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philip.ermita@perpetualdalta.edu.ph
ermita.philip@gmail.com

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• By the end of this course, the participants are expected to appreciate the benefits of digitalizing
inventory and supplies management in terms of improving business operations and gain insights in
selecting the appropriate software for their business.
• Specifically, at the end of the course, the participants are expected to:
1. Discuss inventory management and its role in business;
2. Explain the different methods or techniques in inventory management;
3. Explain how to improve inventory management;
4. Discuss the different considerations in digitalizing inventory and supplies management;
5. Explain the importance of digitalizing inventory and supplies management;
6. Appreciate different softwares for inventory and supply management

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 A

B(4) C(2)

D(2) E(1) D(3) F(2)

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• Inventories are a vital part of business
• Necessary for operations, but they also contribute
to customer satisfaction
• Inventory decisions in service organizations can be
especially critical
• The major source of revenues for retail and
wholesale businesses is the sale of merchandise
(ie., inventory)

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• Raw Materials and Purchased Parts
• Partially completed goods, called work-in-process (WIP)
• Finished Good Inventories (Mfg Firms) or Merchandise (Retails
Stores)
• Tools and Supplies
• Maintenance and Repairs inventory
• Good-in-transit to warehouses, distributors, or customers
(pipeline Inventory)
https://www.youtube.com/watch?v=TU2OniIvVmw&t=82s
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• To meet anticipated customer demand
• To smooth production requirements
• To decouple operations
• To reduce the risk of stockouts
• To take advantage of order cycles
• To hedge against price increases
• To permit operations
• To take advantage of quantity discounts
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Inventory management refers to the process of
ordering, storing and using a company's inventory.
• This includes the management of raw materials,
components and finished products, as well as
warehousing and processing such items.
• For companies with complex supply chains and
manufacturing processes, balancing the risks of
inventory gluts and shortages is especially
difficult.

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1. A system keep track of the inventory on hand
and on order
2. A reliable forecast of demand that includes an
indication of possible forecast error
3. Knowledge of lead times and time variablity
4. Reasonable estimates of inventory holding cost,
ordering costs, and shortage costs
5. A classification system for inventory items

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1. Research existing periods where inventory
was out of synch with demand.
2. Study demand and consumer spending
trends in the marketplace.
3. Assess inventory and supply costs.
4. Decide what processes can be automated
or combine
5. Evaluate supplier performance.

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6. Categorize your inventory.
7. Set category goals.
8. Prioritize changes.
9. Get an outside opinion.
10. Establish an inventory management
policy.

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1. Just-in-time (JIT) Inventory System
• A management strategy that has a company
receive goods as close as possible to when they
are actually needed.
• The purpose of just-in-time inventory is to
reduce inventory costs, decrease waste, and
increase efficiency.
• So, if a car assembly plant needs to install
airbags, it does not keep a stock of airbags on its
shelves, but receives them as those cars come
onto the assembly line.

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Just-in-time (JIT) Inventory System
• Advantages
Less space needed
Waste reduction
Smaller investments
• Disadvantage
Risk of running out of stock
Lack of control over time frame
More planning required

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2. Material Requirements planning (MRP)
• A system for calculating the materials and
components needed to manufacture a product.
• It consists of three primary steps:
a. taking inventory of the materials and
components on hand,
b. identifying which additional ones are
needed and then
c. scheduling their production or purchase

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2. Material Requirements Planning (MRP)
The main benefits are:
• Better inventory control
• Reduced costs
• Improved scheduling
• Excellent customer service
• Production Planning

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3. Economic Order Quantity (EOQ)
• The number of units that a company
should add to inventory with each
order to minimize the total costs of
inventory—such as holding costs,
order costs, and shortage costs.
• The EOQ model finds the quantity
that minimizes the sum of these costs.

