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Inventory Control & Cost Reduction Techniques

Inventory control & Cost Reduction techniques is an important part of materials management which helps to reduce the overall cost of Inventory control by applying various basic as well as innovative techniques such as Inventory turnover ratio, Standardization and codification, Value Engineering and Value Analysis.


Also called Industrial Standardisation

This is a process of establishing an agreement upon acceptable levels of various characteristics on the basis of specific studies, experience, recommendations of the statutory bodies or the governments.

e.g. of characteristics: Dimensions, Physical characteristics, chemical composition, performance etc.

The established agreement or uniform identification is called a standard or specification

Standard and Specification are the two different things. This difference mainly depends on the intention of use.

Specification: is intended for recurrent use

Standard: Every standard is a specification but every specification is not a standard.

Factors or Aspects to consider for standards

DimensionsTo ensure interchangeability and to reduce the varietyIS 13099, IS 13902 (Part I) 1993, IS 5387
Performance Requirements IS 12718 – 1989, IS 12835 – 1991
Design Requirements IS 16533 (Part I) 1989, IS 12835 (Part I) 1989
Safety Requirements IS 1991 (Part 1) 1987, IS 5571 – 1979
Codes of practice, methods of test and glossariesCodes of Tests: guidance on best-accepted practices methods of tests: give details of tests Glossaries: provide standard definitions of terms, conventions, units and symbols used for technical communications 

Levels of Standards

1Individual standardsstandards laid down by an individual user, a department or a firmPreferences of Executive
2Industry Standardsprepared by a group of related interests in a given industry, trade or profession or statutory bodies & authorities by Govt.SMMT (Society of Motor Manufacturer and Traders), Textile Commissioner, Agmark, etc.
3National Standardsat the national level by consulting manufacturers, scientists, users and government departments,ISI (Indian Standard Institution), BIS (Bureau of Indian Standards), The National Physical Laboratory, Departments of Weights and Measures
4International Standards by International bodies ISO (International Organization for Standardisation), Organization for Legal Metrology, World Gold Council

 Some Foreign Standards in Use in India

APIAmerican Petroleum Institute
ASAAmerican standard association
ASTMAmerican Society of Testing Materials
BSSBritish Standard Specification
DINGerman Standards
GOSTUSSR Standards
ISOInternational Organization for Standardization
JIS Japanese Standards
SAESociety for Automobile Engineers
UNIItalian Standards

Activities involved in Indian Standards

1Establishing the need for the standard
2Scrutiny of the request by the divisional council
3Preparation of draft standards
4Publication of the standard

Advantages of Standardization
Standardization offers the following Advantages or benefits.

2Eliminate unnecessary things
3Reduces unnecessary Varieties
4An accurate comparison of Quotations
5Procurement from more than one manufacturers or suppliers
6Interchangeability of parts
7Routinizes purchase efforts
8Reduces inspection and quality costs
9Reduces Material Handling costs
10Reduces procurement lead time
11The basis for further inventory analysis

This is all about Inventory Control & Cost Reduction Techniques.

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