Inventory Management

UNIT 17
Objectives

INVENTORY MANAGEMENT

Upon completion of this unit, you should be able to: understand the meaning of inventory and identify inventory related cost parameters learn about various types of inventory policies appreciate the role of selective inventory management know the exchange curve concept for aggregate inventory planning get a feel of some mathematical models of inventory analysis perform sensitivity analysis on a type of model compute safety stocks understand the problems of slow moving items appreciate the role of computers in inventory control have a brief idea about recent developments in inventory management. Structures 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11 17.12 17.13 17.14 Introduction to Inventory Systems Functions of Inventory Classification of Inventory Systems Selective Inventory Management Exchange Curve and Aggregate Inventory Planning Deterministic Inventory Models Probabilistic Inventory Models Inventory Control of Slow Moving Items Recent Developments in Inventory Management Concluding Remarks Summary Key Words Self-assessment Exercises Further Readings

17.1 INTRODUCTION TO INVENTORY SYSTEMS
Concept of Inventory . Inventory' may be defined as usable but idle resource'. If resource is some physical and tangible object such as materials, then it is generally termed as stock. Thus stock or inventory are synonymous terms though inventory has wider implications. Broadly speaking, the problem of inventory management is one of maintaining, for a given financial investment, an adequate supply of something to meet an expected demand pattern. This could be raw materials work in progress finished products or the spares and other indirect materials. Inventory can be one of the indicators of the management effectiveness on the materials management front. Inventory turnover ratio (annual