Block 4

WASTE MANAGEMENT
Explain the concept of Waste Management. Importance of Waste Management.Key
Elements OF Waste Management. and Challenges and Future Directions
Ans:
Concept of Waste Management:
Waste Management is the process of handling waste materials in a way that reduces their
impact on the environment and human health.
The goal is to reduce the negative impact of waste on the environment and human health.

Importance of Waste Management:

1. Environmental Protection: Helps in reducing pollution and conserving natural
resources.
2. Health and Safety: Proper waste disposal prevents the spread of diseases and
ensures cleaner surroundings.
3. Resource Conservation: Recycling waste materials can conserve valuable resources
and reduce the need for raw materials.
4. Cost Reduction: Efficient waste management can reduce disposal costs and generate
revenue from recycled materials.
5. Sustainable Development: Promotes sustainable practices by reducing waste and
minimizing environmental impact.

Key Elements of Waste Management:

1. Waste Generation: Identifying sources of waste, including industrial, domestic, and
commercial.
2. Waste Collection: Gathering waste from different sources using proper containers
and vehicles.
3. Waste Transportation: Moving waste from collection points to disposal or treatment
sites.
4. Waste Treatment: Processes such as composting, recycling, or incineration to reduce
waste volume and harmful effects.
5. Waste Disposal: Final disposal of waste in landfills or through environmentally
friendly methods.
 6. Waste Reduction: Strategies to reduce waste generation at the source, like reducing
packaging or reusing materials.

Challenges in Waste Management:

1. Increasing Waste Generation: Rapid urbanization and industrialization lead to higher
waste production.
2. Limited Recycling: Many materials are not recyclable or cannot be processed
effectively.
3. Improper Disposal: Illegal dumping and inadequate waste management systems can
harm the environment.
4. High Costs: Waste management services can be expensive, especially in developing
countries.
5. Public Awareness: Lack of awareness and responsibility among people about waste
segregation and recycling.

Future Directions in Waste Management:

1. Technology Integration: Use of advanced technologies like AI, robotics, and sensors
for efficient waste sorting and management.
2. Circular Economy: Focusing on reusing, repairing, and recycling products to reduce
waste.
3. Waste-to-Energy: Converting waste into energy through processes like incineration
or biogas production.
4. Sustainable Practices: Promoting zero-waste policies and sustainable packaging
solutions.
5. Public-Private Partnerships: Collaboration between governments, industries, and
communities for better waste management solutions.
This approach to waste management can help address current challenges and create a
cleaner, more sustainable future.
THE FUNCTIONAL CLASSIFICATION OF WASTE
MANAGEMENT
Here’s a simple explanation of the functional
classification of waste management for exam
point of view:
Functional Classification of Waste Management:
1. Waste Generation:
o The process where waste is produced, either from households, industries, or
commercial activities. Understanding the types and sources of waste is the
first step.
2. Waste Collection:
o Gathering the waste from various sources and bringing it to a central location.
This involves using bins, containers, or trucks for collection.
3. Waste Transportation:
o Moving the collected waste to treatment or disposal sites. It involves
transportation vehicles designed for handling different types of waste.
4. Waste Processing or Treatment:
o Involves methods to reduce the volume of waste or make it less harmful. This
includes recycling, composting, or using waste-to-energy technologies.
5. Waste Disposal:
o The final step where waste is disposed of in landfills, incinerated, or turned
into useful products. This ensures waste doesn’t harm the environment.
6. Waste Minimization:
o Strategies to reduce waste generation at the source, like reducing packaging,
reusing materials, and recycling to lower the amount of waste produced.
These functions work together to ensure waste is properly managed, reduced, and disposed
of, protecting both the environment and human health.
Definition of Wastivity:
Wastivity refers to the amount of waste generated during a production or manufacturing
process. It is a measure of how much material or resources are wasted compared to what is
used effectively in production. Reducing wastivity is important for improving efficiency and
reducing environmental impact.

Gross Wastivity:
• Gross Wastivity refers to the total amount of waste generated during a production
process, including both waste that is unavoidable and waste that could have been
prevented.
• Formula:
Gross Wastivity = Total Waste Generated / Total Material Used

Net Wastivity:
• Net Wastivity refers to the amount of waste that could have been reduced or
eliminated with better processes, design, or efficiency.
• It is calculated by subtracting unavoidable waste (like scrap that is necessary) from
the total waste generated.
• Formula:
Net Wastivity = Gross Wastivity - Unavoidable Waste

In simple terms, gross wastivity includes all waste, while net wastivity focuses on the waste
that could be reduced or avoided through improvements.