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Economic Order Quantity (EOQ)
The main benefits are:
• Better inventory control
• Reduced costs
• Improved scheduling
• Excellent customer service
• Production Planning

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 Where:
Q = Order qty in Units
H = Holding Cost per unit per yr
Sample EOQ Problem D = Demand units per yr
A Local Distributor for a national tire company S = Ordering Cost
expectsto sell approximately 9,600 stell belted TC = Total Cost

radial tires of a certain size and tread design

next year. Annual carrying cost is $16 per tire,
and ordering cost is $75. The distributor
operates 288 days a year.

a. What is the EOQ?

b. How many times per yr does the store
reorder?
c. What is the length of an order cycle?
d. What is the total annual cost if the EOQ
quantity is ordered?
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4. Days Sales Inventory (DSI)
• The days sales of inventory (DSI) is a financial ratio
that indicates the average time in days that a
company takes to turn its inventory, including
goods that are a work in progress, into sales.
• The days sales inventory is calculated by dividing
the ending inventory by the cost of goods sold for
the period and multiplying it by 365.
• Ending inventory is found on the balance sheet and
the cost of goods sold is listed on the income
statement.

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5. First In First Out (FIFO)
• An accounting method in which assets purchased or acquired
first are disposed of first.
• FIFO assumes that the remaining inventory consists of items
purchased last.
• A method used for cost flow assumption purposes in the cost
of goods sold calculation.
• The FIFO method assumes that the oldest products in a
company's inventory have been sold first. The costs paid for
those oldest products are the ones used in the calculation

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5. First In First Out (FIFO)
In addition to enabling FIFO inventory control, pallet flow rack
systems bring the following benefits:
• Minimizes stock handling
• Streamlines warehouse operations
• Maximize warehouse space
• Cancel construction projects: If the need for more warehouse
space prompted construction plans, you may be able to scrap
them using this system.
• Minimize equipment damage

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6. Last In First Out (LIFO)
• Last-in First-out (LIFO) is an inventory valuation method based
on the assumption that assets produced or acquired last are
the first to be expensed.
• In other words, under the last-in, first-out method, the latest
purchased or produced goods are removed and expensed first.
• Therefore, the old inventory costs remain on the balance sheet
while the newest inventory costs are expensed first.

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Here’s an Example of the FIFO and LIFO Inventory Management Method
Let’s say your warehouse stores speakers.
In Week 1, you order 100 speakers for $50 each.
In Week 2, you order 400 speakers, but now they are $60 each because the supplier’s price went
up.
You now have 500 speakers in stock.

In Week 3, you sell 400 speakers for $150 each, and you have 100 speakers left.
Using the FIFO method, you’ve sold out of the speakers that cost you $50. This means that your
remaining speakers are priced at $60 each and worth $6000.
$60 x 100 = $6000 worth of speakers

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Here’s an Example of the FIFO and LIFO Inventory Management Method
Let’s say your warehouse stores speakers.
In Week 1, you order 100 speakers for $50 each.
In Week 2, you order 400 speakers, but now they are $60 each because the supplier’s price went
up.
You now have 500 speakers in stock.

On the other hand, if you used the LIFO inventory management method, those 400 speakers you
sold in Week 3 would use the cost of the speaker in Week 2 ($60). As such, you would price the
remaining 100 speakers at your Week 1 cost ($50), so your inventory using the LIFO method is
worth $5000.
$50 x 1000 = $5000 worth of speakers

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• In every business, there’s a system of
organization that oversees the flow of products
and services. This is what is referred to as
inventory management.
• May decide to include an essential inventory
management system or maybe a combination of
techniques to meet their organizational needs.
• A lot of businesses make use of different
inventory management processes to craft
invoices, receipts, purchase orders, as well as
control inventory-related accounting.

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TIP 1 : Supplier Assistance
• A great way of managing your business
inventory is by asking for help from suppliers.
• With a Supplier-managed list, the vendor can
grant access to the distributor’s inventory data.
Purchase orders are generated by the suppliers
whenever needed.
• Distribution-intensive organizations make use of
vendor-managed inventory control to remove
data-entry mistakes, thereby managing the
timing of purchase orders more effectively.

