MICON Engineering.doc

A study on the inventory management with special reference to MICON ENGINEERS (HUBLI) PVT LTD

INTRODUCTION OF COMPANY

The latest state of the art, new emerging, powerful and cost effective technologies

have been the main reason to set up different kind of industries like, Engineers,

Textile, Mining, Food processing, Cement, Constructions, Chemical, Drugs &

Pharmaceutical, Petrochemical, Marine, Effluent treatment, left irrigation projects,

Power plants, solvent plants, off-shore plants, Sugar, Steel, Automation &

Automobile etc.

In each and every of the above said industries one device plays a crucial role. This

device is called as a VALVE a valve is a device that controls the flow rate of fluid,

charges the direction of flow, allows a fluid to flow in only one direction, allows an

user to take samples, increase the velocity of the fluid, controls the pressure drop in

pipe and for many other application.

Thus there would be a tremendous requirement for valve both in domestic and

global market. Looking at the global market, it can be realized that 40% of the

global valve manufacturers are based in India. Among this 40%, 15-20%is based at

Hubli city, which is well connected to all metropolitan cities of India by Road, rail

& airways.

Hubli city has got a history of valve manufacturing industries. Valves & pumps

manufacturing giants like MIRCOFINISH VALVES; BDK VALVES &AKAY

INDUSTRIES have made their base at hubli since last 35 year.

The main reason for selecting Hubli city for the above activity is, availability of

raw materials, finished goods, bought out items, well equipped machine shops,

testing facilities, and more over cheap labor with high quality consciousness. All

these features have made Hubli an ideal city for valve manufacturing.


Thus it is concluded that a valve & gearbox is considered as heart of any type of

process industry, thereby making an industry to run smoothly without creating any

type of accidents and hazardous environments.

“Micon Engineers (Hubli) pvt.Ltd.” A sister concern of “Tec flow valves (India)

pvt.Ltd.” Started its operations at Hubli with a set of committed engineers and

workmen focusing on supplying of “Aquaria series” valves such as, butterfly

valves, dual plate check valves, air release valves, etc, to the Global valves

exporter based at Mumbai.

Innovation, Reinvention and Diversification are a continuous process at “MICON

ENGINEERS” Be it a new product development or enhancement of older

product, we at MICON ENGINEERS are constantly striving to give the customers

maximum value for their investment, widest product range and most complete

solute


COMPANY PROFILE

Business Type Exporter , Manufacturer

Import Percentage 25%

Primary Competitive Advantage Impeccable quality, prompt delivery, competitive prices and customized designs, hands-on technical assistance to customers

Sales Volume Rs. 5 core

No of Staff 200

Year of Establishment 2002

No of Production Lines 3

Export Markets Asian continent

Investment on Manufacturing Equipment

Rs. 50 lakh

OEM Service Provided Yes

No of Engineers 18

Monthly Production Capacity 10,000 pieces

Product Range Forged steel gate valves

Forged steel globe valves

Forged steel lift check valves

Cast steel gate valves

Cast steel globe valves

Cast steel swing check valves

Cast steel 2pc. ball valves

Cast steel 3Pc. ball valves

Bar stock ball valves

Custom designed ball valves

2pc. Investment cast ball valves

3pc. Investment cast ball valves


BRIEF COMPANY HISTORY:

1990

The formidable MR. M.A. Naikwadi & Sons lays the foundation of an industrial success and Perfect Engineering Works takes shape as a manufacturing sub-contractor for supplying of spare parts for valves and valve accessories.

1995

Started Manufacturing of needle valves in the in the name of M/s Tech Flow valves (India). Pvt. Ltd. And taking a positive step ahead for manufacturing and supplying forged steel gate, Globe and lift check valves to one of the leading industrial valves manufacturer at Mumbai.

2003

Establishment of one more Engineering firm Micon Engineers (Hubli) Pvt Ltd. At Hubli with a set of committed engineers and workmen focusing on supplying of Aquaria series valves such as butterfly valves, dual plate check valves air release valves etc., to one of the leading valve exporter located at Mumbai. Achieved a big challenge of manufacturing 1200MM offset disc butterfly valve with electrical actuation supplied to one of the leading steel plants in India through a leading valve exporter from India.

2006

The Micon Engineering (Hubli) Pvt Ltd had established the quality benchmark and achieved the prestigious ISO 9000-2000 certification through BUREU VERITAS-UKAS International certification authority. The Sleeping giant i.e., India awakes and Micon Engineering rises to the challenging of developing ball valves, cast steel gate, Global and swing check valves to the huge needs of process, Petro Chemical, Power and Oil & Gas Industries.