Differentiate Between Wastivity and

Productivity. Explain whether reducing
wastivity and increasing productivity imply
one and the same thing.
Here is a comparison chart between Wastivity and Productivity:
Aspect Wastivity Productivity

Measures the amount of waste

Measures the efficiency of
Definition generated during the production
producing output per unit of input.
process.

Reducing waste in the production Maximizing output with minimal

Focus
process. resources.

To minimize waste and improve To increase output while optimizing

Goal
resource usage efficiency. resource use.

Ratio of output to input (labor,

Measurement Ratio of waste to total material used.
material, etc.).

Wastivity = Total Waste / Total

Formula Productivity = Output / Input
Material Used

Negative indicator (more waste is Positive indicator (more output is

Indicator
undesirable). desirable).

Effect on Focuses on reducing inefficiency and Focuses on improving efficiency

Production waste. and output.

High productivity means more

High wastivity means more materials
Example products are made with fewer
are wasted in the production process.
resources.

In simple terms:
• Wastivity = Waste generated (efficiency loss).
• Productivity = Output produced (efficiency gain).
Reducing wastivity can help improve productivity, but they measure different aspects of
production efficiency.

Does Reducing Wastivity and Increasing Productivity Mean the Same?

• Not exactly the same, but they are related. Reducing wastivity generally helps in
improving productivity, but they are not identical.
o Reducing Wastivity: When wastivity is reduced, less material or resources are
wasted, meaning that the materials used are more efficiently transformed
into the product. This reduction in waste can lead to a more efficient
production process, which can indirectly increase productivity.
 o Increasing Productivity: Involves improving the overall output per unit of
input. This could mean producing more with the same amount of resources,
time, or labor, which may also include reducing wastivity. However,
productivity improvement can also come from other factors like better
management, automation, or innovation in the production process.
So, while both aim to improve efficiency, reducing wastivity focuses more on minimizing
waste, whereas increasing productivity focuses on maximizing output. Reducing wastivity is
one way to improve productivity, but it doesn't automatically mean the same thing.

COMPLEMENTARY OF WASTE MANAGEMENT AND RESOURCE MANAGEMENT.

Waste management is complementary to Resource management. Comment.

Waste Management is Complementary to Resource Management:

In simple terms, waste management and resource management work together to ensure
that resources are used efficiently and waste is minimized.
• Waste Management focuses on handling, reducing, recycling, and disposing of waste
produced during various activities.
• Resource Management involves using resources like raw materials, energy, and labor
efficiently to avoid unnecessary consumption and waste.
How They Complement Each Other:
1. Efficient Resource Use: By managing resources well, less waste is generated. For
example, using raw materials efficiently reduces the amount of waste produced in
manufacturing processes.
2. Waste Reduction: Waste management practices like recycling and reusing help
conserve resources. Instead of throwing away used materials, they can be processed
and used again, reducing the need for new resources.
3. Sustainable Practices: Both practices focus on sustainability. Proper waste
management reduces the environmental impact, while effective resource
management ensures that resources are available for future generations.
 4. Cost Savings: Efficient resource management can reduce the cost of acquiring new
materials, and good waste management can reduce disposal costs. Together, they
can lead to financial savings.
Conclusion:
Waste management and resource management are interconnected. Proper management of
resources leads to less waste, and managing waste properly helps conserve valuable
resources. Together, they contribute to more sustainable and efficient practices in
production and daily activities.

Taxonomy of Wastes
Taxonomy of Wastes (In Simple Terms):
The taxonomy of wastes is a way to classify different types of waste based on their sources,
composition, and characteristics. This helps in managing waste effectively. Here are the key
points:

1. Based on Source:
• Industrial Waste: Waste from factories and manufacturing processes (e.g., chemicals,
metals).
• Household Waste: Waste from homes, such as food scraps and packaging.
• Agricultural Waste: Waste from farming, like crop residues and manure.
• Commercial Waste: Waste from businesses, such as office paper and food waste.
• Construction & Demolition Waste: Waste from building sites (e.g., bricks, wood).
• Medical Waste: Waste from hospitals and clinics (e.g., syringes, bandages).

2. Based on Composition:
• Biodegradable Waste: Waste that can break down naturally, such as food and paper.
• Non-Biodegradable Waste: Waste that doesn't break down naturally, like plastics and
glass.
• Hazardous Waste: Waste that is harmful (e.g., chemicals, batteries).
• Recyclable Waste: Waste that can be reused or processed again (e.g., plastic, paper).
• Non-Recyclable Waste: Waste that cannot be recycled (e.g., dirty plastics, ceramics).

