 Hello everybody, I am Mr. Keshav Valase from Walton Institute of Technology, SolarPur. Today we are going to discuss about some basics of inventory control. At the end of this session, students are expected to understand what is inventory, what is inventory control. At the same time, the basics as to even why we need to maintain the inventory. So, in this session, we are discussing about fundamental aspects that is basics about the inventory control. Coming to what is inventory, we focus our discussions mostly on engineering manufacturing industry. To run any manufacturing industry, we need a variety of items. All these items, the stock of goods, which we needed to manufacture the final product of any manufacturing company, that stock of goods is called as inventory. Here, I repeat again, we are considering only the items which go into manufacturing final product of a company. That is, if we consider a two-wheeler manufacturing company automobile sector, then all the items there are stock which go into manufacturing a two-wheeler, the automobile as a final product of the company. Otherwise, some people talk about inventory items like stationary or furniture and many others. But we are focusing purely on inventory items which go into manufacturing the final product of the company. Secondly, inventory control we can refer as our all the activities towards maintaining the stock of the goods so that our ultimate inventory related cost will be kept minimum. Thus, inventory is the stock of goods, all the items that go into manufacturing the product and inventory control is all the activities directed towards maintaining our inventory related cost to minimum level. Now, coming to the types of inventories, again I mentioned specifically here, we are focusing only on manufactured goods. We are thinking on manufacturing industries and inventory items for such industries only. With this, we can classify inventory into three types, raw material, work in process and finished goods. Raw materials can be thought in different forms which basically come from primary manufacturing processes by enlarge rolled bars which could be rounding section or square hexagonal or any shape which are used as the preform as a raw material then to machine and manufacture the final products required. These raw materials may even be sometimes a part of forced components or sheet metal parts also. Secondly, work in process. Once we start the manufacturing activity, once we process first operation on raw material, then till the last operation on that job is completed, the state of the job is referred as the state of the material, the state of the inventory is referred as work in process. Third category is finished goods. These are the items wherein all the operations are completed on the job and now the job is ready to be dispatched as a completed job. For example, if we take automobile industry then say two wheeler while we complete painting and everything and then it is ready for dispatch that a stage of the product we can call as finished goods stage. Thus, there are these three types of inventory items. Here I would expect you to just think little while on some industry and for that industry you can list down different types of inventory items and possibly classify them under these three categories of raw material, work in process and finished goods. You may take any auto industry, maybe fan manufacturing, machine tool industry or any industry and just try to list down all items that you can think of for that industry into these three categories of inventory. Now, coming back to why we need to think of inventory, why we need to maintain inventory, why to control inventory. If we look to this graph, this straight line represents holding cost or carrying cost. This particular graph is the graph for inventory cost versus inventory quantity wherein we are considering only on two major costs in the inventory. One is holding or carrying cost, second is setup or ordering cost. Here there are many more types of costs to be added but they are negligible. Hence, the prominent one these two types of costs we are considering. This holding cost, this straight line indicates that as the quantity increases, if you see x-axis as the quantity increases, this holding cost increases and the second types of costs mentioned here is as the quantity increases, this setup cost or ordering cost goes on decreasing. The behavior of these two costs is contradictory to each other in the sense while quantity increases, one cost increases and second decreases. Hence, if you look to this point, here both the costs are same and we are interested in this particular lowest point of a total cost. This total cost is a summation of both these costs and we are interested in this bottom most point of this total cost curve which indicates the minimum cost. Hence, we need to maintain inventory so that we can run our business around this particular point of minimum cost associated with this lowest point which can be referred as economic order quantity. Thus to keep our inventory related cost, total cost to a minimum level we need to maintain inventory. Now here I have just mentioned two books as references, one is by S.D. Sharma, second is by Hira Gupta, otherwise we have plenty of the books available in operations research. Thank you.