2009&2010

Owing to the fact of demanding need of customers in global level, Micon Engineering took a step ahead of the plant expansion of Hubli. Now we have been performing in 20000 square feet wide area, with the state of the art manufacturing facilities and enhancing the manufacturing capacity up to the 24 size with an EOT crane of 5 TON.

We have also been re-certified with ISO 9001:2008 in this year. We have been regularly exporting to middle-east countries since 2008.

This year became an unforgettable year for us, as we have achieved enlistment in and other prestigious OEM’s thereby enhancing our credentials and quality bench marks. EIL, JACOBE, BHEL, L&T, TATA PROJECTS,PDIL, NPCIL, DAE.

2012&2013

This year we have got the approval for API monogram license API 600 & API 6D.

2013&2014

This year we have a plan for (Unit II) expansion of about 40000 sq ft area for manufacturing higher size and rating valves.


VISION

To achive100%customer satisfaction, by year 2012 with 15%annual

improvement.

To be increase sales by 25%each year by improving marketing process.

To reduce recurring customer complaints to zero by strengthening corrective

action process.

To reduce rejection level 0.3to 20%with annual improvement of annual over

previous year rejection level.

To enhance productivity by every year.

To achive improvement of supplies quality and deliver performance

consistence with minimum out of staff situation.

MISSION

To, design, manufacture and market quality products that meet the customer

requirements and achieve total customer satisfaction through continual

improvements.

QUALITY POLICY

We the management and all involved in the Micon Engineers (Hubli) Pvt. Ltd. Are committed to design, develop, manufacture, supply and service ‘Industrial Valves and Allied Products’ meant for global applications including oil and gas, by:-

Continually improving our systems Incorporating requirement for API monogram program. Fulfilling quality, quantity and deliver requirement so the customer. Keeping the price reasonable


INTRODUCTION OF THE MICON ENGINEERS

Micon Engineering is one of the dynamic growth oriented engineering and ISO 9001:2008 Certified Company engaged in manufacturing and marketing industrial Valves. These valves are designed and manufactured to confirm strictly to ASTM, ANSI, API, BS, EN & IS other internationally recognized standards to meet the most stringent, requirements for industrial valves.

Owing to growing need of industry, MICON ENGINEERS (HUBLI) PVT. LTD was established in 2004. The company’s headquarters and manufacturing facilities are located at Hubli, Karnataka State (INDIA).

We are extremely glad to inform that, Micon has certified approvals and registration with TDC (Technical Development Committee for Indigenous Materials), ISO 9001-2008, EIL, IBR, DNV/TUV/EIL FIRE SAFE, NPCL, UHDE, TOYO INDIA, APGENCO, TATA PROJECT LTD, PDIL, BHEL, L&T, & ECONOSTO MIDEAST, DAE ETC.

MICON’s strength is to produce quality products at affordable prices, prompt delivery and the unflinching commitment to excellence. Our product range includes FORGED STEEL GATE, GLOBE CHECK VALVES available in range from 15mm to 50mm and pressure class rating 800, 1500, & 2500 with IBR certification.

With seven years of short time frame, Micon Engineers (Hubli) Private Limited has become one of the well-acclaimed Manufacturers, Exporters and Suppliers of precise industrial valves, based in hubli, Karnataka (India). We have been offering a large array of products that includes Steel Gate Valves, Cast Steel Gate Valves, Steel Globe Valves, Butterfly Valves, Dual Plate Check Valves and Air Release Valves. Using high quality raw materials such as carbon steel, stainless steel, alloy steel, & duplex, etc., we have been designing the best products. Our products are designed as per the API, EN, BS, ASTM, ANSI and varied other international standards to match up with the expectations of the clientele.

Supported with more than 200 talented employees, we have been setting benchmarks of quality and excellence. Commitment towards work and providing


client satisfaction has always been our priority. The latest CNC & Conventional machinery is used in the production to enhance production capacity up to 16000 Valves per Month. Moreover, our fully fledged R&D and quality testing facilities make us the trusted player in this domain. We are an ISO 9001: 2008 certified firm adhering to the strict quality policies. The advanced CAD and CAM amenities are installed in our unit to design custom built products as per the needs of the clients.


