Transportation, Inventory control

Transportation rates depends on :

Value of product; more the value, higher the rate.

Cost of handling : Space reqd, traffic density of origin, volume, quantity discount, dsitances, special facilities;

Competition of transporters;inter modal, intra industry

Govt policies, regulations.

Cost reduction opportunities : wherever possible, freight bills send to auditing firm

Variations : Commodity rates, Rates related to shipping products, commodity description

Carrier alternatives ; FOB termsPackaging & Materials handling ; trucks with

special racks, material handling devices, cut packaging costs.

Damage losses can be reduced by 80% if merchandize is handled more gently in company operated trucks.

Damage claims : inadequate packaging, more costly containers, making claims against carriers, traffic dept works with packaging engineers to reduce damage, carriers aloow for some damage, prevent future damage

Demurrage : Penalties beyong stipulated time; 24 to 48 hrs; credit note for early taking.

Insurance buyingInsurance management : Cover for Materials

in transit & storageMarine InsuranceInland transit

Inventory & Inventory control techniques: Inventory is a Complete list of items; A

quantity of goods in stockInventory control is a set of policies &

procedures by which an organization what materials it should hold in stock & quantities of each it should carry.

Need for IC : It is around 30%. Larger the range of inventory items, greater

the no of problems in inventory, procurement, investment, handling, accounting, shortages, stockoputs, deterioration , obsolescence,etc.

2 major questions in IC : How much to buy & when to buy this quantity;

a. Requirements ; Timewise, operations scheduleb. Quantity in stock or order : Stores stock ledger

balance + unfulfilled purchase ordersc. Procurement time or lead time : Administrative &

Suppliers” D. Obsolescence : Make material obsolete

Economic order quantity : A technique to determine the quantity & economize on total cost of purchases.

Inventory control techniques :

ABC Classification : Always better control ;Analysis of all items in terms of annual

consumption of each in Rupees.; 10% items account for total ACC- annual consumption cost, 20% account for 15% of ACC, 70% for 5% of ACC.

HML : high, Medium, Low – on unit value ; above 5000, 1000 to 5000, less than 1000

VED : Vital, essential, desirable – mostly for spare parts. Older the machine, more the maintenance spares required,

SDE : Scarce, desirable, essential

GOLF : Govt, ordinary, local, foreign – MMTC, STC, IDPL, ordinary procedures of IC wont work, special treatment.

FSN : Fast, slow & non Moving – Focus on Non moving & control them.

SOS : Seasonal, Off seasonal, Seasonality – Agricultural origin & seasonal in character to be purchased at best time ; EOQ not applicable

XYZ : Value of items ;