3. Based on Physical State:

 • Solid Waste: Waste in solid form (e.g., plastic bottles, paper).
• Liquid Waste: Waste in liquid form (e.g., wastewater, oils).
• Gaseous Waste: Waste in gas form (e.g., air pollutants, fumes).

4. Based on Degradability:
• Biodegradable Waste: Waste that can be decomposed by nature (e.g., food waste).
• Non-Biodegradable Waste: Waste that cannot break down naturally (e.g., plastics).

5. Based on Hazardous Nature:

• Non-Hazardous Waste: Waste that is safe and does not harm the environment or
health (e.g., paper).
• Hazardous Waste: Waste that can be dangerous to health or the environment (e.g.,
chemicals, medical waste).

Conclusion:
The taxonomy of wastes helps classify different types of waste to manage them properly. By
understanding where the waste comes from and its nature, we can handle, recycle, or
dispose of it in the best way possible.

Outline of I-O-W (lnput-Output-Waste) Model

Outline of the I-O-W (Input-Output-Waste) Model:
The I-O-W (Input-Output-Waste) model is a framework used to understand the relationship
between inputs, outputs, and the waste generated during a production or service process.
This model helps in analyzing the efficiency of a system and identifying ways to minimize
waste while maximizing output.

1. Input:
• Definition: Inputs are the resources or materials used in a production process. This
can include raw materials, energy, labor, capital, and other resources.
• Examples:
o Raw materials (e.g., wood, metal, chemicals)
o Labor (human effort)
o Energy (electricity, fuel)
 o Machinery or equipment
o Financial resources

2. Output:
• Definition: Outputs are the final products or services generated after the input
resources are transformed in the production process. These outputs are the desired
results of the system.
• Examples:
o Finished products (e.g., cars, electronics, food items)
o Services (e.g., healthcare services, education)
o By-products (which may be useful or recyclable)

3. Waste:
• Definition: Waste refers to the unwanted or unused resources that are produced
during the transformation of inputs into outputs. Waste can be solid, liquid, or
gaseous and may be harmful to the environment or economy if not managed
properly.
• Examples:
o Material waste (scrap metal, plastic, wood)
o Energy waste (excess energy consumption)
o Environmental waste (pollution, emissions)
o Process inefficiencies (e.g., defective products, unused by-products)

Key Concepts:
1. Efficiency: The goal is to maximize output while minimizing waste and using
resources efficiently.
2. Waste Minimization: Identifying ways to reduce waste, recycle, or reuse materials to
improve sustainability.
3. Sustainability: The I-O-W model helps in achieving a sustainable production process
by balancing inputs, outputs, and waste.
4. Circular Economy: The model encourages a circular approach, where waste is
minimized, and materials are reused or recycled.
Conclusion:
The I-O-W Model provides a simple yet powerful tool for analyzing and improving
production systems. By understanding the inputs, outputs, and waste, organizations can
improve efficiency, reduce costs, and contribute to environmental sustainability.

UNIT 13-→ STANDARDISATION, CODIFICATION AND VARIETY

REDUCTION
CLASSIFICATION OF MATERIALS
What do you understand by the term classifications? Explain
the concept of Classifications of Materials on the basis of
nature of Materials.
Ans:
Classifications refer to the process of grouping things based on their similarities or shared
characteristics. In the context of materials, it means dividing materials into different
categories based on specific properties or features.
Classification of Materials Based on Nature:
1. Raw Materials: Materials directly used in producing the final product (e.g., cotton for
textiles).
2. Machinery and Equipment: Machines and tools used in production (e.g., lathe
machines, electric motors).
3. Consumable Items: Materials that are used once and cannot be reused (e.g., coal,
lubricants, stationery).
4. Chemicals: Substances used in production, requiring careful handling (e.g., acids,
salts).
5. Inflammable Items: Materials that are highly prone to fire (e.g., petrol, kerosene).
6. Fuel Stock: Consumables used as fuel for production processes (e.g., coal for
furnaces).
7. Furniture: Movable items like tables, chairs, and benches used in the workspace.
8. Scrap Materials: Waste or leftover materials from production, which can be sold
(e.g., metal scrap).
 9. Packaging Materials: Materials used to package goods (e.g., boxes, paper, plastic).
10. General Items: Items not directly linked to production but essential for day-to-day
operations (e.g., cleaning supplies, uniforms).
Classification Based on Usability:
1. Serviceable, Unserviceable, and Obsolete Items:
o Serviceable: Items that can be repaired and reused.
o Unserviceable: Items that can no longer be repaired.
o Obsolete: Items no longer in use due to newer technology.
2. Finished and Semi-Finished Items:
o Finished Items: Complete products ready for sale.
o Semi-Finished Items: Products needing further processing before sale.
3. Dead Stock Items: Items that are no longer in use but still have some life left (e.g.,
old machinery).
4. Unused Items: Items that are defective or damaged and can no longer be used in
production.