ORGANISATION CHART

M.D

G M Quality H O D

Purchase manager

Store keeper

Technical Finance director

Design manager

Account ASST

Design Asst

Maintenance supervisor

Production HOD

Planning work manager

Supervisor Workers

Marketing executive

Marketing G M

Accounting G M

IMI Quality inspection

Final Quality inspection

In process

Account ASST

Sales coordinator

Design Asst


DEPARTMENTS

MARKETING & SALES DEPARTMENT:

MARKETING

SALES CO-ORDINATION

DESIGN DEVELOPMENT

PURCHASE DEVELOPMENT

STORES (INWARD MATERIAL INSPECTION)

PRODUCTION PLANNING AND CONTROL

QUALITY CONTROL

MACHINE SHOP

ASSEMBLY & TESTING

INSPECTION

DESPATCH


This department is a helping hand to market all the products of MICON group of

company as well as its sister concerns, it is playing a vital role in realm of

marketing the products in a delighting manner, it provides pleasant services for

their overall satisfaction.

MARKETING DEPARTMENT CHART:

HEAD MARKETING

SALES CO-ORDINATIONASSISTANT MARKETING


MARKETING OBJECTIVE

To design develop the quality products which are reliable and economically.

To continuous improvement of product’s quality.

Cleared products are sent to dispatch section.

MARKETING STRATEGY:

Direct marketing

Magazines

System selling

Relationship marketing

Website


FINANCE DEPARTMENT

Company is a needed reputed manufacturing industry in India. It is largely

responsible for economic development of the country. It is actively practicing

country's economic goal, and it has given its contribution in solving many of the

prevailing problems.

FINANCE DEPARTMENT

OBJECTIVES:

1. To provide accurate & complete systematic information of financial Activities

2. To maintain all the books of accounts & other financial documents.

3. To prepare periodic financial statement of the Company like profit and loss

account & balance sheet etc.

FUNCTIONS:

G M FINANCE

ASSISTANT A/C

OFFICE ACCOUNTANT

ASSISTANT A/C


1. To Preparation of daily Cash books, General ledger& Bank

books.

2. To prepare all Receipts & Payments accounts.

3. Maintenance of all Sales Ledgers & Purchase Ledgers.

1. Preparation of Sales Tax Returns & Excise Duty Returns &

Income Tax Returns


QUALITY ASSURANCE DEPARMENT

The main function of the QA department is to check whether the raw materials

purchased and goods manufactured are better quality or not.

It Operates when the Materials

In process.

IMI (invert material inspection).

FI & T (final inspection & testing).

Inspection of production planning.


QUALITY ASSURANCE DEPARMENT CHART

GM-QUALITY ASSURANCE

HOD-QUALITY ASSURANCE

ENGIENEER I.M.I INSPECTOR INSPECTOR (F.I &T)

INSPECTOR QAINSPECTOR QA


DESIGN DEPARTMENT

It is a core section of any manufacturing company. It is section where the design

and development of product is carried out. The MICON has a full pledged design

and development department.

DESIGN DEPARTMENT:

OBJECTIVES

To design and develop the quality products which are reliable, economical

predictable and meets the customer requirement.

To continuously improve the quality of all products structure.

Requisition to store for assembly material assembling of material is done at

this stage.

DIRECTOR

S.R ENGINEER

ENGINEER DESIGN ENGINEER DESIGN

DRAFT MAN


PURCHASE DEPARTMENT

It also one of the important departments in the Company. To control the

materials the Company using First in First out Method. & ERP techniques

And suppliers are-paid 30 days,) days, 90 days depend upon the nature of

materials & they will be paid on installment bases also.

PURCHASE DEPARTMENT CHART

PURCHASE MANAGER

PURCHASE OFFICER

PURCHASE ASSITANT

PURCHASE OFFICER PURCHASE OFFICER

PURCHASE ASSITANT


PRODUCTION DEPARTMENT:

