![]() The decoupling inventories act as shock absorbers in case if varying work rates, machine breakdowns or failures etc.ĭemands in many cases are seasonal and he inventories have to be maintained to meet such high seasonal demands economically. For an item that requires processing on a series of different machines with different processing times, it is a must to have decoupling inventories of the item in between the various machines for smooth and continuous production. They are required to decouple or disengage the different parts of the production system. This extra stock in excess of the average demand during the lead time is called buffer stock. Such situations require extra stock of the item to reduce the number of stock outs or back orders. Similarly, the average delivery time may be known but actual delivery time may be more due to some unforeseen reasons. A company may well know the average demand of an item that it needs but the actual demand may turn out to be quite different. They are required as protection against the uncertainties of supply and demand. ![]() coal being transported from coal fields to a thermal plant. They consist of items that are currently under transportation e.g. These are also called transit, pipe line or movement inventories. Indirect inventories are of following types: in the inventory of every production enterprise but these does not become a part of the goods produced. For example, fuel, oil, coolants, lubricants, maintenance, spare parts, tools etc. Indirect inventory includes such items which are required for manufacturing production of goods and services are not a part of the finished goods. Maintenance, repair and operating items such as spare parts and consumable stores that do not go into the final product but are consumed during the production process.Īll other items such as scrap, obsolete and unsaleable products, stationary and other items in office, factory and sales department etc. Products can be displayed for the consumer. It helps in efficient scheduling of productionĮ. It is impossible to produce instantaneously on demand.ĭ. It is economical to have inventory than constantly placing orders.ī. The finished goods may be stocked to meet varying market demands. This includes the final products ready for dispatch to consumers or distributors. The components which are in the process, neither raw material nor finished food but semi finished goods lying in machines or in factory awaiting completion is called work in progress. Items such as raw materials, components and subassemblies used to produce the final product. Direct Inventories can be further classified into following types: These includes such items which are directly used for production or manufacture and are a part of the goods/services produced or provided. ![]() Inventories are generally classified into following types: Types of Inventories/Classification of Inventories ![]()
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