The scope of inventory control is as follows:
1. Determination of economic order quantity
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2. Formulation of policy
3. Determination of lead time
4. Effectiveness towards running of store
5. Organisation structure
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6. Determination of safety stock
7. Minimum material handling and storage cost.
1. Determination of economic order quantity:
Economic order quantity or economic lot size refers to that number ordered in a single purchase or number of units should be manufactured in a single run, so that the total costs — ordering or set up costs and inventory carrying costs are at the minimum. So, the determination of E.O.Q. is also within the scope of inventory control.
2. Formulation of policy:
The policies of investment procurement, storage, handling, accounting, storages and stock outs, deterioration, obsolescence etc. are to be formulated under the scientific system of inventory control. What, when and how much of purchasing and fixation of minimum and maximum levels is also to be determined for a given period of time.
3. Determination of lead time:
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By lead time is meant the time that lapses between the raising of an indent by the stores and the receipt of materials by them. Lead time is of fundamental importance in determining inventory levels.
4. Effectiveness towards running of store:
The determination of policies of the location, layout and materials and storage handling equipments certainly help in the effective working of stores organisation.
5. Organisation structure:
After determining of inventory policy, the next step is to decide the location, layout and types of storehouse. It facilitates the movement of materials and thus minimise the storage and handling cost of stores.
6. Determination of safety stock:
Safety stock is defined as the difference between the amount stocked to sati.sfy demand during a certain time interval and the mean expected demand for that period. It is for the purpose of providing protection against depletion. If demand remained constant and lead tin-; is invariable, there would be no fear of shortages and no need for safely stocks.
The exact quantity of safety stock of an item depends upon its lead time, usage value, and variability of lead time demand, carrying charges and the importance of its stock out cost. Again, determination of buffer stock reserve stock is included in the management of inventory.
7. Minimum material handling and storage cost:
Stores organisation activities are arranged in such a manner that the east of bringing in the store house and issuing from the store house if the various stores, will minimise the storage and materials handling cost of stores.