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TIP 2 : Inventory Control Personnel
• Another practical tip you can consider while managing
your inventory is hiring a dedicated inventory control
person/supervisor/manager.
• Inventory managers are responsible for all of the
business’s merchandise products that are readily
available on the ground and in transit.
• They also specialize in performing changes and
adjustments, such as return orders.
• They are able to assure that the merchandise has
been received, while also implementing inventory
reporting methods.

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TIP 3 : Lead Time
• The amount of time for re-ordered inventory
to arrive is what is referred to as Lead Time.
• As you know, suppliers have different time
ranges for delivering their products after
placing an order.
• One useful way for managing inventory is to
manufacture lead reports to better
understand the amount of time required to
replenish your stock.

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TIP 4 : Monitor Inventory Levels
• Owning a large amount of inventory
augments your expenses and significantly
increases overhead costs.
• Another useful tip is to precisely determine
the inventory needs that the business
requires.
• Try as much as you can to limit the annual
list and reduce investing many resources on
slow or never selling products.

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TIP 5 : Customer Delivery
• Customer delivery is another effective way
of managing your inventory turnover as well
as your delivery turnaround.
• This incorporates how often you weigh and
measure your inventory investments as well
as the estimated duration it takes to get to
your clients.

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TIP 6 : Inventory Consultant
• A lot of organizations hire inventory
consultants and specialists that are not
staff of the company, to oversee internal
inventory systems.
• These inventory consultants are usually
responsible for cycle counting, monitoring
order-picking operations, and maintaining
and sustaining accuracy.

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TIP 7 : Purchase Software
• Quite a lot of businesses manage their
inventory with a designed inventory
management database or through the
purchase of inventory management
systems.
• Inventory management software allows
the distributor to customize the
database to fit their individual and
general corporate needs.

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TIP 8 : Product Turnaround
• Every business corporation has either a
product it sells or a service it provides.
• One helpful way you can manage
inventory is by establishing a system that
focuses more on types of products that
sell quickly, rather than ones that take
quite a lot of time to sell.

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TIP 9 : Tracking System
• Most top-ranking businesses have a developed
tracking system that allows them to monitor
turnaround times effectively.
• These inventory tracking systems, come in
different variations ranging from spreadsheets
to computer programs.
• These programs provide complete inventory
control that allows business proprietors to
manage and organize their productivity levels
and take cycle counts in stock rooms or
distribution centers.

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TIP 10 : Work in Progress
• Every successful business should be able
to track different units as they navigate
through various operational stages.
• By establishing a system that can track
“work-in-progress,” it can enable
businesses to change and adjust the
order amounts before the inventory gets
diminished in sales and in turnaround
too.
https://www.youtube.com/watch?v=1d0O8MAMyAM

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• With the tools available for inventory planning,
there is no reason to delay digital transformation.
• And because today’s software is intuitive and
developed with ease of use in mind, technical
assistance and deployment can be done without
the need for a complex IT infrastructure or skill
set level, allowing anyone to take advantage of
the software’s benefits.

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 Here are five steps to digitizing the inventory
planning process

1. Develop a Digital Target

• To understand where to start, develop a digital target
that states where you would like to end up.
• For example, a company wanting to improve inventory
accuracy, reduce holding costs and improve fill rates
may need to survey cross-functional areas such as
purchasing
• Consider key areas such as forecasting and planning to
develop a realistic digital target that pulls all relevant
departments into the data stream

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 Here are five steps to digitizing the inventory
planning process

1. Develop a Digital Target

• To understand where to start, develop a digital target
that states where you would like to end up.
• For example, a company wanting to improve inventory
accuracy, reduce holding costs and improve fill rates
may need to survey cross-functional areas such as
purchasing
• Consider key areas such as forecasting and planning to
develop a realistic digital target that pulls all relevant
departments into the data stream

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 Here are five steps to digitizing the inventory
planning process

2. Assess Business Needs

• Once the digital target is established, assess your current
business needs.
• This helps determine the kind of software needed to hit the
target and aligns the digital target with the business goals.
• For example, inventory planning software can be used on its
own as well as integrated into an existing ERP as part of a
broader digital conversion at the enterprise level.
• The assessment should include development of an inventory
plan and a clear focus on how to execute the plan.

