This document discusses material management and inventory control in the pharmaceutical industry. It defines material management and inventory control, and explains their importance in achieving organizational objectives at low cost. The objectives of material management and inventory control are outlined. Techniques for inventory classification, analysis, and control are presented, including ABC analysis, EOQ model, fixed period model, and hybrid models. Benefits of effective inventory management are listed.
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This document discusses material management and inventory control in the pharmaceutical industry. It defines material management and inventory control, and explains their importance in achieving organizational objectives at low cost. The objectives of material management and inventory control are outlined. Techniques for inventory classification, analysis, and control are presented, including ABC analysis, EOQ model, fixed period model, and hybrid models. Benefits of effective inventory management are listed.
This document discusses material management and inventory control in the pharmaceutical industry. It defines material management and inventory control, and explains their importance in achieving organizational objectives at low cost. The objectives of material management and inventory control are outlined. Techniques for inventory classification, analysis, and control are presented, including ABC analysis, EOQ model, fixed period model, and hybrid models. Benefits of effective inventory management are listed.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online from Scribd
This document discusses material management and inventory control in the pharmaceutical industry. It defines material management and inventory control, and explains their importance in achieving organizational objectives at low cost. The objectives of material management and inventory control are outlined. Techniques for inventory classification, analysis, and control are presented, including ABC analysis, EOQ model, fixed period model, and hybrid models. Benefits of effective inventory management are listed.
Copyright:
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MATERIAL MANAGEMENT AND
INVENTORY CONTROL INTRODUCTION
Material management may be defined as process by
which an organization is supplied with goods and services that they need to achieve its objective -Ammer Material management as a confederacy of traditional material activity bound by A common idea-the idea to integrate management approach to planning acquisition ,conversion, flow and distribution of production material from raw material to finished product -Lee and Dobler IMPORTANCE OF MATERIAL MANAGEMENT 1.Low prices for material and equipment 2.Faster inventory turnover 3.Continuity of supply 4.Reduced lead time 5.Reduce transportation cost 6.Less duplication of efforts 7.Reduced material obsolescence 8.Improve supply relationship and better record information 9.Better inter-departmental cooperation 10.Personnel development OBJECTIVES OF MATERIAL MANAGEMent 1.Low price 2.High inventory turnover 3.Low cost acquisition and possession 4.Continuity of supply 5.Consistency of quality 6.Low payroll cost 7.Favorable supply relation 8.Development of personnel 9.Good records Materials Management in pharma
5 Definitions of inventory Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state. Types of Inventory: Raw material Purchased but not processed Work-in-process Undergone some change but not completed A function of cycle time for a product Maintenance/repair/operating (MRO) Necessary to keep machinery and processes productive Finished goods Completed product awaiting shipment Why to Hold Inventories in pharma industry Improve customer service Reduce certain costs Contribute to the efficient and effective operation of the production system Finished Goods Essential in produce-to-stock positioning strategies Products can be displayed to customers Work-in-Process Necessary in process-focused production Raw Material Suppliers may produce/ship materials in batches Why Not to Hold Inventories Certain costs increase such as carrying costs cost of customer responsiveness cost of coordinating production cost of diluted return on investment reduced-capacity costs large-lot quality cost cost of production problems Inventory Costs
Order processing Shipping Handling Inventory Costs Carrying Costs Capital (opportunity) costs Inventory risk costs Space costs Inventory service costs Out-of-Stock Costs
Lost sales cost
Back-order cost Objectives of Inventory Control in pharma industry
1) Maximize the level of customer service by avoiding
under stocking.
2) Promote efficiency in production and purchasing by
minimizing the cost of providing an adequate level of
customer service. FACTORS AFFECTING Inventory Control
Type of product Type of manufacturer Volume Inventory Control TECHNIQUE
ABC Classification
Class A 5 – 15 % of units 70 – 80 % of value
Class B 30 % of units 15 % of value
Class C 50 – 60 % of units 5 – 10 % of value OTHER ANALYSIS TECHNIQUE HML Classification
VED Classification
SDE Classification
FSN Classification Inventory control System What is inventory control system ? Activities Included in inventory control system of an organization Inventory is ordered on bases of : Fixed Order Quantity System Fixed Order Period System
INVENTORY CONTROL SYSTEM vTwo questions before the manager When to order ? How much to order ?
vReorder Point vReorder Quantity ECONOMIC ORDER QUANTITY (EOQ) Model
System in which order for supplier is placed when the existing
stock reaches to reorder point EOQ assumptions: Known and constant lead time Instantaneous receipt of material No quantity discounts Only order (setup) cost and holding cost No stock outs EOQ Model
EOQ inventory over time:
Order quantity Usage Rate = Q (maximum Average inventory Inventory level) (Q*/2) Inventory Level
Minimum inventory 0 Time Fixed Period Model
Answers how much to order
Orders placed at fixed intervals Inventory brought up to target amount Amount ordered varies
No continuous inventory count
Possibility of stock out between intervals Useful when vendors visit routinely P-System Periodic Review Method
An alternative to EOQ - system control is periodic review
method Q-system - each stock item reordered at different times - complex, no economies of scope or common prod./transport runs P-system - inventory levels for multiple stock items reviewed at same time - can be reordered together higher carrying costs - not optimum, but more practical Hybrid Inventory Models
Base stock model
Startwith a certain inventory level Whenever a withdrawal is made, an order of equal size is placed Ensures that inventory maintained at an approximately constant level Appropriate for very expensive items with small ordering costs BENEFITS OF INVENTORY management
1.Ensures an adequate supply of material
3.Keep down investment in inventories 4.Facilitate purchasing economies 7.Eliminate duplication in ordering 8.Better utilization of available stocks 9.Check against the loss of materials 10.Facilitates a cost accounting facility 11.Manages to make cost and consumption comparisons 12.Consistent and reliable basis for preparing financial statements THANK YOU sandesh bhoir
