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An inventory control system is a process for managing and locating objects or materials. In common usage, the term may also refer to just the software components. Modern inventory control systems often rely upon barcodes and RFID tags to provide automatic identification of inventory objects. In an academic study performed at Wal-Mart, RFID reduced Out of Stocks by 30 percent for products selling between 0.1 and 15 units a day. Inventory objects could include any kind of physical asset: merchandise, consumables, fixed assets, circulating tools, library books, or capital equipment. To record a n inventory transaction, the system uses a barcode scanner or RFID reader to automatically identify the inventory object, and then collects additional information from the operators via fixed terminals (workstations), or mobile computers.
An inventory control system may be used to automate a sales order fulfillment process. Such a system contains a list of order to be filled, and then prompts workers to pick the necessary items, and provides them with packaging and shipping information. An inventory system also manages in and outwards material of hardware . Real-time inventory control systems may use wireless, mobile terminals to record inventory transactions at the moment they occur. A wireless LAN transmits the transaction information to a central AVALON. Physical inventory counting and cycle counting are features of many inventory control systems which can enhance the organization.
Inventory control (also known as inventory management) refers to the systems and strategies businesses use to ensure that they have adequate supplies of raw materials for production and finished goods for shipment to customers, while also minimizing their inventory carrying costs. Storing excess inventory is costly, because the space and financial resources invested in the
The purchasing. scrap reporting. He recommended that business managers examine the accuracy and effectiveness of their: bills of materials (BOM). receiving policies. COMPUTERS AND INVENTORY In today's business environment. shoe stores. "It is nearly impossible to overemphasize the importance of keeping inventory levels under control. But Pachura noted that managers may gain more information by segmenting average inventory into raw materials. for some businesses ²such as convenience stores. there are plenty of small retail outlets. "Whether the problems incurred are caused by carrying too little or too much inventory. Comparing these figures often reveals opportunities for improving inventory controls. receiving. engineering. and accounting departments all contribute to the accuracy of the inventory methods and records. computerized tracking systems have emerged . and warehouse locator systems. The basic measure of inventory turnover is defined as cost of goods sold divided by average inventory on hand. however. manufacturers. manufacturers need to become aware that inventory control is not just a materials management or warehouse department issue. even many smaller businesses have come to rely on computerized inventory management systems. The inventory turnover ratio is a tool that can help companies to determine whether they are producing and carrying too much inventory. But for firms operating in industries that feature high volume turnover of raw materials and/or finished pro -ducts. and then computing a separate turnover figure for each. inadequate inventory stores can result in costly production shutdowns or delays in filling customer orders. work in process inventory. At the same time. and finished goods. manufacturing. Indeed. vendor lead times. and other businesses that still rely on manual means of inventory tracking.goods can often be put to better use elsewhere. Certainly." Pachura created a checklist to aid companies in assessing their inventory controls. or nurseries²the purchase of an electronic inventory tracking system might constitute a wasteful use of financial resources. engineering changes. Inventory control systems help companies to find the delicate balance betwe en too little and too much inventory. reorder triggers." Ronald Pachura wrote in an article for IIE Solutions.
Automation can draidatically affect all phases of inventory management. companies that make good use of this technology are far better equipped to succeed than those who rely on outdated or unwieldy methods of inventory control. including counting and monitoring of inventory items. The amount of control you have on inventory . to better manage inventory levels. recording and retrieval of item storage locations. recording changes to inventory. Writing in Production and Inventory Management Journal. But many analysts indicate that productivity ²and hence profitability²gains that are garnered through use of automated systems can be increased when a business integrates its inventory control systems with other systems. Key components of an integrated system are general ledger. This is true even of stand -alone systems that are not integrated with other areas of the business. including inventory handling requirements. so it doesn't come back to bite the bottom line. it is little wonder that business experts commonly cite inventory management as a vital element that can spell the difference between success and failure in today's keenly competitive business world. Given such developments. such as accounting and sales. database connectivity. a director of product strategy for business applications at a firm in New York. and connections to a range of vertical business applications. confirmed this view in an interview with Eskow: "What drives business is optimization of working capital." David Cahn. the recent development of powerful computer programs capable of addressing a wide variety of record keeping needs²including inventory management ²in one integrated system have also contributed to the growing popularity of electronic inventory control options. Moreover. business executives are "increasingly integrating financial data. According to Udo. The goal: to control inventory quarter to quarter. Godwin Udo described telecommunications technology as a critical organizational asset that can help a company realize important competitive gains in the area of inventory management. According to Dennis Eskow in PC Week. with sales information that includes customer histories. and anticipating inventor y needs. electronic data interchange . such as accounts receivable.as a key component of business strategies aimed at increasing productivity and maintaining competitiveness.
