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Inventory Management

Inventory management aims to balance inventory levels with customer service. All organizations use some form of inventory planning and control to manage supplies. There are several types of inventory including raw materials, work-in-progress, maintenance supplies, and finished goods. Regular inventory analysis and ABC analysis are used to classify inventory and pursue continuous improvements. Quality inventory management software can help track inventory, forecast demand, handle purchasing, and ensure accurate counts.

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Princess Darlyn Alimagno
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656 views37 pages

Inventory Management

Inventory management aims to balance inventory levels with customer service. All organizations use some form of inventory planning and control to manage supplies. There are several types of inventory including raw materials, work-in-progress, maintenance supplies, and finished goods. Regular inventory analysis and ABC analysis are used to classify inventory and pursue continuous improvements. Quality inventory management software can help track inventory, forecast demand, handle purchasing, and ensure accurate counts.

Uploaded by

Princess Darlyn Alimagno
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Inventory Management

Inventory Management
The objective of inventory management is to strike a balance
between inventory investment and customer service. You can never
achieve a low-cost strategy without good inventory management.
All organizations have some type of inventory planning and control
system. A bank has methods to control its inventory of cash. A hospital
has methods to control blood supplies and pharmaceuticals.
Government agencies, schools, and of course, virtually every
manufacturing and production organization are concerned with
inventory planning and control.
Function of Inventory
1. To “decouple” or separate various parts of the production process.
Example: If a firm’s supplies fluctuate, extra inventory may be
necessary to decouple the production process from suppliers.
2. To decouple the firm from fluctuations of demand and provide a
stock of gooods that will provide a selection for customers. Such
inventories are typical in retail establishment.
3. To take advantage of quantity discounts, because purchases in larger
quantities may reduce the cost of goods or their delivery.
4.To hedge (limit) against inflation and upward price changes.
Types of Inventory
1. Raw Material Inventory has been purchased but not processed. This
inventory can be used to decouple (or separate) suppliers from the
production process.. The preferred approached is to eliminate supplier
variability in quality, quantity, or delivery time so that separation is not
needed.
2. Work-in-process (WIP) inventory is components or raw materials that
have undergone some chang but are not completed. WIP exist because
of the time it takes for a product to be made ( called ctcle time).
Reduces cycle time reduces inventory.

From the figure, actual


work time, or “run” time,
perhaps as low as 5%.
3.MRO’s are inventories devoted to
maintenance/repair/operating supplies
necessary to keep machinery and processes
productive. They exist because the need and
timing for maintenance and repair of some
equipment are unknown.

4. Finished-good inventory is completed


product awaiting shipment. Finished goods
may be inventoried because future
customer demands are unknown.
Inventory Analysis-regular auditing of inventory in the
pursuit of continuous improvements to how it is manage.
ABC Analysis-a method for dividing on-hand
inventory into three classifications based on
annual dollar volume.

It is based pon the pareto principle - AKA the 80/20 rule. Applied to
retail, this would suggest that around 80% of sales would typically
come from 20% of a company’s total inventory.
Purchasing Inventory
Inventory Management
Technique
In essence, all the inventory management techniques a retailer needs are
covered throughout the different chapters of this guide. These span across a
number of different areas and tasks within the field of inventory
management - forecasting, purchasing, storing, analysing, etc.
9) Verify accuracy with regular counts
Unfortunately, errors are inevitable when it comes to
your stock
So taking a physical count of inventory with regular stock takes is critical.
The traditional way of doing this is to shut the warehouse down for a night (or longer)
and complete a big count once or twice a year. But this can be an extremely time-
consuming and complex task, especially for large inventories or facilities.
Instead, try spreading it out through the year:
● Cycle counting. This is where team members would be given ‘counting tasks’ of a
small number of items to do each week. Over the year, each product has then usually
been counted and verified several times.
● Spot checking. This isn’t done with any specific regularity. It can simply be done if a
product is proving particularly problematic or if a team member finds they have some
spare time and needs something to do. Good inventory systems will manage this for
you. Assigning regular counting tasks to your team and allowing for easy corrections
via digital barcode scanners.
This means utilizing quality inventory management software to do most of the
heavy lifting for you.
Helping take care of tasks like:
● Tracking. So you can sync inventory in real-time across multiple channels
without overselling and back orders.
● Forecasting. To remove the guesswork and never have too much or too little
inventory on-hand.
● Purchasing. So you can handle all suppliers and create and manage POs in
one place.
● Counts. To keep inventory numbers accurate by automatically assigning
weekly cycle counting tasks to your team.
● Organization. Recording exact bin locations for variants so you can find and
pick inventory quickly and accurately.

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