WORKS MANAGER

PLANNING DEPARTMENT MACHINE ASSEMBLY SHOP

R/M MACHINE ASSEMBLY PLANNING

SUPERVISOR SUPERVISOR

SUPERVISOR SUPERVISOR

PLANNING PLANNING PLANNING


RESEARCH AND DEVELOPMENT

Machinery/Equipment used in R&D Department

Make & Type of Machinery used in our R&D Department

SL.No. Type of Machinery Capacity/ Configuration Make Qty. Remarks

1 17" Monitor Personal Computer

2.66 G Hz. Hard Disc. Pentium-4 CPU

HCL 3

2 17" LCD Monitor Personal Computer

2.66 G Hz. Hard Disc. Pentium-4 CPU

HCL 2

3 Print & Copy Type Printer

15, 000 Prints/ Sarridge TOSHIBA 1

4 Inkjet Printer 30 PPM HP 1

5 LaserJet Printer Standard HP 1


WORKING METHODS

The company's mission is to design, manufacture and market quality

products that meet the customer requirements and achieve total customer

satisfaction through continual improvements. To achieve this, the company

has established a well defined quality system and has employed a team of

committed engineers, who have been performing to their level of excellence

keeping themselves upgraded with the latest innovations, Engineers

excellence, precision manufacturing, assuring 100% quality and hands-on

technical assistance to the customer.

MICON's strength is quality products at affordable prices, prompt delivery

and the unflinching commitment to excel. The Group's products have been

enjoying a sustained presence in the national markets for over two decades

in chemical & and process industries. Innovation, Reinvention and

Diversification are a continuous process at “MICON ENGINNERS”

PRODUCT PROFILE


NATURE OF PRODUCT UNITS

i. Types of valves

a. Gate globe check valveb. Ball valves c. Butterfly valves

These valves are classified as follows:

A) GATE GLOBE CHECK VALVES

Forged steel Cost steel

I. Gate globe check valves I. Gate valvesII. Gate lift valve check II. Global valves

III. Globe valve check III. swing check valves


B) BALL VALVES

Forged steel Cost steel

1. Forgedsteel ball valves 1. Cast steel ball valves

2. Forged steel glob valves 2. Cast steel glob valves

C) BUTTERFLY VALVES

Flanged type valves Wafer type valves

PRODUCT PROFILE


Butterfly Valves, Ball Valves, Gate Valves, Globe Valves, Check Valves, Forged Steel Valves

Contact Details

Address : Plot No. : C-255, M. T. Sagar Industrial Estate, Gokul Road, Hubli, Karnataka - 580030

Telephone No. : 91 - 836 - 2332900

RECENTLY UPDATED PRODUCTS

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UNI-DIRECTIONAL TWO-LUG TYPE KNIFE GATE VALVE

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HOPPER ISOLATED UNI-DIRECTIONAL KNIFE GATE VALVE


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SQUARE / RECTANGULAR TYPE UNI-DIRECTIONAL KNIFE GATE VALVE

Square / Rectangular Type Uni-Directional Knife Gate Valve is ideal for silo / hopper i...

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PRODUCT PROFILE


BALL VALVES

Ball valves come in two basic designs: Floating Ball and Trunnion Mounted, with

three basic construction variants: Three piece, End Entry and Top Entry with

options of either full or reduced bore designs. Principally designed as an on/off

isolation valve for a very wide range of temperatures and pressures they have

inherent quick opening flow characteristics. Specially designed ball valves

however, may offer good flow control capabilities at High Pressure. All ball

valves offer compact actuation due to their rotary quarter-turn operation. Fire safe

versions are available for use in the oil and petrochemical industries

BUTTERFLY VALVES

One of the most compact & light-weight valves available are used for a wide range

of applications, the choice of seat, lining and disc options has increased

significantly over recent years making the valve a popular choice. A wide range of

materials, sizes and pressure ratings gives reliable positive isolation and moderate

flow control capability over a wide range of applications throughout the industry.

The metal seated valve is well established in petrochemical and oil industries being

lightweight, fire safe and suitable for actuation.

Butterfly valves offer a number of advantages when used for the proper

application. They may be used in a wide variety of chemical services, they are

available with small dimensions allowing for use in areas where space is limited,

and they allow a high coefficient of flow

CHECK VALVES


A check valve is a mechanical device, a valve, that normally allows a fluid to flow

through it in only one direction. Check valves are two-port valves, meaning they

have two openings in the body, one for fluid to enter and the other for fluid to

leave. There are various types of check valves used in a wide variety of

applications. Although they are available in a wide range of sizes and costs, many

check valves are very small, simple, and / or cheap. Check valves work

automatically and most are not controlled by a person or any external control;

accordingly, most do not have any valve handle or stem. The bodies (external

shells) of most check valves are made of metal

DIAPHRAGM VALVES

Diaphragm Valves are mainly used in water treatment plants, fertilizer &

petrochemicals industries, chemical industries, refineries, thermal power stations,

and other process industries. Equally suited to on and off, or flow control

applications, a diaphragm valve will handle positive pressures or high vacuum.

