Understanding the Basics of Stocks

and Inventories
What are stocks and Importance of managing Different methods for
inventories? stocks and inventories managing stocks and
inventories

Key factors influencing The impact of stocks Future trends in stocks

stocks and inventories and inventories on and inventories
business operations management
01 What are stocks and
inventories?
Understanding stocks and inventories

Stocks in business Stocks refer to the goods and materials that a

business holds for the ultimate purpose of
resale.

Importance of Inventories are essential for ensuring smooth

inventories production, meeting customer demand, and
minimizing stockouts.

Managing stock levels Effective inventory management involves

optimizing stock levels to balance costs and
customer service levels.
 Types of stocks and inventories

Raw materials inventory Work in progress Finished goods

inventory inventory
This type of inventory includes the Work in progress inventory consists of This inventory category comprises the
materials used in the production items that are in the process of being final products ready for sale to
process, such as wood, metal, or manufactured but are not yet customers.
plastic. completed.
Inventory management strategies

Just-in-time (JIT) ABC analysis Vendor-managed inventory

(VMI)
JIT strategy aims to minimize inventory ABC analysis categorizes inventory VMI involves the supplier managing the
levels by receiving goods only when items into groups based on their inventory levels at the customer's
needed in the production process. importance, allowing for efficient location, reducing stockholding costs.
management.
02 Importance of managing
stocks and inventories
Optimizing stock levels

Balancing supply and By managing stock levels, businesses can

demand ensure they have the right amount of products
to meet customer demand without excess or
shortage.

Reducing carrying costs Effective stock management helps in minimizing

the costs associated with holding excess
inventory, such as storage, insurance, and
obsolescence.

Minimizing stockouts Proper inventory management prevents

stockouts, ensuring that products are available
when customers need them, thus avoiding lost
sales.
 Enhancing operational efficiency

Streamlining order Reducing lead times Minimizing overstocking

fulfillment
Efficient inventory management Optimized inventory levels result in By maintaining optimal inventory levels,
facilitates smoother order processing shorter lead times for products, businesses can avoid overstocking,
and fulfillment, leading to improved enabling faster delivery to customers which can tie up capital and lead to
operational productivity. and reducing wait times. wastage.
Improving financial performance

Managing working capital Enhancing cash flow Supporting profitability

Efficient inventory management helps Proper stock management contributes By managing stocks effectively,
in optimizing working capital by to better cash flow by preventing businesses can enhance profitability
ensuring that resources are not tied up excess inventory buildup, freeing up through cost savings and improved
in excessive stock levels. funds for other business needs. resource utilization.
03 Different methods for
managing stocks and inventories
Using Economic Order Quantity (EOQ)

Calculation of optimal The EOQ method helps in determining the ideal

order quantity quantity of inventory to be ordered, balancing
ordering costs and holding costs.

Minimization of total By using EOQ, businesses can minimize total

inventory costs inventory costs by finding the right balance
between ordering and holding costs.

Consideration of EOQ takes into account demand variability to

demand variability ensure that the right amount of safety stock is
maintained to meet customer demand.
 Implementing Just-In-Time (JIT) inventory system

Reduction of excess Improvement of cash Enhancement of

inventory flow production efficiency
JIT helps in reducing excess inventory By reducing inventory holding costs JIT leads to enhanced production
by ensuring that products are delivered and freeing up cash, JIT improves the efficiency by streamlining the
and produced only when needed. overall cash flow of the business. production process and reducing
waste.
Utilizing ABC analysis for inventory classification

Categorization of inventory Optimization of inventory Allocation of resources

items management based on priority
ABC analysis categorizes inventory By focusing on different inventory ABC analysis helps in allocating
items into different groups based on categories, businesses can optimize resources based on the priority of
their importance and value to the their inventory management strategies inventory items, ensuring efficient
business. accordingly. resource utilization.
04 Key factors influencing stocks
and inventories
Impact of economic Inflation and deflation
cycles effects
Economic conditions greatly Inflation and deflation can
affect stock levels, as demand significantly impact the cost of
fluctuates with economic cycles, holding stocks, affecting
impacting inventory inventory valuation and
management and procurement influencing purchasing
strategies. decisions. Economic
Conditions

Supply chain Consumer confidence

disruptions
Economic conditions can lead Consumer confidence affects
to supply chain disruptions, demand, influencing inventory
affecting the availability of raw levels and production planning,
materials and finished goods, as it directly impacts purchasing
impacting stock levels. behavior.
 Automation and robotics
Technological advancements like automation and robotics
can streamline inventory management, reducing stock
holding costs and improving efficiency.