equals the optimization of the capital. But as Eskow noted. for instance. Citing various warehousing experts. These arrangements place the responsibility for inventory management squarely on the shoulders of the vendors." Another development of which business vendors should be aware is a recent trend wherein powerful retailers ask their suppliers to implement vendor managed inventory systems. cited a study by the International Mass Retail Association in Transportation and Distribution: "The study concludes that stand alone Warehouse Management System (WMS) packages acquired today to perform individual functions will probably be abandoned in just a few years because they do not integrate we ll with other systems. Kind. WAREHOUSE LAYOUT AND OPERATION The move toward automation in inventory management naturally has moved into the warehouse as well. Tom Andel and Daniel A. business owners have a variety of system integration options from which to choose. That's why it 's so important to integrate the inventory data with everything else. the vendors obtain warehouse or point -of-sale information from the retailer and use that informati on to make inventory restocking decisions. business observers have suggested that "stand -alone" systems are falling into disfavor. Under such an agreement." he noted. Systems investments must be considered in context of future systems objectives. At the same time that these integrated systems have increased in popularity." THE FUTURE OF INVENTORY CONTROL SYSTEMS In the late 1990s many businesses were investing heavily in integrated order and inventory systems designed to keep inventories at a minimum and replenish stock quickly. "Integrated inventory systems may range in platform and complexity. Sarah Bergin contended in Transportation and Distribution magazine that "the key to getting . based on their needs and financial liquidity.
including individual rack tier positions." Another important component of good inventory management is creation and maintenance of a sensible. Communication systems: Again. customer service. and number of pallet loads in each storage location. A running record will be maintained of the stock number. and should be user-friendly so that workers can quickly locate currently stocked items and open storage spaces alike. this can be a valuable investment if the business's warehouse requirements are significant. Such facilities often utilize forklift machinery that can be used more effectively if their operators are not required to periodically return to a central assignment area. Real-time processing in the warehouse uses combinations of hardware. effective warehousing design. and. the intelligent part of the system is sophisticated software which automates and controls all aspects of warehouse operations. ultimately. Grid coordinates of the reserve area. profitability." Grid coordinate numbering system: The warehouse numberin g system should be developed in conjunction with the storage layout. A well -organized. Current technology. lot number. This empowers employees to take actions that achieve immediate results.productivity gains from inventory management « is placing real-time intelligent information processing in the warehouse. especially if they are involved in processing large volumes of goods and materials. Transportation and Distribution magazine cited several steps that businesses using warehouse storage systems can take to help ensure that they get the most out of their facilities. and the pallet load capacity of all storage locations must be incorporated into the database. must therefore be established. It recommended that companies utilize the following tools: y Stock locator database: "The stock locator database required for proactive decision making will be an adjunct of the inventory file in a state -of-the-art space management system. Conversely. userfriendly warehouse layout can be of enormous benefit to business owners. an inefficient warehouse system can cost businesses dearly in terms of efficiency. But according to these executives. makes it possible for the warehouse computer y y . including material handling and data collection technologies. however.
