INVENTORY MANAGEMENT – Define the numerous techniques are available for forecasting and explain in detail

  Define the numerous techniques are available for forecasting and explain in detail




Wall Mart – success story we know very well. Their formula for success has been getting the right product on the appropriate shelf at the right time, at the lowest price. This is possible only when there is in place a perfect forecasting system, backed by the most accurate data possible. The company has invested several million dollars in data warehousing. It possesses more detail than any of its competitors on what is going on, product by product, store by store, day upon day. The systems house data on point of scale, day upon day. The systems house data on point of sale, inventory products in transit, market statistics, customer’s demographics, finance, product returns and supplier performance. The data is used for analyzing trends, managing inventory, understanding customers and determining product mix and presentation at each store.

Wall Mart has developed a demand forecasting application that looks at individual items for individual stores to decide the seasonal sales profile of each time. The system keep a year’s worth of data on the sales of 100,000 products and predicts which items will be needed in each store?

Q1) Explain the term forecasting?

Q2) What are the advantages of forecasting?

Q3) Explain the types of forecasting?

Q4) Define the numerous techniques are available for forecasting and explain in detail?


Suppose you are working as a Inventory Manager in a manufacturing company. Your company requires 1000 units of raw material per month. The ordering cost is Rs 100 per order. The carrying cost is 15% of average inventory per order. The cost of raw material is Rs 10 per unit. The company can get a discount of 3% on price of it orders 5000 or more units upon orders of 8000 units or more the company get a discount of 5%.

Q1) How you will calculate the Economic order quantity?

Q2) Should you feel that company accept a discount?

Q3) If so which discount do you think that your company should accept?

Q4) Why give reasons and justify your view?


It is learnt that Ford & General Motors have both established large internal-based market places named Auto xchange & Trade xchange respectively. They want to create an online market place to achieve greater economics of scale and to give their suppliers access to more business globally, allowing suppliers and manufacturers to slash costs.

Toyota, however, does not want to collaborate with them. Their philosophy is that supplier’s are their partners. They believe in helping suppliers cut costs through a guarantee of long term contract. Putting these parts in the open market would pit them against other suppliers, causing an adversarial relationship.

For Toyota to agree to join in the market place, they suggested that they could start with some “standardized” components. Differences arose in the definition of a ‘Standardised component. GM feels that steering wheels and wire connectors can be begun with but Toyota considers that these components are competitive.

Q1) How do you think suppliers would view these sites?

Q2) Discuss the advantages and disadvantages of these two approaches?

Q3) All the components together help to create a competitive vehicle, so is the idea of a market place incorrect?

Q4) Discuss the pros and cons of such market places?


HLL Company is a young growing organization with a turnover of over Rs 200 crores. The company has a central warehouse near the factory, 7 regional warehouses at important locations and 27 depots or storage points from where supply is made to stockists who sell the company’s products. Its current stock holding is :

18 days All India Sales at Central Warehouse

37 days All India Sales at 7 Regional Warehouses

50 days All India Sales at its 27 depots

The company was making very good profit on its sales and the marketing manager who was incharge of the entire distribution system was least concerned about the huge inventory.

The top management was however, not very happy with the situation and hired a professional materials manager to conduct a diagnostic study. The study revealed that out of the total stock held, a considerable volume, representing about 25 days annual sales was slow moving and 72 non-moving items valuing more than Rs 4.1 crores had not moved for over two years. 354 items that were slow moving valued at Rs 6.1 crores could last for about 5 years based on the present rate of consumption.

The area salesman attached to the depots indented for the new stocks and not the depot incharge. As a professional material manager, you are asted to :

Q1) Comment on the shortcomings of the present state of affairs?

Q2) Comment on the current system of controlling finished goods inventories?

Q3) Suggest area of improvement in the present system.

Q4) Explain the advantages of your suggestion

Define the numerous techniques are available


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Define the numerous techniques are available