Technology and Inventory tracking systems

Innovation Sophisticated inventory tracking systems enable real-time
monitoring, optimizing stock levels, minimizing shortages,
and enhancing inventory accuracy.

Data analytics and forecasting

Utilizing data analytics and forecasting tools can enhance
demand planning, inventory optimization, and lead to more
accurate stock replenishment strategies.

E-commerce and digitalization

The rise of e-commerce and digitalization impacts
inventory management by changing customer
expectations, leading to adjustments in stock levels and
distribution strategies.
 Regulatory Environment

Compliance and Tariffs and trade Environmental Product safety

standards policies regulations regulations
Adhering to regulatory Changes in tariffs and trade Environmental regulations Adherence to product safety
compliance and standards policies can affect inventory impact inventory planning by regulations affects inventory
influences inventory costs, lead times, and influencing the choice of management, requiring
management practices, sourcing decisions, materials, packaging, and specific handling, storage,
impacting stock levels, influencing stock levels and disposal methods, affecting and documentation,
storage requirements, and supply chain strategies. stock management. impacting stock control.
handling procedures.
Trends and Seasonal demand
preferences patterns
Understanding consumer trends Seasonal variations in
and preferences is crucial for consumer demand influence
stock planning, guiding product stock levels, requiring seasonal
assortment, inventory levels, inventory management
and promotional strategies. adjustments to meet fluctuating
consumer needs. Consumer Behavior

Omni-channel retailing Brand loyalty and

marketing influences
The growth of omni-channel Brand loyalty and marketing
retailing impacts inventory influences affect stock levels by
management by necessitating impacting consumer buying
seamless stock availability behavior, requiring tailored
across various sales channels inventory management
to meet consumer demands. strategies.
 Supplier relationships
Maintaining strong supplier relationships is vital for
inventory management, impacting stock availability, lead
times, and supply chain resilience.

Global Supply Logistics and transportation

Chain Dynamics Efficient logistics and transportation networks are critical
for managing stock levels, influencing inventory costs,
delivery times, and stock replenishment.

Geopolitical events
Geopolitical events can disrupt global supply chains,
impacting stock availability, sourcing decisions, and
necessitating risk mitigation strategies.

Inventory warehousing strategies

Optimizing inventory warehousing strategies is essential
for managing stock levels, impacting storage costs, order
fulfillment, and inventory turnover.
05 The impact of stocks and
inventories on business
operations
 Financial Implications

Cost of Holding Stock Valuation Inventory Turnover Impact on Profit

Inventory Methods Margins
The cost of holding inventory Different valuation methods The rate of inventory Stock levels directly impact
impacts the financial health impact financial reporting turnover affects working profit margins through
of a business, affecting cash and taxation, influencing the capital and the efficiency of influencing pricing strategies
flow and profitability. overall financial position of capital allocation within the and cost of goods sold.
the business. business.
Supply Chain Production Planning
Management
Efficient inventory management Optimal stock levels facilitate
contributes to streamlined efficient production planning,
supply chain operations, reducing bottlenecks and
reducing lead times and enhancing overall operational
enhancing responsiveness. efficiency.
Operational
Efficiency

Inventory Accuracy Inventory Control

Systems
Accurate inventory records are Effective control systems
crucial for minimizing stockouts, enhance operational efficiency
preventing overstock situations, by preventing stock
and ensuring smooth discrepancies and optimizing
operations. resource allocation.
 On-Time Delivery
Optimal inventory levels contribute to meeting customer
demand, ensuring timely delivery, and enhancing overall
customer satisfaction.

Customer Product Availability

Satisfaction Maintaining adequate stock levels ensures product
availability, reducing stockouts and meeting customer
expectations.

Order Fulfillment
Efficient inventory management supports timely order
fulfillment, improving customer experience and loyalty.

Return Management
Effective inventory control enhances the handling of
returns, contributing to positive customer experiences and
retention.
 Risk Management

Supply Chain Risks Stock Obsolescence Demand Forecasting Compliance

Management
Inventory management Proper inventory control Accurate inventory data Inventory management
addresses supply chain minimizes the risk of stock supports effective demand contributes to compliance
risks, such as disruptions obsolescence, reducing forecasting, reducing the risk with regulations, minimizing
and fluctuations, mitigating financial losses and of stock shortages and risks associated with non-
potential impacts on preserving business viability. excess inventory. compliance and penalties.
business operations.
Product Portfolio Market Demand
Management Analysis
Inventory insights guide Inventory data facilitates market
strategic decisions on product demand analysis, aiding in
portfolio management, strategic pricing and market
influencing expansion, positioning decisions.
diversification, or
discontinuation. Strategic Decision
Making

