INVENTORY CONTROL

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DRUG STORE AND BUSINESS MANAGEMENT
INVENTORY CONTROL
Mr. Maroti M. Jeurkar Lecturer, YBCP, chandrapur
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INVENTORY CONTROL Inventory control is a process
of maintaining optimum level of inventory by
using any technique of inventory control. OR It
is a systematic control, constant checking
evaluation of stored inventories. OBJECTIVES
OF INVENTORY CONTROL (1) maximum customer
service High level of inventory ensures good
customer service production schedule are kept
flexible to meet the changing demands. (2)
minimum inventory investment The inventory
blocks the capital ,they generate storage cost,
or become obsolete on storage. (3) low cost
plant operation. The overall plant costs are kept
low by stable production which is possible by
having sufficient inventories
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Functions of Inventory Control. 1. To keep the
inventories as low as possible consistent with
the market conditions. 2. To forecast market and
economic condition of supply as regards
availability of the material. 3. To maintain a
sufficient stock of finished product to meet the
reasonable expectations of customers for prompt
delivery of goods. 4. To maintain proper records
so as to supply accurate and regular material
reports to the management. 5. To maintain out of
stock danger, which result in crash purchase at
uneconomical rates.
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Technique of Inventory Control. 1. ABC analysis
2. Economic Order Quantity 3. Perpetual
Inventory system 4. Review of slow and
non-moving items 5. Input output ratio analysis
6. Setting of various level 7. Use of Material
Budgeting 8. Establishing an effective purchase
procedure 9 Scrap surplus disposal 10 VED
analyses
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1. ABC Analysis
A items B items C items
it covers 10 of the total inventories. it covers 20 of the total inventories it covers 70 of the total inventories
it consumes about 70 of total budget.. it consumes about 20 of total budget. it consumes about 10 of total budget.
it requires very strict control.   it requires moderate control. it requires loose control.
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A items B items C items
it requires either no safety stocks or low safety stocks. it requires low safety stocks it requires high safety stocks
it needs maximum follow up   it needs periodic follow up it needs close follow up
it must be handled by senior officers it can be handled by middle management it can be handled by any official of the management
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• ECONOMIC ORDER QUANTITY(EOQ)
• The correct quantity of the material to buy is
  the quantity at which the ordering cost and the
  inventory carrying cost will be minimum.
• Methods for Determination of EOQ
• Tabular determination of EOQ
• Graphic presentation of EOQ
• Determination of EOQ by algebraic formula

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• ECONOMIC ORDER QUANTITY(EOQ)
• Tabular determination of EOQ

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ECONOMIC ORDER QUANTITY(EOQ)
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ECONOMIC ORDER QUANTITY(EOQ) Determination of
EOQ by algebraic formula aAnnual consumption,
bBuying cost per order, cCost per unit of
material, sStorage other inventory carrying
cost. EOQ 2???? /????
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• 3. PERPETUAL INVENTORY CONTROL.
• Definition of Perpetual Inventory System The
  inventory control method in which every inflow
  and outflow of stock are constantly updated,
  through an electronic point of sale system, is
  known as Perpetual Inventory System. The records
  maintained under this system are always up to
  date.
• The perpetual inventory system comprises
• Bin card
• Stores ledger
• Continuous stock-taking
• Advantages
• 1. It helps in detection immediate
  rectification of errors.
• 2. It ensures a reliable checking of the store
  items.
• 3. Timely action can be taken on shortages.
• 4. It serves as moral check on staff.
• 5. Overstocking under stocking is avoided.
• 6. Helps in completion of profit loss account
  balance sheetllll

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• 4. REVIEW OF SLOW AND NON-MOVING ITEMS.
• Inventory is an important constituent of total
  cost and as such a proper system of inventory
  control leads to a significant economy in the
  total cost of production.
• In order to detect slow and non-moving items, the
  following steps may be taken
• Periodic report A monthly or quarterly report on
  the stocks of non moving items is prepared which
  indicate its purchase, consumption and balance in
  hand. these report are given to the management.
• Obsolete items many of the slow and non-moving
  items may become useless with the passage of
  time. A well design information system has to be
  devised to locate such obsolete items, so that
  these can be utilized and their further purchase
  can be stopped.
• Moving ratios In order to isolate slow moving
  items, dormant and dead stocks, moving ratios may
  be calculated periodically. These ratios slow the
  turnover of these items for presentation to the
  management.

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SETTING OF VARIOUS LEVELS Maximum stock level
Maximum stock level represents the upper limit
beyond which the quantity of any item is not
normally allowed to rise. The formula for
computing maximum stock level is as follows
Maximum Reorder level Reorder quantity
Minimum consumption Minimum consumption Minimum
consumption per week x Minimum re-order period
Minimum stock level Minimum stock level or
safety stock is the lower limit below which the
stock of any item should not normally be allowed
to fall. This is also known as buffer stock. The
main purpose of determining this limit is to
protect against the possibility of a particular
item going out of stock and there is further
danger of stoppage of its production and
supplies. This level is fixed after considering
average rate of consumption lead time.  
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This system is based on utility of items. In a
drug store VED analysis is useful in controlling
maintaining the stock of various types of
formulation of a particular group of drugs. The
brands are classified into following categories-
Vvital. E essential. D-desirable. There should
be maxi. Stock of vital items, followed by
essential items then desirable items.. e.g
acetyl salicylic acid brands available are
Disprin,Micropyrine and Anacin Hence divide
as follows Vvital. Disprin E
essential, Micropyrine D-desirable Anacin
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