and current installations and locations of vendor's distribution centers. businesses weighing whether to outsource such a key component of their operation need to consider the expense of such a course of action. evaluations of their time sensitivity. "Task assignment can then be made by visual display or printout. and up -to-the-minute tracking of inventory item location." wrote Bergin. businesses should settle on a strategy that eases traffic congestion and reduces problems associated with ongoing turnover in inventory. as well as their feelings about relinquishing that level of control. and projected fill rate. verification. crossdocking and dispatch." Inventory control systems such as the one utilized by SonicAir. keyboard entry. or voice recognition. and task completion can be confirmed by scanning.system to interact with terminal displays on the forklifts themselves. Of course. y Maximization of storage capacity: Warehouses that adhere to rigid "storage by incoming lot size" storage arrangements do not always make the best use of their space. the expected transit time. "There are third party services available for managing warehouse operations. OUTSOURCING WAREHOUSE RESPONSIBILITIES Some companies choose to outsource their warehouse functions. provide businesses with the ability to do real -time updating of inventory. Such systems are also capable of providing "a strategic stocking ana lysis which looks at the customer's equipment locations to determine which strategic stocking locations should be used." added Bergin. "This allows a company that isn't as confident in running their own warehousing operations to concentrate on their core business and let the experts worry about keeping track of their inventory. . for one. said Bergin. Instead. provides companies with an analysis of products and spare parts. SonicA ir." observed Transportation and Distribution.
Likewise. Breaking Down Inventory An ABC inventory system breaks down your inventory based on movement. so you can monitor them more closely. Most companies find their inventory falls under the 20 -80 rule. while slow-moving items are counted annually. As a general rule. sales or costs criteria. The ABC inventory method . Twenty percent of their inventory accounts for 80 percent of all sales. you are committing to monitoring the fastest-moving items more than the slower-moving items. With the 20-80 rule. The ABC inventory system was designed specifically for this purpose. the top 20 percent of your inventory items is placed in the 'A' category. The ABC inventory control method determines the importance of inventory items based on usage. you can classify items with extremely long lead times as 'A' items to help prevent ordering del ays. and the slowest-moving items are classified as 'C' items. Other Criteria While the standard ABC inventory system works based on the volume of movement. some companies intermix other criteria to monitor specific inventory items. Your cycle count system will count a specific amount of inventory on a monthly basis. the next tier of inventory is classified as 'B' items. Cycle Counting When you establish an ABC inventory system. This creates a need to more accurately monitor the faster-moving items. This inventory control method provides companies the ability to give individual stock keeping units (SKUs) different levels of inventory control based on the SKUs relative importance. Companies perform a Pareto analysis to determine ABC item classifications.ABC SYSTEM OF INVENTORY The ABC inventory system more accurately monitors faster -moving inventory. The remaining inventory is divided into moderate -moving items and the very slow-moving items. 'B' items are counted a minimum of semi-annually. You can classify extremely high-cost inventory items as 'A' items. The fastest-moving items are classified as 'A' items. all 'A' items are counted monthly to ensu re maximum inventory accuracy.
a company that uses annual usage as its basis for classification stocks more of the "A" class items because of their higher usage and less of the lower use "C" class items. Companies utilizing ABC analysis in the warehouse give priority space to faster moving SKUs. This has a positive impact on customer service and gives a competitive advantage to the company that uses this methodology. reducing safety-stock levels and negotiating reduced pricing with suppliers.offers advantages over non -classification methods in the areas of cost -control. Stocking a better mix of the right inventory allows a company to control over-supply and under-supply of important SKUs. If a company uses customer demand as its basis for analysis. These initiatives can include reducing the SKU's lead -time. companies can focus on containing the cost of the 20% of items that make up 80% of a companies annual spend. This allows workers to rapidly find. but sometimes -costly SKUs. ABC analysis provides a company with information to stock the right-mix of inventory. Control Utilizing the ABC inventory method gives a company more control over the inventory it stores. Implementing ABC . pick and pack fast moving items. On the other hand. Costs Because the ABC inventory method makes use of Pareto's law (the basic 80/20 rule). When a company has the right inventory at the right time it reduces backorders and unfilled orders. Improved service One of the greatest benefits comes from the improvement in customer service levels and order fulfillment. A company that uses annual costs of goods sold (COGS) as its basis for the ABC classification method stocks less of the "A" class ite ms (identified as having higher annual COGS) and stocks more of the "B" and C" class items (identified as having lower annual COGS). Once a company has determined which items fall into each ABC category it can establish cost-reduction initiatives at the SKU level. even without implementing cost-savings initiatives a company experiences costreductions from eliminating excess stock for less important. Warehouse ABC inventory extends to warehouse management has well. Additionally. SKU level management and order fulfillment. it ends up stocking a better mix of the items customers require.