CODIFICATION
Codification refers to the process of organizing and assigning unique codes or
numbers to items, products, or materials to make identification, tracking, and
management easier.
In simple terms, it is like creating a system or code to label and categorize
different items in an organized manner, so that they can be easily identified and
accessed when needed.
For example:
• In inventory management, each product might be assigned a unique
code (e.g., a number or alphanumeric code) to quickly identify it in the
system.
• In libraries, books are given unique identification numbers (like ISBN) for
easy retrieval
Key Points:
1. Simplifies item identification.
 2. Helps in easy retrieval and management of materials.
3. Makes tracking and recording efficient.
4. Reduces errors and confusion in handling large numbers of items.
It's an important process in inventory control, record-keeping, and material
management.
WHAT ARE THE REASONS FOR CODIFICATION OF MATERIALS.
Ans:
Reasons for Codification of Materials (In Simple Terms for Exam):
1. Easy Identification: Codes help in quickly identifying materials, reducing
the chances of confusion and errors.
2. Efficient Management: It makes managing large amounts of materials
easier by organizing them in a systematic way.
3. Time-Saving: Helps in faster tracking and retrieval of items, saving time
for workers and managers.
4. Reduced Errors: Reduces mistakes in inventory management and
ordering by ensuring each material has a unique code.
5. Simplifies Record Keeping: Helps in maintaining accurate records of
materials for audits and analysis.
6. Better Control: Enables better control over stock levels, helping to avoid
shortages or overstocking.
7. Improves Communication: Simplifies communication across
departments, as everyone uses the same codes for materials.
8. Cost Efficiency: Helps in minimizing waste and improving the purchasing
process, leading to cost savings.
By using codification, organizations can organize materials more effectively and
improve operational efficiency.
Codification System (In Simple Terms for Exam):
Objectives of Codification:
1. Efficient Identification: To easily identify and categorize materials with
unique codes.
 2. Improved Organization: To arrange materials systematically for easy
access and management.
3. Time-Saving: To save time in searching for and tracking materials.
4. Error Reduction: To minimize mistakes in inventory management and
order processing.
5. Better Control: To manage materials effectively and track usage, stock
levels, and ordering.

Features of Codification:
1. Unique Codes: Every material is assigned a specific code for easy
identification.
2. Systematic Structure: Codes are organized in a logical and structured
way (e.g., numbers or alphanumeric sequences).
3. Standardization: Uniform system followed across the organization for
consistency.
4. Easy Retrieval: The system allows quick access to material information.

Advantages of Codification:
1. Faster Operations: Quick retrieval and identification of materials.
2. Accurate Record-Keeping: Helps maintain error-free inventory records.
3. Reduced Confusion: Avoids mix-up of materials by using distinct codes.
4. Improved Efficiency: Saves time, reduces manual errors, and enhances
productivity.
5. Better Control and Monitoring: Easier to track stock levels, purchases,
and usage.

Disadvantages of Codification:
1. Initial Setup Cost: Requires time and resources to set up the codification
system.
 2. Complexity in Large Systems: Can become complicated if there are too
many materials and codes to manage.
3. Training Required: Employees need to be trained to understand and use
the system effectively.
4. Maintenance: The system needs to be regularly updated, especially if
new materials are introduced.

In summary, codification helps in organizing and managing materials more

effectively, but it requires effort and resources to set up and maintain.
Standardization: Key Points for Exam
Definition:
• Standardization is the process of creating and applying rules to make
activities more organized, benefiting all involved parties, ensuring
efficiency, and meeting safety requirements.

Objectives of Standardization:
1. Efficiency: Improve overall productivity and reduce costs.
2. Uniformity: Create consistent methods for materials, processes, or
products.
3. Interchangeability: Enable parts and products from different
manufacturers to work together.
4. Safety: Ensure that products and processes are safe for use.

