS OF INVENTORY CONTROL Ensures an adequate supply of materials Minimizes inventory costs Facilitates purchasing economies Eliminates duplication in ordering Better utilization of available stocks Provides a check against the loss of materials Facilitates cost accounting activities Enables management in cost comparison Locates & disposes inactive & obsolete store items Consistent & reliable basis for financial statements
5 TECHNIQUES OF INVENTORY CONTROL ABC ANALYSIS

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