Due to the wide range of material options it will handle almost all applications

within its temperature and pressure ranges (175°C max. and 16 bar max.) and as

such is used in almost every industry on both corrosive and abrasive applications.

All working parts are isolated from the line media which enhances its reliability.

Maintenance is a simple task with the body remaining in the pipe, the valve thus

being field serviceable. It has linear flow characteristics which makes it well suited

to throttling or modulating duties. On/off and control automation is possible with

the use of modern compact actuators and accessories

GATE VALVES


This is the most common and traditional type of valve. The valves are large to

accommodate the yoke and stem mechanism, but fully open the full bore design

provides an uninterrupted flow path. Generally either used fully open or closed, for

on/off isolation, and not used for modulating flow control duties. Variants include

Solid and Flexible Wedge Gates, Double Disc Gates, Through Conduit Valves,

Parallel Slide Valves and Knife Gate Valves.

GLOBE VALVES

Globe valves are designed for flow control or on/off isolation of fluids. They are

manufactured in straight patterns, angle patterns, oblique patterns and needle

designs with a large variety of internal seat construction variants to handle High

Pressure flow control duties. A wide choice of metal body options and trims means

Globe valves are widely used throughout industry.

OUR PRODUCTS


Over the last few years we have been introducing new products on a regular basis,

such as air release valves, cast steel gate valves, globe valves, swing check valves,

dual plate check valves to name a few. We are on the constant look for innovative

products that complement our world class product range. With our well-

established network of sales offices and leading industry clientele, we have been

able to successfully branch out and gain product acceptance for various ancillary

products. Our wide and comprehensive range of products includes:

1. Forged steel globe valves

2. Forged steel lift check valves

3. Cast steel gate valves

4. Cast steel globe valves

5. Cast steel swing check valves

6. Cast steel 2pc. ball valves

7. Cast steel 3pc. valves

8. Custom designed ball valves

9. 2pc. Investment cast ball valves

10. 3pc. Investment cast ball valves


MAIN COMPETITORS OF MICON ENGINEERS

AkayIndustries. Audo Industries Cresent Industries. KSB Industries Weir BDK Niton Micro finish Procep.


INTRODUCTION TO THE INVENTORY MANAGEMENT

Inventories mean the stock of the product and the components of the product,

i.e. raw material and semi product.

In other words, inventory is the composed of assets that will be sold in the

future in the normal course of business operations

Raw materials:

Stainless steel

Casting

Seats bars

Fasteners

Chemicals

MEANING OF INVENTORY:

The term inventory includes raw materials, finished packaging, spares and

other stocked in order to meet an unexpected demand or distribution in the

future.

Inventory includes the following categories of items:

Production inventories

In process inventories

MRO (maintenance, repair and operating) inventories.

Finished goods inventories.

These inventories are stocked by the company for the purpose

smooth production and customer satisfaction.


Inventories constitute the most significant part of current assets of a large

majority of companies. The large size of inventories maintained by firm are

considerable amount of funds is required to commit to them. It is therefore,

absolutely imperative to manage inventories efficiently and effectively in

order to avoid unnecessary investment. It is possible for a company to reduce

its levels of inventories to considerable degree without any address effect on

production and sales by using simple inventories planning and control

technique. The reduction in excessive inventories carries a favorable impact

on companies’ profitability.

NATURE OF INVENTORIES:

Material purchased pending usage is inventory. What is the company

purchased for manufacture of product is inventory?

Inventory is stock of the product a company is manufacturing for sale and

components that make up the product.

The various forms in which inventories exist in a manufacturing

company, they are as follows:

The manufacturing companies hold inventories in the form of raw material,

work in process and finished goods. There are at least three motives for

holding inventories.

1. To facilitate smooth production and sales operation(transaction

motive)

2. To guard against the risk of unpredictable changes in usage rate

and delivery time(precautionary motive)


3. To take advantageous of price fluctuations (speculative motive).

Inventories represent investment of a firm’s fund. The objective

of the inventory management should be the maximization of the

value of the firm.

The firm should therefore consider

1. Costs

2. Return

3. Risk factors

Two types of costs are involved in the maintenance:

1. Ordering costs: requisition, placing of order, transportation,

receving, inspecting and storing clerical and staff services.

Ordering costs are fixed per order. Therefore, they decline as the

order size increases.

