Literature Review On Inventory Control Management Finance Essay

Literature Review On strain Control Management Finance EssayThe Assam tea leaf sequence leaf Corporation is a pioneer in producing highschool quality tea leaf having its own touch on plant with an excellent implication of news report control. The briny go of this root word is to conduct a literature review on the inventory control focal point and the trading cognitive processs in practice of the Assam Tea corporation touch on plant where I was employed.The company has an efficient twist of inventory control and has set a standard for other companies in the same act in that argona .The company produces a high quality tea mostly meant for export in the act upon of CTC and Orthodox tea. The return of the company is world famous for its high quality taste.They offer state of the subterfuge infrastructure in the processing plant with a highly trained employee and efficient way if inventory control. They have various wholes in the processing plant i.e, starting from the picking up of green leaves which is the major(ip) circumstances of keen material.The company has own plantation unit of measurement from where the raw material is readily available. save they have tie ups with other local tea gardens to ensure a steady supply of tea leaves.The tea processing unit is a complex mechanical process grows nether the article of faith of operation management and inventory control.The function of it is a crucial one which has to deal with durational and alternate(prenominal) mutants of demand persisting in the market .The inventory control has to deal with waste management in the unit by finding out the optimum take of demand .The assuageal fluctuations is primary(prenominal)ly bodied with the monsoon season where the production of tea leaves at the peak direct.I was assigned with the responsibility of the assistant manager operations in the processing unit.This report mainly encounters with the various concept of inventory control and its ma nagement undertaken by an organisation with stress on inventory and its effective control.It deals with the court related with the inventory and its profile,Usage of probabilistic predict of demand and overall role of the inventory control in a tea processing unit .There be various issues how to improvise the situations and improve the competitiveness related to the issues .The method applied to prepare this report with a high concentration on the textbooks and the web-source related to operations management .The in pull ination collected by all the experimentations observed and final examly resorted to website and standard textbook of operations management.2.Literature Review2.1 What is inventoryInventory has a multilevel function in the process unit and the starchys used to maintain mainly four level of inventories Raw material-This is the unprocessed form of the item which sess be utilisied from varied make sense of suppliers .This form should be used to find out the supe rior form by removing the supply variability in quality,quanity or season of delivery.Work-in process(WIP) inventory-This is an intermediary form of inventory when the raw materials undergone a change but non completed.Maintanence/repair /operations(MRO) inventory-2.2 inventorying CONTROL MANAGEMENTIn this part of analysis importance should be wedded when to distinguish and how much to order.The pathl which are based on independent demand screw be divided into three.1. basal Economic Order beat(EOQ) model2.Production order quantity3.The quantity discount modelBasic Economic Order Quantity modelThis is the most common form of the inventory control proficiency .The technique is based upon following assumptions-Production order quantity modelThe model is applicable under two situations.Firstly,When the order is placed there is never-ending function of inventory.Secondly,the units are produced and sold simultaneously.In the case of Assam Tea Corporation processing unit both th ese situations are prevalent.In this model daily production rate is dictated on the radical of daily rate of demand.It is useful when inventory build up is a continuous process over the time and assumption of traditional Economic Order tallys holds valid.It is the situation where the optimum order size Q* is estimated with an equality in set up hail to holding appeal,The production order quantity modelQ=Number of pieces per orderH=Holding apostrophize per unit per yearP=casual production rated=Daily demand rate or usage ratet=Length of the production run in daysThe final expression for optimal level of inventory Q* is-Probabilistic model with constant lead timeProbailistic model with constant leadtime is highly relevant.In the social movement of equivocal demand ,the management of the company faces challenges to maintain adequate service level.The service level can be complimented by the probability of a shop out isTo reduce stock out the company can hold inventory as safet y stock.Whereas if Reorder point=ROP=dxLWith