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Purchasing Management

The document outlines various inventory management techniques, processes, and best practices to optimize stock levels and improve efficiency in businesses. Key techniques include Just-in-Time inventory, ABC Analysis, and Economic Order Quantity, while best practices emphasize the use of inventory management systems and regular audits. Additionally, it discusses different inventory management systems, such as manual, barcode, and cloud-based systems, to enhance tracking and organization.

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6 views3 pages

Purchasing Management

The document outlines various inventory management techniques, processes, and best practices to optimize stock levels and improve efficiency in businesses. Key techniques include Just-in-Time inventory, ABC Analysis, and Economic Order Quantity, while best practices emphasize the use of inventory management systems and regular audits. Additionally, it discusses different inventory management systems, such as manual, barcode, and cloud-based systems, to enhance tracking and organization.

Uploaded by

abrahamowino280
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 DOCX, PDF, TXT or read online on Scribd
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NAME REGISTRATION SIGNATURE

NO
BRANDON BBM/1479/23
ODHIAMBO
CAROL SILA BBM/0320/23
SUSAN BBM/1480/21
NYAMBURA
ELVIS BEJA BBM/1680/22
KIDERI

COURSE TITTLE; PURCHASING MANAGEMENT

COURSE CODE;BBM 340


Inventory Management Techniques
Inventory management techniques help businesses optimize stock levels, reduce waste,
and improve efficiency. Some key techniques include:

1. Just-in-Time (JIT) Inventory — Stock is replenished only when needed, reducing


storage costs and waste.
2. ABC Analysis — Classifies inventory into three categories: o A: High-value, low-
quantity items o B: Moderate-value, moderate-quantity items o C: Low-value, high-
quantity items
3. First-In, First-Out (FIFO) — Oldest stock is sold first, preventing obsolescence.
4. Last-In, First-Out (LIFO) — Newest stock is sold first, beneficial for inflationary
environments.
5. Economic Order Quantity (EOQ) — A formula-based approach to determine the
ideal order quantity, balancing order and holding costs.
6. Reorder Point Formula — Establishes when new stock should be ordered to avoid
shortages.
7. Safety Stock — Maintains extra inventory as a buffer against demand fluctuations.
8. Dropshipping — A method where products are shipped directly from the supplier to
the customer, reducing the need for storage.
9. Batch Tracking — Groups items into batches for better traceability.

Inventory Management Process


1. Demand Forecasting — Estimating future sales to plan inventory levels.
2. Inventory Procurement — Ordering stock from suppliers based on forecasts.
3. Receiving & Inspection — Checking stock for quality and quantity upon arrival.
4. Storage & Organization — Arranging inventory efficiently to facilitate access and
minimize damage.
5. Tracking & Updating — Using manual or automated systems to track stock
movements.
6. Order Fulfillment — Picking, packing, and shipping orders to customers.
7. Stock Auditing — Regular cycle counting and full inventory checks to ensure
accuracy.
8. Replenishment — Reordering stock based on predefined thresholds.

Best Practices for Managing Inventories


Use an Inventory Management System (IMS) — Automate tracking to reduce human
errors.
Adopt Barcode or RFID Tracking — Enhances accuracy and efficiency.
Optimize Warehouse Layout — Reduces picking time and enhances workflow.
Monitor Key Performance Indicators (KPIs) — Track inventory turnover, order
accuracy, and stockout rates.
Implement Supplier Relationship Management — Strengthen partnerships for better
lead times and pricing.
Regular Audits & Cycle Counting — Ensures data accuracy and prevents
discrepancies.
Minimize Dead Stock — Regularly evaluate and discount slow-moving
items. Use Cloud-Based Systems — Enhances accessibility and scalability.

Inventory Management Methods & Strategies


Push vs. Pull Strategies — o Push: Inventory is produced in advance based on
forecasts. o Pull: Inventory is replenished based on demand.
Vendor-Managed Inventory (VMI) — The supplier manages stock levels at the
retailer's location.
Perpetual Inventory System — Continuously updates inventory records with real-
time data.
Periodic Inventory System — Conducts stock checks at scheduled intervals.
Consignment Inventory — Supplier retains ownership of inventory until sold.
Cross-Docking — Reducing storage needs by transferring incoming stock
directly to outgoing shipments.

Inventory Management Systems


These systems help businesses track, organize, and optimize inventory. Types include:

1. Manual Inventory Systems — Spreadsheets or paper-based tracking, suitable for


small businesses.
2. Barcode & REID Systems — Automate data entry and improve accuracy.
3. Cloud-Based Inventory Systems — Accessible from anywhere, integrating with
ecommerce and POS systems.
4. Enterprise Resource Planning (ERP) Systems — Comprehensive software that
integrates inventory with financials, HR, and supply chain management.
5. Al & IoT-Enabled Systems — Predict demand, automate replenishment, and
improve real-time tracking.

i• S

REFERENCE;

1.Chopra,S and Meindl,P.(2019).Supply Chain Management;Strategy,planning


and operation(7th e.d.).Pearson.
2.Waters,D.(2019).Inventory Control and Management (3rd e.d.).Wiley
3.Richards,G.(2017).Warehouse Management;A complete guide to improving
efficiency and minimizing costs in the modern warehouse (2nd e.d.).Kogan Page

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