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An Optimal Inventory Control Of Raw Materials And Network Analysis Of Production Planning
[A CASE STUDY OF AKA PAINT NIGERIA LIMITED]
CHAPTER ONE -- [Total Page(s) 4]
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1.3 THE NEED FOR AN INVENTORY
The
inventory of a company can be described as the totality of stocks of
various kinds which include raw materials, partly finished goods and
materials, subassemblies, office and workshop supplies and finished
goods.
The fundamental reason for inventory is that it is physically
impossible and economically impracticable for each stock item to arrive
exactly when it is needed other reasons are
vAnticipating normal demand
vTaking advantage of bulk- purchase discounts.
vMeeting emergency shortages due to some unforeseen circumstance like strikes breakdown of the firm’s plant or vehicle
vAbsorbing wastage and unpredictable fluctuation etc.
1.4 INVENTORY COST
(a)
Purchase or manufacturing cost :- This is per unit cost of buying or
making a unit of production. This includes transportation, clerical and
administrative costs associated with the physical movement of bought
goods. The unit price of the commodity decreases as the ordered quantity
increases.
(b) Holding or carring cost :- This is the cost of carrying item in storage of inventory until it is sold or used. This include
(i) Interest on capital invested in the stock
(ii) Storage costs or changes (rent lighting heating air conditioning etc)
(iii) Insurance security
(iv) Stores staffing equipment maintaince and running costs. Holding cost increase with the level of inventory.
(c) Shortage or penalty or stock out cost :- These are the cost associated with running out of stock. These include
(i) Cost contribution through the best sale called by the stock out
(ii) Loss of future sales because consumers goes elsewhere
(iii) Loss of consumers good will
(d)
Setup cost :- This is the cost of placing an order for a commodity from
an outside vendor, which is independent of the number of units ordered
for
CHAPTER ONE -- [Total Page(s) 4]
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ABSRACT - [ Total Page(s): 1 ]This study is aimed at determining the optimal quantity of raw materials to be ordered for and when best to make the order. It also aimed in determing the completion time in the producer of paint. A case study of Aka paint industry limited was taken. ¬To complete these, data was collected from the company and the project network was drawn. Mathematical models such as economic lot size model were used in determing the optimal quality of the raw materials to be kept on inventory. Programme eval ... Continue reading---