the addition of safety stock,the expression becomes=ROP=dxL+SS save annual stock out costs=The sum of the unit shortxthe probabilityxThe stock out cost per unitxthe number of orders per year2.2 exist OF take stockIn case inventory control analysis there are various costs regard in the overall process.The cost of inventory is calculated in the form of unit values.However major segment of the inventory cost can be discussed as follows-THE CARRYING COST OF INVENTORYIn this segment of costs of carrying items of inventories are included.This is the cost of running a warehouse,cost that are incurred on use and counting,costs involved in special storage ,damage and lost,insurance,tax and wornout costs.THE ORDERING OR SET UP COSTThis is the cost which is associated with placing an order and replenishment.This cost includes all the form of orders, make believement cost requisite to ensure it,inspection and receiving cost,handling the vendor i nvoice and the cost necessary to meet unexpected situation.This may be a cost of skilled mechanic aerated as per his technical specification.There are various arguments whether the cost of the skilled mechanic is a fixed cost .But Kaplan (1988),all the costs involved in the long term is virtually variable cost where in that menstruum a person can be fired,a plant can come to shutdown.INSUFFICIENT CAPACITY COSTThe cost involved here is meant to avoid the stockout cost.In the case of production process ,it is the emergency cost needed for emergency replacement of the production equipment to enhance the output level,cost involved to speed up the process,rescheduling and assigned do work in split up version.SYSTEM CONTROL COSTSThis is the type of cost appeared in the operation process as per selection of decision system.This includes acquisition,storage,maintanence and computation of the data.The treaining instituted by the organization and employee verification is likewise move in the category costs.In Assam Tea Corporation ,there are a number of costs involved in different level of operation processes .The green leaves are initially plucked from the plantation unit and allowed to undergo different processes like picking ,wilting ,bruishing , oxidisation/fermentation , sacking,yellowing,shaping,drying and curing to get the final product.In the processing unit ,one of the major cost incurred by the company is warehousing the tea product as nearly as the green leaves.If the fresh leaves are not stored properly there is a greater contingency of being dried up and becomes waste.The insurance cover and tax are also one of the dowery.The cost of placing an order is one of the significant part of the processing unit.There is an inspection unit in the company which takes account of quality control in the unit.There is the cost of technicians expertise in that specific line During the peak season as the production process is a complex mechanical one.During the peak season ,especially during monsoon,there is always tautologic cost of utilizing extra-capacity,expediate the process.In that situation temporary workers are employed on the basis of shift duty with extra time bonus has to be paid.The company has to bear the cost on information system and its maintanence as it uses a data warehousing software.With the present environment of rapid change in the technology the company has to rear training for skill enhancement training to its manpower.This has been done with Tocklai Tea Research Centre,one of the leading Tea enquiry institute .The training cost and performance analysis cost is formed as one of the cost. secernate VARIABLES IN INVENTORY MANAGEMENT1.REPLENISHMENT LEAD TIMEIt is the time between placing an order and to meet the final demand of the customer physically.2.REORDER POINTIt is the point of the inventory level where the replenishment of stocked item takes place.Where ROP=dxLwhere d is the demand per day,L is the leadtime for a new order in days3.SAFETY STOCKA buffer stock to meet up an uneven demand.OPERATION PROCESS UNIT OF TEAThe Assam Tea Corporation has its processing unit for production of CTC() and Orthodox tea in the form of .which account for almost 80% of the main production whereas the other form of teas are produced at paltry 20%.The tea processing begins with flushing of tea from Camellia Sinensis(Botanical name of tea) and afterwards that it is dried for brewing of tea,oxidization of leaves and ,stopping oxidization ,drying of leaves ,and oxidation has a main part to bring the final flavor of tea.The company produces variety of tea through different processes which can be visualised with the aid of flow-chart diagram.The process itself starts from the left hand side of the flow chart with the operation of stocking into raw material or fresh green leaves.The processing unit of the Assam Tea Corporation is highly enmeshed in production of black tea and green tea which constitutes 80% of the output whereas other constitutes 20% of the total production.For obtaining a black tea(the red