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3. Assess Technical Options
• Different companies have different capabilities in terms of IT
expertise and infrastructure.
• Understanding what the technical needs are can help determine the
type of software, the method of deployment and the learning curve
and training required.
• While each operation will be different, the strength of cloud-based
software such as DemandCaster’s Inventory Planning and
Optimization platform mean that lack of IT infrastructure and
skillsets doesn’t exclude small and medium sized companies from
deploying a world class inventory planning solution.
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 Here are five steps to digitizing the inventory
planning process

4. Continuously Improve Processes

• The power of digitized inventory planning means that trends
can be identified faster and accurately.
• This impacts areas both upstream and downstream from
inventory control allowing them to improve manufacturing,
purchasing and other internal processes due to the
capabilities of the system and the utilization of real-time data.

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5. Prioritize and Create a Roadmap
• The power of digitized inventory planning means that trends
can be identified faster and accurately.
• This impacts areas both upstream and downstream from
inventory control allowing them to improve manufacturing,
purchasing and other internal processes due to the
capabilities of the system and the utilization of real-time data.

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1. Inconsistent Tracking
• Using manual inventory tracking procedures
across different software and spreadsheets
is time-consuming, redundant and
vulnerable to errors.
• Even small businesses can benefit from a
centralized inventory tracking system that
includes accounting features.

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2. Warehouse Efficiency
• Inventory management controls at the
warehouse is labor-intensive and
involves several steps, including
receiving and putaway, picking, packing
and shipping.
• The challenge is to perform all these
tasks in the most efficient way possible.

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3. Inaccurate Data
• Need to know, at any given moment,
exactly what inventory you have.
• Gone are the days when inventory
could be counted once a year with an
all-hands-on-deck approach.

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4. Changing Demand
• Customer demand is constantly shifting.
• Keeping too much could result in obsolete inventory
you’re unable to sell, while keeping too little could
leave you unable to fulfill customer orders.
• Order strategies for core items, as well as
technology to create and execute an inventory plan,
can help compensate for changing demand.

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5. Limited Visibility
• When your inventory is hard to identify or
locate in the warehouse, it leads to incomplete,
inaccurate or delayed shipments.
• Receiving and finding the right stock is vital to
efficient warehouse operations and positive
customer experiences.

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6. Manual Documentation
• Managing inventory with paperwork
and manual processes is tedious and
not secure.
• It doesn’t easily scale across multiple
warehouses with lots of stock.

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7. Problem Stock
• Perishable and fragile stock need
specialized plans for care and storage.
• High-value inventory needs specific loss-
prevention strategies and inventory
controls.

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8. Supply Chain Complexity
• Global supply chains shift daily, placing a
burden on your inventory planning and
management operations.
• The manufacturers and wholesale
distributors that dictate when, where and
how your inventory ships require flexibility
and offer unpredictable lead times.

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9. Managing Warehouse Space
• Efficiently managing space is an intimidating task.
• Planning and designing warehouse spaces with
inventory management platforms helps you better
control the timing of new stock deliveries.
• It can account for important factors, such as available
space.
• Read more about the differences between
warehouse management and inventory management.
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10. Insufficient Order Management
• One of the most common challenges to
sound inventory management is preventing
the overselling of products and running out
of inventory.
• Using historical and seasonal data trends
can help you accurately predict customer
orders.

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11. Increasing Competition
• Globalized supply chains are subject to
unpredictable economic shifts and market
forces that impact the competition for raw
materials.
• Small businesses are sometimes faced with
choosing between competing for high-demand
materials or holding enough inventory to
control costs.
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12. Evolving Packaging
• Compostable packaging—or removing
packaging all together—to reduce waste
presents new obstacles for warehouse design
and storage.
• It may even mean new equipment or shorter
shelf life for some items.

