Daily Concept Booster Mechanical Engineering: Inventory Control Part-01 |_00.1
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Daily Concept Booster Mechanical Engineering: Inventory Control Part-01

Inventory Control

Inventory can be termed as stock on hand at a given point of time which may be held for the purpose of later sell.
It may include raw material, work in process, semifinished or sub assembly and final product.
Inventory control is used to manage inventory in such a manner that day to day working run smoothly without any delay but at the minimum cost.

Inventory Cost

Purchasing Cost (P.C.)

It is the cost of purchasing inventory.
P.C=No.of unit×Cost/unit

Ordering Cost (O.C.)

It is the cost when purchased from outside, and it is bringing into inventory within the system.
It includes cost of tender, processing cost, inspection cost etc.
O.C=No.of order×cost/order

Set-up Cost (S.C)

When the inventory is produced internally, the cost associated with bringing shut down production system again into the starting position of the industry.
It includes maintenance cost, cost of bringing raw material, etc.
S.C=No.of setup×Cost/setup

Holding Cost (H.C) or Carrying Cost

It is the cost associated with storing, keeping, and maintaining inventory within the production system.
H.C=Average inventory for a period×(Holding Cost)/(Unit×Unit time)

Shortage Cost (S.C)

The cost associated with the loss incurred by stock out
H.C=Average no. of unit short×(Shortage Cost)/(Unit×Unit time)

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Published by VINAYAK KUMAR

Graduated from BIT Sindri, Postgraduated from IIT BHU Varanasi

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