Features of Standardization:
1. Rules: Established by authority or consensus to ensure uniformity.
2. Application: Used across different industries, departments, or nations.
3. Material Specifications: Includes details like grades, sizes, and
performance standards.
Benefits of Standardization:
1. Reduced Inventory: Fewer types of materials or items, leading to lower
inventory costs.
2. Better Communication: Common standards improve understanding and
coordination.
3. Interchangeability: Parts like plugs and batteries from different brands
can be swapped easily.
4. Safety: Ensures products meet safety standards (e.g., helmets for
workers).
5. Health Protection: Standards help ensure the safety and health of
consumers (e.g., food and medicines).
6. Environmental Protection: Helps reduce pollution by setting emission
limits.
7. Cost Savings: Reduces costs, minimizes human effort, and conserves
materials.
8. Promotes Exports: International standards create trust in global markets.

Process of Standardization (Steps):

1. List all materials used in the product design.
2. Classify materials based on function and dimensions.
3. Group items with similar functions and size characteristics.
4. Analyze items: Find the most common dimensions and ensure they meet
performance standards.
5. Check standards: Compare with national or international standards. If no
exact match, create a new local standard.

Disadvantages of Standardization:
1. Limited Product Range: Fewer options may lead to customer
dissatisfaction due to lack of variety.
 2. Boredom: Workers may find repetitive tasks monotonous.
3. Hinders Innovation: Reduces flexibility and may slow down product
development.

Conclusion:
• Standardization helps improve efficiency, reduce costs, and ensure
safety. However, it can limit variety and creativity if enforced too rigidly.
What are the reasons for Standardisation of Materials?
Reasons for Standardization of Materials:
1. Cost Reduction: Standardizing materials reduces the need to maintain a
large variety of materials, which helps in cutting down storage and
handling costs.
2. Interchangeability: Standardization ensures that parts from different
suppliers or manufacturers can be used interchangeably, making it easier
to find replacements and reducing production delays.
3. Quality Control: It simplifies the process of quality checking because
standardized materials are consistent in size, shape, and performance.
4. Improved Efficiency: With fewer variations, the production process
becomes more streamlined and efficient, leading to less wastage and
quicker production.
5. Easier Procurement: Standard materials are easier to source, allowing
businesses to purchase in bulk, negotiate better prices, and ensure
timely deliveries.
6. Simplified Maintenance: Standardized materials reduce the complexity
of maintenance as parts are uniform and easier to replace.
7. Better Communication: Standardized items help in better
communication across departments and with suppliers, as everyone
follows the same specifications.
8. Global Compatibility: Using industry or national standards ensures that
materials can be used globally, which is especially useful in international
trade.
 9. Safer Products: Standardization often includes safety regulations,
ensuring that materials and products meet required safety standards,
protecting both workers and consumers.
10.Encourages Innovation: By reducing unnecessary varieties,
standardization allows businesses to focus on innovative improvements
in their products.

UNIT 12 Purchase System & Procedure and Inventory Management

Vendor Evaluation and Ratings.
Explain the process of vendor evaluation and rating. Provide different types
of Vendor Rating plans.
Vendor Evaluation and Rating is the process of assessing and determining the
performance and reliability of vendors or suppliers based on specific criteria.
This helps businesses ensure they are working with the most suitable and
efficient vendors for their needs.
Steps in Vendor Evaluation and Rating:
1. Identify Evaluation Criteria:
o Define the factors that are important for vendor selection, such as
quality, price, delivery time, customer service, and compliance
with contracts.
2. Collect Vendor Information:
o Gather detailed data about the vendors, such as their financial
stability, past performance, and capability to meet demand.
3. Evaluate Vendor Performance:
o Assess how well the vendor meets the requirements in each of the
defined criteria. This can be done through surveys, site visits, and
reviewing past transactions.
4. Rating Vendors:
o Based on the evaluation, assign scores or ratings to the vendors.
Ratings may be based on a scale (e.g., 1 to 5 or "Excellent,"
"Good," "Poor").
 5. Monitor Performance Continuously:
o After selecting a vendor, regularly monitor their performance to
ensure they continue to meet expectations. This helps in building
long-term relationships and addressing any issues early.
Types of Vendor Rating Plans:
1. Point Rating Method: Vendors are scored based on predefined criteria
like quality, price, and delivery. Points are added up to determine the
best vendor.
2. Weighted Rating Method: Different criteria are assigned different
weights based on importance. For example, delivery might be 40%, price
30%, and quality 30%. Vendors are rated based on these weights.
3. Cost-Based Rating: This focuses on the total cost, including hidden costs
like shipping, handling, and after-sales service.
4. Categorical Rating: Vendors are classified into categories (e.g.,
"Excellent," "Good," "Average") based on their performance in various
areas.
5. Scorecard Rating: A scorecard is created to evaluate a vendor’s
performance over time on various factors, allowing comparisons
between different vendors.
6. 360-Degree Feedback:
The 360-degree feedback plan in vendor evaluation involves gathering feedback
from multiple stakeholders involved in the interaction with the vendor. This
comprehensive approach ensures that a vendor is evaluated from various perspectives,
giving a holistic view of their performance.

