Oracle E Business Suite : Oracle Inventory | Class 4

Oracle Inventory   : Various Concepts in Inventory Control

Inventory Control is a technique of maintaining the size of the inventory at some desired level , Keeping in view the best economic interest of the organization.

                            Type of Inventory                Reasons for Holding the Inventory
Raw Material To Reap the price advantage available for on seasonal raw material
Work in Progress To Balance the Production flow
Readymade Components When the Components of item are bought rather then made
Scraps They are Disposal of in bulk
Finished Goods Lying in stock rooms and waiting for dispatches


The chain of finished goods in transit goes like that Suppliers>Raw Material>Production WIP> Finished Goods>Customers

What is Economic Order Quantity or EOQ?

Economic Order Quantity is the size of the order for which the total cost is minimum.

Formula for EOQ

EOQ = ~{2RCp/ Ch}

Where R= Annual Quantity to be used in units, Cp= Cost of Placing the Order, Ch= Cost of holding one unit for one year. The stock of finished goods is called inventory.

ABC Analysis is done in the case of costlier items.

What is ABC Analysis?

Classification based on Consumption Value

1 A Class  Items  :

  • These items require detailed and rigid control
  • Need to be stocked in smaller quantities

2   B Class  Items :

  • These items do not need detailed and rigid control
  • Normally stock is reviewed once in 1 or 2 months

3 C Class  Items :

  • Do not require close control
  • These items need to be procured infrequently in bulk to get quantity discount.

Major Drawbacks for Excessive Inventory are:

1 The unnecessary tie up of the firm funds and profit and loss

2 Excessive Carrying  Cost

3 The risk of Liquidity

Inventory system is maintained in order to have the stock of the item, either raw or finished goods. It is kept in stock where the plant is there or manufacturing of any item is done. It is also maintained in such a way that an order is received gradually and inventory is depleted simultaneously. The main objective of Inventory management is to have right material, at the right time, to meet production demand while optimizing the overall inventory investment.


The purpose of Inventory Management in Oracle is to:

1 Maximize Inventory Level

2 Maximization Utilization of stores

3 Reduce Lead Time

4 Increase  Production Efficiency

5   Improve Customer Satisfaction

6   To Minimize the possibility of disruption in the production schedule of a firm for want of Raw   Material,  stock and spares.

7 To Keep down capital investment in inventories.

What is Inventory Control?

It is concerned with acquisition storage handling use of inventory whenever needed for providing adequate Provision.

Thus to sum up we can say that Inventory management is needed to improve customer satisfaction, increase production efficiency and reduce lead time. It is a process of vital importance in Oracle to get desired results on time.


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