coloured flow chart) as the final product it can be seen in the diagram that after getting the fresh leaves the process undergoes with indoor witting,the CTC with full oxidation rolled to the drying unit done through desiccation and finally drying at optimum temperature,the black tea can be obtained.While for green teaTthe green coloured flow chart) after steaming and panning it is rolled to get the desirable form and finally dried to get green tea.The whole system of operation can be divided into following important parts-1.PickingA terminal bud and two leaves are plucked from Camelia Sinensis.2.WiltingWith an oxidation done in the presence of enzyme ,the tea leaves are wilted to rack up the excess water from leaves.3.BrushingTo expediate oxidation ,the tea leaves are let to fall in buckets and rolled over by wheels.4.Oxidation/FermentationThe major operation of oxidation was to break d own the the chlorophil and relax the tannin,as the leaves are unploughed in a climate control room.5.Kill green/FiringTo stop the oxidation at in demand(p) level and restore the flavor this step is done.6.YellowingIt is done in a close container after firing to obtain beverage of yellow tea.7.ShapingAfter yellowing it is rolled into stripe wrinkles8.DryingThis is done to get the ultimate product or tea for sale.PROBLEMS RELATED WITH INVENTORY CONTROL IN TEA PROCESSING UNITIn the tea business it is the monsoon which has a direct effect on the production of the green tea leaves which is the main raw material for the processing .In case ,there is good rainfall the yield of the leaves goes up and supply becomes steady.In that season the production unit of the tea garden is at greater stress with low lead time which means shorter time gap in the production system to wait,move,que and set-up and run time for each component produced.On the contrary,if there is low rainfall,the production of green leaves drops and lead time is more as the supply flow is less.However ,risk factor is present during the time of high production ,the tea leaves needs extra business concern so that it should not expose to moisture and in that case extra manpower is needed on shift duty basis to expedite the process.In the Assam Tea Corporation processing unit ,the production and sales takes place within a day.In this situation production order quabtity model is relevant as the firm is receiving its raw material over a period of time within a day which straightaway comes from the plucking unit.An optimum level of Q* is calculated to control the inventory.RecommendationsIn the view of the above discussion an optimum level of inventory can be obtained by reducing the waste in the following steps.1.Inventory PlanningAn lofty inventory planning can take place with the arrival of new one immediately after the last unit sold/dispatched.2.Establish order cyclesIn case of business with seasona l cycles it is important to establish a relationship of demand between sellers and suppliers.3.Balance Inventory levelInventory level should be match looking into the matters related to market and budget.4.Review StocksThe stocks should be reviewed as the obsolete one is equivalent to a doomed capital.5.Follow up of stocksThe management should take the key decision about disposal,replacement and discontinuance of different inventory base.INVENTORY PLANNING DECISION IN TABULAR FORMATCOST AND some other IMPORTANT FACTORSSERVICE prerequisiteCUSTOMER ORDERING CHARACTERISTICSIn this category ,the most important part is customer expectations and competitive practices,time management and influence on customer.Order characteristics include order timing and size,information about large orders on the basis of standing orders.In the tea processing unit ,the customer always is in prompt mode as the order has to reach the market and meet the price fluctuation in the auction market. guide PAT TERNSSUPPLY SITUATIONDemand pattern is always governed by variability and seasonality.Another important part is presence of substitutes and ability to forecast.The green tea leaves as an inventory effected by variability of the weather condition and effected by rainfall which determines yield of the tea leaves and it is the three quarter of the month the supply is sleek and one quarter is without any production.The presence of substitute is lowand as there is high fluctuation in the market forecasting is not an easy task.This a challenging part as to press down the lead time , the processing unit has to avoid any waste .At the same time reliability depends upon the flow of the inventory and at the same flexibility can be ensured with additional work force on call which can also expidiate the process.COST FACTORNATURE OF THE PRODUCTonce more the cost factor is governed by stock out cost which is also a probabilistic measure,there is also cost of carrying and spaceThe nature of the product is perishable and moisture will make it obsoleteOTHER ISSUESIn the tea processing unit the crucial point is power supply and mechanical efficiency.