Importance of Vendor Evaluation and Rating:

• Helps businesses choose reliable suppliers.
• Ensures quality and cost-effectiveness.
• Aids in building strong relationships with suppliers.
• Reduces the risk of delays or poor product quality.
• Rating Plan Description
Point Rating Vendors are rated on set criteria with points assigned to each
Method criterion.
Weighted Rating Vendors are rated on criteria with different weights based on
Method importance, and scores are adjusted.
Cost-Based Focuses on the total cost of the vendor, including hidden costs and after-
Rating sales service.
Categorical Vendors are categorized into groups like Excellent, Good, Average, or
Rating Poor based on performance.
Scorecard Ongoing evaluation based on a scorecard tracking performance metrics
Rating over time.
360-Degree Feedback gathered from all stakeholders involved with the vendor,
Feedback providing a holistic view.

INVENTORY SYSTEM:
What is Inventory System?
Ans:
An Inventory System is a method used by businesses to manage and track the
goods, materials, and products they have in stock. It helps companies control
their inventory levels, keep track of stock movements (like purchases and
sales), and ensure that they have the right amount of products at the right
time.
discuss the importance of inventory management . also identify and explain
the types of costs that are involved in an inventory system.
Ans:
Importance of Inventory Management:
Inventory management is crucial for businesses as it helps in efficiently
handling stock levels. Here are some reasons why it is important:
1. Avoid Stockouts: It ensures that there is always enough stock to meet
customer demand, preventing sales loss due to unavailability.
2. Reduce Overstocking: Helps avoid excess inventory, which ties up capital
and increases storage costs.
3. Improved Cash Flow: Efficient inventory management ensures that
money isn't unnecessarily tied up in unsold goods, improving cash flow.
 4. Optimize Warehouse Space: Proper management reduces the need for
excess storage space, saving costs on warehouse rentals.
5. Better Supplier Relationships: Knowing exactly what is in stock allows for
timely orders, helping to maintain good relationships with suppliers.
6. Enhanced Decision Making: By tracking inventory data, businesses can
make informed decisions regarding purchasing, production, and sales.

Types of Costs Involved in an Inventory System:

