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Inventory Management

Inventory Management

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Published by: Nathan on Apr 30, 2010
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11/07/2012

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Inventory Management
Introduction
Inventory management is the active control program which allows the management of sales, purchases and payments.Inventory management software helps create invoices, purchase orders, receiving lists, payment receipts and can print bar coded labels. An inventory management software systemconfigured to your warehouse, retail or product line will help to create revenue for your company. The Inventory Management will control operating costs and provide better understanding. We are your source for inventory management information, inventorymanagement software and tools.A complete Inventory Management Control system contains the following components:
Inventory Management Definition
Inventory Management Terms
Inventory Management Purposes
Definition and Objectives for Inventory Management
Organizational Hierarchy of Inventory Management
Inventory Management Planning
Inventory Management Controls for Inventory
Determining Inventory Management Stock Level
OBJECTIVES OF INVENTORY MANAGEMENT
 Through the end of the 1980's, most software packages for distributors placed an emphasis onsales and accounting related modules. In the early 1990's, many distributors recognized that theyneeded help controlling and managing their largest asset, inventory. In response to this need,several computer software companies developed comprehensive inventory management modulesand systems. These new packages include many new features, designed to help distributorseffectively manage warehouse stock. But after implementing new software, many distributorsdon't feel that they have gained control of their inventory. These wholesalers continue to facemany of the same challenges they experienced with their old systems:
Stockouts and lost sales are common while warehouses are bulging with inventory
On-hand and available-for-sale quantities in their computer systems aren't accurate
The return on investment from inventory is not satisfactoryIn some cases, the problem lies in the computer software. Some packages still do not have thenecessary capabilities for effective inventory management. In other situations, a distributor isusing a software package that is too complicated. His buyers don't have the knowledge, time,and/or skills to take advantage of the system's capabilities. But the most common reasondistributors do not achieve their inventory management goals has nothing to do with thecomputer system they utilize.
 
Despite what many data processing salespeople will tell you, computers do not provide solutionsto inventory management problems. Computers are tools. They must be used in the proper  business environment in order to work effectively. This environment is comprised of severalelements. All of them must be present in order for your new inventory management system tolive up to its potential. If your system is not performing up to this potential, be sure you haveimplemented each of the following characteristics of good inventory management:1.Protect your company against theft - Make sure that the only people in your warehouse belong in your warehouse. Pilferage is a larger problem than most distributors realize.2.Establish an approved stock list for each warehouse - Most dead inventory is "D.O.A"(dead on arrival). Order only the amount of non-stock or special order items that your customer has committed to buy. Before adding an item to inventory, try to get a purchasecommitment from your customer. If this is not possible, inform the salesperson whorequests the item that he or she is personally responsible for half the carrying cost of any part of the initial shipment that isn't sold within nine months.3.Assign and use bin locations - Assign primary and surplus bin locations for every stockeditem. All picking and receiving documents should list the primary bin location (in either characters or a bar code). With correct bin locations on documents, order picking is probably the least complicated job in your warehouse. Assign inexperienced people tothis task and your most experienced warehouse workers to receiving inventory and stock management.4.Record all material leaving your warehouse - There should be appropriate paperwork for every type of stock withdrawal. Under no circumstances should material leave thewarehouse without being entered in the computer. Eliminate "no charge/no paperwork"material swaps. Product samples should be charged to a salesperson's account until theyare either returned to stock or charged to the customer.5.Process paperwork in a timely manner - All printed picking documents should be filled by the end of the day. Stock receipts should be put away and entered in the computer system within 24 hours of arrival.6.Set appropriate objectives for your buyers - Buyers should be judged and rewarded basedon the customer service level, inventory turns, and return on investment for the productlines for which they are responsible.7.Make sure every employee is aware of the cost of bad inventory management - Inventoryloss through theft, breakage, or loss must be paid for with net profit dollars. If your net profit before taxes is 4%, it takes $2,500 in new sales to make up for a $100 merchandiseloss!8.Ensure that stock balances are accurate and will remain accurate - Implement acomprehensive cycle counting program. A good cycle counting program can replace your traditional year-end physical inventory.9.Determine the most advantageous replenishment path for each item in each warehouse -Assign one of these "paths" to each item in each warehouse:1.Distributive purchasing - The warehouse replenishes stock with a purchase order issued directly to the vendor 2.Central Warehousing - The stock of one warehouse is replenished with a stock transfer from a central warehouse
 
3.Cooperative Purchasing - Several branches "pool" their needs and issue onevendor purchase order in order to meet the vendor minimum order within areasonable amount of time10.Specify guidelines for setting the reorder method an other purchasing parameters tomaximize inventory turns and minimize stockouts:1.Minimum/Maximum quantities2.Economic order quantities3.Order up to a specific stock level4.Safety stock quantities5.Preseason buys11.Document replenishment procedures:1.Line buys2.Non-stock items3.Price-break purchasing4.Preseason buys5.Importing material12.Establish customer service, inventory turnover, and return on investment goals for thefollowing 24 months for each branch and major product line - After each month endclose, compare the goals to the actual results.13.Initiate an on-going dead stock and excess inventory control program - Excess inventoryis usually considered to be any quantity of a product greater than a 12 month supply.1.Transfer excess stock to a branch that needs the material2.Return the stock to the vendor 3.Lower the price of items with excess inventory4.Substitute surplus inventory for lower cost items that are still popular 5.Offer special commissions for the sale of surplus merchandise6.Sell the excess inventory to a competito7.Donate excess stock to a non-profit agency8.Throw it out, take the "write-off" for your financial statement, and free up room inyour warehouse14.Make inventory management considerations part of corporate strategic planning.
Benefits of holding inventory
Avoiding Lost Sales
Losing business is the last part where you, as a business owner wants. Without the necessarygoods in hand, which are ready to be exploited, most businesses will surely lose its business andmarket share.There are some customer are willing to wait, especially when the product they want must bemade to order or it is not sidely available from your competitors. Thus, your business must prepare itself to provide the goods or product demanded by your customers.For instance, Shelf Stock are items that are stored and sold with little or no modification to your customers. Let take an example of an automobile industry. An automobile is an item of Shelf 

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