sales or costs criteria. even without implementing cost-savings initiatives a company experiences costreductions from eliminating excess stock for less important. Costs Because the ABC inventory method makes use of Pareto's law (the basic 80/20 rule). These initiatives can include reducing the SKU's lead -time. Companies perform a Pareto analysis to determine ABC item classifications. reducing safety-stock levels and negotiating reduced pricing with suppliers. The Advantages of the ABC System of Inventory Control The ABC inventory control method determines the importance of inventory items based on usage. Stocking a better mix of the right inventory allows a company to control over-supply and under-supply of important SKUs. This inventory control method provides companies the ability to give individual stock keeping units (SKUs) different levels of inventory control based on the SKUs relative importance. . A company that uses annual costs of goods sold (COGS) as its basis for the ABC classification method stocks less of the "A" class items (identified as having higher annual COGS) and stocks more of the "B" and C" class items (identified as having lower annual COGS). but sometimes -costly SKUs. a company that uses annual usage as its basis for classification stocks more of the "A" class items because of their higher usage and less of the lower use "C" class items. On the other hand. Control Utilizing the ABC inventory method gives a company more control over the inventory it stores. SKU level management and order fulfillment. The ABC inventory method offers advantages over non -classification methods in the areas of cost -control. companies can focus on containing the cost of the 20% of items that make up 80% of a companies annual spend. Additionally.inventory management in the warehouse reduces labor cost and increases productivity. Once a company has determined which items fall into each ABC category it can establish cost-reduction initiatives at the SKU level.
Implementing ABC inventory management in the warehouse reduces labor cost and increases productivity . When a company has the right inventory at the right time it reduces backorders and unfilled orders.Improved service One of the greatest benefits comes from the improvement in customer service levels and order fulfillment. This has a positive impact on customer service and gives a competitive advantage to the company that uses this methodology. This allows workers to rapidly find. ABC analysis provides a company with in formation to stock the right-mix of inventory. pick and pack fast moving items. it ends up stocking a better mix of the items customers require. Companies utilizing ABC analysis in the warehouse give priority space to faster moving SKUs. If a company uses customer demand as its basis for analysis. Warehouse ABC inventory extends to warehouse management has well.
end up with the opposite of the desired result. emplo yee involvement and quality.. In recent years manufacturers have continued to try to hone forecasting methods (such as applying a trailing 13 week average as a better predictor for JIT planning.. To meet JIT objectives.Just-in-time (JIT ) is a production strategy that strives to improve a business' return on investment by reducing in-process inventory and associated carrying costs. Quick notice that stock depletion requires personnel to order new stock is critical to the inventory reduction at the center of JIT. This saves warehouse space and costs. and efficiency. To achieve continuous improvement key areas of focus could be flow. Just In Time production method is also called the Toyota Production System. such as the presence or absence of a part on a shelf. quality. the process rel ies on signals or Kanban between different points in the process. Kanban are usually 'tickets' but can be simple visual signals.  however some research demonstrates that basing JIT on the presumption of stability is inherently flawed. the complete mechanism for making this work is often misunderstood. However.  . its effective application cannot be independent of other key components of a lean manufacturing system or it can ". For instance. JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment. which tell production when to make the next part. Implemented correctly.
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