There are several costs associated with inventory management. Here are the
key ones:
1. Holding Costs (Carrying Costs):
o These are costs associated with storing and maintaining inventory.
o Includes rent, utilities, insurance, security, and depreciation of
stock.
o The more inventory you hold, the higher these costs.
2. Ordering Costs:
o These are costs related to ordering and receiving inventory.
o Includes the cost of placing orders, shipping fees, inspection costs,
and handling.
o It is more cost-effective to place larger orders less frequently than
many small orders.
3. Stockout Costs:
o These costs occur when inventory runs out, and you cannot fulfill
customer orders.
o Includes lost sales, customer dissatisfaction, and potential long-
term damage to the business reputation.
4. Purchase Costs:
o The cost of acquiring raw materials or goods to sell, including the
purchase price and any additional costs like taxes or shipping.
 5. Obsolescence Costs:
o These are costs incurred when inventory becomes outdated or no
longer sells, leading to write-offs or deep discounts.
o Common in industries where products have a short lifecycle (e.g.,
technology or fashion).
6. Shrinkage Costs:
o These costs refer to the loss of inventory due to theft, damage, or
mismanagement.
o Can lead to increased insurance premiums and inventory
inaccuracies.
Summary:
Effective inventory management helps businesses reduce costs, improve
efficiency, and enhance customer satisfaction. The key costs involved in
managing an inventory include holding costs, ordering costs, stockout costs,
purchase costs, obsolescence costs, and shrinkage costs. By minimizing these
costs, businesses can maximize their profits and streamline their operations.
FUNCTIONS OF INVENTORY:
Functions of Inventory (for exam point of view):
1. To Meet Customer Demand: Ensures products are available to customers
when they need them.
2. Buffer Against Uncertainty: Protects against supply chain disruptions or
unexpected demand changes.
3. Support Production Process: Provides necessary materials and
components for uninterrupted production.
4. Economies of Scale: Reduces cost per unit by purchasing and storing in
bulk.
5. Maintain Production Flexibility: Allows quick adaptation to changes in
production schedules or product demand.
6. Hedge Against Price Fluctuations: Helps buy stock when prices are low
to avoid higher future costs.
 7. Handle Seasonal Demand: Manages products with seasonal demand to
ensure availability during off-peak periods.
8. Promote Sales and Marketing: Supports promotional offers and
discounts by ensuring stock availability.
CLASSIFICATION OF INVENTORY SYSTEM:
ANS:
Classifications of Inventory System (for exam point of view):
1. Manual Inventory System:
o Involves tracking inventory manually using paper records or
spreadsheets.
o It's time-consuming and prone to errors.
o Often used by small businesses with limited inventory.
2. Periodic Inventory System:
o Inventory is counted and updated at regular intervals (e.g., weekly,
monthly).
o No real-time tracking; physical counts are done periodically.
o Suitable for businesses with low transaction volumes or limited
resources.
3. Perpetual Inventory System:
o Tracks inventory in real-time as items are sold or received.
o Updates automatically, providing accurate stock levels at any time.
o Common in businesses with high transaction volumes, like retail.
4. Just-In-Time (JIT) Inventory System:
o Inventory is ordered and delivered just before it is needed for
production or sales.
o Reduces holding costs and waste by maintaining minimal stock
levels.
o Common in industries focused on efficiency, like manufacturing.
 5. ABC Inventory System:
o Classifies inventory into three categories based on value and
usage:
▪ A: High-value items with low quantity.
▪ B: Moderate value and quantity.
▪ C: Low-value items with high quantity.
o Helps businesses focus on managing the most important items (A
items).
6. Automated Inventory System:
o Uses technology like barcode scanners, RFID, or inventory
management software.
o Tracks inventory automatically and updates in real-time.
o Reduces errors and increases efficiency.
7. Cloud-Based Inventory System:
o Stores inventory data on the cloud, accessible from anywhere with
internet access.
o Offers real-time tracking, easy updates, and scalability.
o Suitable for businesses with multiple locations or that need
remote access.
ROLE OF PURCHASING FUNCTION:
What are the common objectives of the purchasing function?What are the
activities in the purchasing function which require high consideration for legal
Aspects?
Ans:
The purchasing function refers to the process of acquiring goods and services
required by an organization to carry out its operations. It involves selecting
suppliers, negotiating terms, ordering, and ensuring the timely delivery of
materials or products. The primary goal is to secure the necessary items at the
best possible cost, quality, and delivery time to meet the organization's needs.
Common Objectives of the Purchasing Function (for exam point of view):
 1. Cost Control: Ensure that goods and services are purchased at the best
possible price without compromising quality.
2. Quality Assurance: Purchase materials that meet the required standards
and specifications.
3. Timely Delivery: Ensure materials or products are delivered on time to
avoid production delays.
4. Supplier Relationships: Build and maintain good relationships with
suppliers for smooth operations.
5. Inventory Management: Ensure that adequate inventory levels are
maintained without overstocking.
6. Compliance: Ensure that all purchasing activities comply with
organizational policies, legal regulations, and ethical standards.
7. Sustainability: Purchase environmentally responsible and sustainable
products whenever possible.