2. Carrying costs: warehousing, handling, clerical and staff

services, insurance and taxes. Carrying costs vary with inventory

holding. As order size increases, average inventory holding

increases and therefore, the carrying costs increases.

The firm should minimize the total cost (ordering plus carrying).

The economic order quantity (EOQ) of inventory will occur at

point where the total cost is minimum.


The following formula can be used to determine EOQ:

EOQ=Q*

Where A is the annual requirement,

O is the per order cost, and

C is the per unit carrying cost

When should the firm place an order to replenish inventory? The inventory

level at which the firm places order to replenish inventory is called the reorder

point. It depends on

a) The lead time

b) The usage rate

Under perfect certainity about the usage rate, and instantaneous delivery (i.e.

zero lead time), the reorder point will be equal to: lead time x usage rate.

In practice, there is uncertainty about the lead time and usage rate. Under

perfect certainty about the usage rate. Therefore, firms maintain safety stock

which serves as a buffer to meet contingencies. In that case, the reorder point

will be equal to lead time * usage rate + safety stock. The firm should

strike a trade-off between the marginal rate of return and marginal cost of

funds to determine the level of safety stock.

A firm, which carries a number of items in inventory which differ in value,

can follow a selective control system. A selective control system, such as the

A-B-C analysis, classifies inventories in three categories according to the


value of the items. B-category consists of high value items and C-category

consist of lowest value items. More categories of inventories can also create

tight control may be applied for high-value items and relatively loose control

for low-value items.

The following are the advantages of available from the efficient inventory

management;

Reduction in investment in inventories.

Proper and efficient use of raw materials.

Ensuring continuous production and maximum sales.

Maintaining sufficient stock of finished goods for smooth and timely supply of goods to customers and maintain their patronage.

Minimizing inventory costs.

Efficient and optimum use of physical as well as financial resources, safety stock.


Benefits of inventory management and control:

Proper management and control of inventories will result in the following benefits to an organization.

Inventory control ensures an adequate supply of materials and stores, minimizes stock outs and shortages and avoids costly interruptions in operations.

It keeps down investment in inventories, inventory carrying costs and obsolescence losses to the minimum.

It facilitates purchasing economies through the measurement of requirements on the basis of recorded experience.

It eliminates duplication in ordering or in replenishing stocks by centralizing the source from which purchase requisitions emanate.

Its permits better utilization of available stocks by facilitating inter-department transfers within a company.

It facilitates cost accounting activities by providing a means for allocating material cost to products, departments or other operating accounts.

Perpetual inventory values provide a consistent and reliable basis for preparing financial statements.

COMPOSITION OF MATERIAL :


RAW MATERIAL WORK IN PROCESS FINISHED GOODS

Stem gaskets

Valve stem

Valve bodies

38 series Ball

Valve

Ball Valve

Plug Valve

Paints

Fasteners

Body casting


Inventory Management is consisting of 2 hands. The first hand as shown in

the diagram is that Physical Inventory Management, Second one is Financial

Inventory Management.

The reason behind of dividing these views is: to gather the information very

easily and for easy to understanding of each view thoroughly. Let us see the

Meanings of each view one by one.

Physical Inventory Management

Meaning: “Keeping of goods is also a type of management. Whenever

requirements comes from the production department, providing of those

required materials in a proper manner & providing those at the specified

period, is the main motto of Physical Inventory Management.”

Benefits for Holding Inventory:

Benefits in Purchasing

FINANCIAL

INVENTORY MANAGEMENT

INVENTORY MANAGEMENT

PHYSICAL INVENTORY

MANAGEMENT


Benefits in Production

Benefits in Work-in-Process

Benefits in Sales.

Inventory, as a current asset, differs from the other current assets because

only financial managers are not involved. Rather, all the functional areas,

finance, Marketing, Product & Purchasing are involved.

The job of the financial manager is to reconcile the conflicting viewpoints

of the various functional areas regarding the appropriate inventory levels in

order to fulfill the overall objective of maximizing of owner’s wealth.

Two-Bin System:

Under this system, the inventory items are grouped into two categories. In

one group or bin, sufficient quantity is kept to meet the current requirements

over a designated period of item. In another group or bin, a safety stock is

maintained to meet the requirements of inventory at times when the stock in

the first bin is exhausted and re-ordering occurs.

An effective inventory management should:

Ensure a continuous supply of raw materials to facilitate uninterrupted

production.

Maintain sufficient finished goods inventory for smooth sales operation

and efficient customer services.


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