Supplier Relationships Technology Adoption

Inventory evaluation influences Inventory considerations play a

supplier relationships, impacting role in strategic technology
negotiations, lead times, and adoption decisions, affecting
overall supply chain resilience. automation, digitization, and
innovation.
06 Future trends in stocks and
inventories management
 AI-driven demand forecasting and
inventory planning
AI-driven demand forecasting and inventory planning
utilize advanced algorithms to predict demand and
optimize stock levels, leading to improved efficiency and
cost savings.

Utilizing advanced Blockchain for transparent and secure

supply chain management
technology for Blockchain technology ensures transparency and security
inventory in supply chain management, reducing the risk of
counterfeit products and enhancing trust among
optimization stakeholders.

Internet of Things (IoT) for real-time

tracking and monitoring
IoT enables real-time tracking and monitoring of inventory,
providing valuable data for decision-making, minimizing
stockouts, and enhancing overall operational visibility.

3D printing for on-demand inventory

production
3D printing allows on-demand production of inventory
items, reducing storage costs and increasing flexibility in
responding to fluctuating demand.
 Sustainable practices in inventory management

Implementing eco- Embracing circular Optimizing Implementing

friendly packaging economy principles transportation for energy-efficient
and storage for inventory reduced carbon warehousing and
solutions
Adopting eco-friendly circulation
Embracing circular economy footprinttransportation
Optimizing distribution warehousing
Energy-efficient facilities
packaging and storage principles promotes the methods and routes and distribution facilities
solutions reduces reuse, refurbishment, and minimizes the carbon reduce energy consumption,
environmental impact, aligns recycling of inventory items, footprint associated with lower operational costs, and
with sustainability goals, and contributing to a more inventory movement, demonstrate a commitment
enhances brand reputation. sustainable and resource- supporting environmental to sustainable inventory
efficient supply chain. conservation efforts. management.
Personalization and Agile inventory
customization to meet strategies for rapid
diverse consumer market responsiveness
needs
Personalized and customized Agile inventory strategies
inventory offerings cater to enable quick adjustments to
diverse consumer preferences, market demands, supporting
driving customer satisfaction faster product launches,
and loyalty in a competitive promotions, and adaptations to
market landscape. changing consumer trends. Adapting to
changing consumer
behavior and market
dynamics

Multi-channel inventory Dynamic inventory

distribution for pricing for demand-
omnichannel retailing driven profitability
Multi-channel inventory Dynamic inventory pricing
distribution facilitates seamless aligns with demand fluctuations,
omnichannel retailing, ensuring optimizing profitability while
consistent product availability preventing overstocking or
across online and offline sales underpricing in response to
channels. market dynamics.
 Resilient inventory planning for supply
chain disruptions
Resilient inventory planning strategies prepare for supply
chain disruptions, including natural disasters, geopolitical
events, and economic fluctuations, minimizing operational
risks.

Risk management Implementing inventory diversification and

safety stock management
and resilience in Inventory diversification and safety stock management
inventory mitigate risks associated with supplier disruptions, demand
variability, and unexpected market shifts.
operations
Utilizing data analytics for proactive
inventory risk assessment
Data analytics tools enable proactive assessment of
inventory risks, identifying patterns, trends, and potential
vulnerabilities for informed decision-making.

Collaborative risk-sharing initiatives with

supply chain partners
Collaborative risk-sharing initiatives with supply chain
partners enhance resilience, sharing the burden of
inventory risks and fostering mutual support during
challenging times.
 Evolving regulatory compliance and ethical inventory
practices

Adhering to ethical Compliance with Transparency in Proactive measures

sourcing and fair evolving industry inventory for data privacy and
trade principles standards and documentation and cybersecurity in
Adhering to ethical sourcing quality certifications
Compliance with industry reporting documentation
Transparent inventory
Proactive measures for data
and fair trade principles standards and quality and reporting of inventory management
privacy and cybersecurity
ensures responsible certifications demonstrates practices foster trust with protect sensitive inventory
procurement practices, commitment to product stakeholders, regulatory information, safeguarding
promoting social equity and safety, reliability, and bodies, and consumers, against breaches and
environmental stewardship adherence to regulatory upholding integrity and ensuring compliance with
across the supply chain. requirements for ethical accountability in operations. privacy regulations.
inventory practices.
THANK YOU
CVBergantiños