Activities in the Purchasing Function Requiring High Consideration for Legal

Aspects:
1. Contract Negotiation and Signing: All agreements with suppliers must
comply with legal terms, such as delivery schedules, payment terms, and
quality specifications.
2. Product and Supplier Compliance: Ensuring that products meet
regulatory standards and are not counterfeit or substandard.
3. Intellectual Property Rights: Protecting the company’s rights and
respecting suppliers’ intellectual property, such as patents or
trademarks.
4. Import and Export Regulations: Ensuring compliance with international
trade laws, tariffs, and customs regulations.
5. Payment Terms and Conditions: Understanding and adhering to legal
aspects of payment agreements and financial terms.
6. Health and Safety Standards: Ensuring that purchased materials and
products meet all safety and health regulations.
 7. Environmental Compliance: Ensuring purchased materials meet
environmental regulations and sustainability standards, especially in
manufacturing or construction.
INPUTS:
Inputs refer to the resources, materials, or data that are used in a process to
produce a desired output or result. In business and operations management,
inputs are the various factors that are put into a system or process to help
achieve the final product or service.
For example:
• In manufacturing, inputs may include raw materials, labor, machines,
and energy used to create a product.
• In a service industry, inputs may include information, customer needs,
and the skills of the staff involved.
In simple terms, inputs are the necessary components or resources that are
required to start or support a process.
"A purchase requisition is the primary and authorization document
describing the needed items."Explain, in view of the statement, the most
common types of requisition forms.
Ans: What is Requisition Forms?
A Requisition Form is an internal document used by employees or departments
within an organization to request the purchase of goods, services, or resources.
It provides essential details about the items or services required and acts as an
authorization for the purchasing or procurement department to proceed with
the purchase.
A purchase requisition is an internal document that requests the purchasing
department to buy goods or services. It specifies what is needed, why it's
needed, and the urgency of the purchase. It also serves as authorization for the
purchase.
The most common types of requisition forms are:
1. Purchase Requisition Form:
o Used by departments to request the purchasing of materials,
equipment, or other goods.
 o It includes details like item name, quantity, delivery date, and the
department making the request.
2. CapEx (Capital Expenditure) Requisition Form:
o Used for purchasing high-cost, long-term assets like machinery,
buildings, or equipment.
o This form requires approval from senior management due to the
significant financial investment.
3. IT Requisition Form:
o Used when requesting IT-related goods or services, such as
computers, software, or IT support.
o It includes technical specifications, the purpose of the request,
and approval from the IT department.
4. Service Requisition Form:
o Used when requesting external services, such as maintenance,
consulting, or repairs.
o It specifies the type of service needed, duration, and any special
conditions.
5. Employee Requisition Form:
o Used by departments to request new hires or to replace
employees.
o It includes job title, description, justification, and other
recruitment-related details.
6. Travel Requisition Form:
o Used to request approval for employee travel, such as for
conferences, meetings, or business trips.
o It includes details like travel dates, destination, and estimated
costs.
7. Emergency Requisition Form:
o Used for urgent or unplanned purchases that need immediate
action due to an unexpected situation.
 o It highlights the urgency and usually requires faster approval for
processing.
These requisition forms help to ensure that purchases are controlled, properly
authorized, and aligned with organizational needs. They also maintain a clear
record of purchasing activities for accountability and transparency.
SELECTIVE INVENTORY MANAGEMENT:
What is Selective Inventory Management?
Ans:
Selective Inventory Management is a strategy used to manage and prioritize
inventory based on its importance and value to the business. Instead of
treating all inventory items the same, this approach focuses on giving more
attention to the most important items that contribute more to the business,
while less attention is given to less important or low-value items.
• Prioritization: It helps prioritize items based on factors like value,
demand, or criticality to operations.
• Efficient Resource Allocation: By focusing on the high-priority items,
resources such as time, money, and effort can be used more efficiently.
• ABC Analysis: One common method used for selective inventory
management is ABC analysis, where items are classified into three
categories (A, B, and C) based on their value and importance.
o A items: High-value and high-priority items.
o B items: Moderate value and priority.
o C items: Low-value and low-priority items.
Selective inventory management helps businesses minimize costs, reduce
waste, and improve overall efficiency.
Explain with help of an example the ABC Process of inventory. Discuss its
Merits and Demerits.
Ans:
ABC Process of Inventory
The ABC analysis is a method used to classify inventory into three categories
(A, B, and C) based on their importance, value, or usage. The goal is to focus
more on managing the most valuable items (A) and less on the less important
ones (C).
Categories in ABC Analysis:
1. A items: High-value items with low quantity. They are very important for
the business and should be closely monitored. Example: Expensive
machinery or high-end raw materials.
2. B items: Moderate-value items with moderate quantity. They are
important but not as critical as A items. Example: Standard tools or
components.
3. C items: Low-value items with high quantity. They are less critical and
can be purchased in bulk without much attention. Example: Office
supplies like pens, paper, etc.
Example:
Suppose a company has 100 types of inventory items. Through ABC analysis,
the company finds that:
• 10 items are high-value and account for 70% of the total inventory value
(A items).
• 20 items are of medium value and account for 20% of the value (B
items).
• 70 items are low-value and account for only 10% of the value (C items).
In this case, the company would focus more on managing the A items to avoid
stockouts and reduce costs, while less effort would go into managing the C
items.
Merits of ABC Analysis:
1. Efficient Resource Allocation: Helps prioritize resources and attention on
high-value items.
2. Cost Management: Reduces costs by focusing on critical items and
avoiding overstocking of low-value items.
 3. Improved Stock Control: Helps maintain optimal stock levels and
prevents stockouts of important items.
4. Better Supplier Relationship: Focus on high-value items may lead to
better supplier management and negotiations.
Demerits of ABC Analysis:
1. Over-Simplification: The classification might overlook other factors like
seasonality, demand fluctuations, or product life cycle.
2. Frequent Changes: Inventory values and importance may change,
requiring regular updates to the analysis.
3. Ignoring C Items: The focus on A items might lead to neglecting C items,
which could still be necessary for day-to-day operations.
Overall, ABC analysis helps businesses focus on what matters most, but it
requires continuous monitoring and adjustments.