Inventory Control Techniques

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  1. Always better control (ABC) classification. In this analysis, the classification of existing inventory is based on annual consumption and the annual value of the items. Hence we obtain the quantity of inventory item consumed during the year and multiply it by unit cost to obtain annual usage cost. The items are then arranged in the descending order of such annual usage cost.

(a) A-Item: Very tight control, the items being of high value. The control need be exercised at higher level of authority.

(b) B-Item: Moderate control, the items being of moderate value. The control need be exercised at middle level of authority.

(c) C-Item: The items being of low value, the control can be exercised at gross root level of authority, i.e., by respective user department managers.

2.High, medium and low (HML) classification. In this analysis, the classification of existing inventory is based on unit price of the items. They are classified as high price, medium price and low cost items.

3.Vital, essential and desirable (VED) classification. In this analysis, the classification of existing inventory is based on criticality of the items. They are classified as vital, essential and desirable items. It is mainly used in spare parts inventory.

4.Scarce, difficult and easy to obtain (SDE). In this analysis, the classification of existing inventory is based on the items.

5.GOLF analysis: In this analysis, the classification of existing inventory is based sources of the items. They are classified as Government supply, ordinarily available, local availability and foreign source of supply items.

6.SOS analysis: In this analysis, the classification of existing inventory is based nature of supply of items. They are classified as seasonal and off-seasonal items.

7.Fast moving, slow moving and non-moving (FSN).

8.Economic order quantity (EOQ). Inventory models deal with idle resources like men, machines, money and materials. These models are concerned with two decisions: how much to order (purchase or produce) and when to order so as to minimize the total cost.

9.Max-Minimum system.

10.Two bin system

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