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13. Expanding Product Portfolios
• Many online retail strategies remove the
need for large warehouse distribution
centers.
• These strategies make it easier to expand
inventory and diversify product portfolios,
but demand technology and resources for
ordering, shipping and tracking.

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14. Overstocking
• Keeping too much stock on hand can be as
problematic as having too little.
• Overstock impacts business cash flow and
leads to inventory-related problems, such as
storage and loss.

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15. Inventory Loss
• The loss of inventory due to spoilage, damage
or theft can be a supply chain problem.
• It requires identifying, tracking and measuring
problem areas.

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16. Poor Production Planning
• Production planning is vital for avoiding
delayed manufacturing and cost
overruns.
• If not done well, it can impact sales
forecasts and project scheduling.

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17. Lack of Expertise
• It can be tough to find skilled inventory
managers who are adept at the latest
technology and can improve inventory strategy.
• Simply upgrading your inventory management
platform with a host of features isn’t enough.
You need capable management.

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18. Poor Communication
• Communication and collaboration are key.
• When departments are apathetic about
sharing information, it makes identifying
inventory trends and finding ways to
improve much more difficult.

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19. Inefficient Processes
• Low-tech, manual inventory management procedures
don’t seem like a daunting challenge when inventory
is small and there’s only one warehouse location to
manage.
• But as sales volume increases and inventory expands,
inefficient, labor-intensive and low-tech standard
operating procedures are difficult to scale.

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20. Inadequate Software
• To scale inventory management software to support
complex logistics, it needs to integrate with your
existing business process platforms.
• The difficult task is choosing from hundreds of
inventory management solutions and mastering a
host of features that require training and ongoing
support.

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• Digital inventory management allows you to
track inventory with powerful, yet simple
software.
• A digital inventory management system
makes it easy to keep tabs on how much you
have in stock
• It offers many benefits including increased
efficiency and a decreased workload.

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A Digital Inventory System Applies Cycle
Inventory Counting
• The most efficient way to conduct inventory
management is through a system of cycle
counting.
• This means counting a portion of—rather
than all of your total inventory over a set
period of days, and rotating the list of items
counted each day.

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A Digital Inventory Management System
Simplifies Purchasing
• Many operators have exceptional managers
on staff who have their own “system” for
inventory management and purchasing.
• But those unique strategies are not always
easy to carry out if they take vacation or
leave for other employment.

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A Digital Inventory System Saves Time
• With a digital system accessible via a wireless
tablet or smartphone, time spent taking
inventory is drastically reduced.
• A manager concerned about whether a
certain item is stocked correctly can check
that count from the device and eliminate
wasted time spent running to the stock room.

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A Digital Inventory Management System Minimizes
Data Entry Errors
• When compared to a handwritten inventory, the ease
of data entry on a tablet is far simpler and more
reliable.
• Errors or misunderstandings made from poor
handwriting, erased entries, or misentry are greatly
reduced with a wireless tablet.
• Corrections are easily and clearly made and updated
immediately to your entire system. https://www.youtube.com/watch?v=H881x-zIurY
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Things to consider:
• Installation and configuration
• Training
• Customization
• Process design
• Maintenance
• Upgrades and Support
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The Best Inventory Management Software for Small Businesses of 2021

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The Best Inventory Management Software for Small Businesses of 2021

https://www.youtube.com/watch?v=x70A2JV1j64

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The Best Inventory Management Software for Small Businesses of 2021

https://www.youtube.com/watch?v=KCtxVh05ZgE
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The Best Inventory Management Software for Small Businesses of 2021

https://www.youtube.com/watch?v=28BAOADX4nc
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The Best Inventory Management Software for Small Businesses of 2021

https://www.youtube.com/watch?v=yepWzFP_2D8
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The Best Inventory Management Software for Small Businesses of 2021

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The Best Inventory Management Software for Small Businesses of 2021

https://www.youtube.com/watch?v=n876BDJs4TE
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The Best Inventory Management Software for Small Businesses of 2021

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Comparison of Inventory Software

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Six important inventory management features:
• Improved inventory control and
forecasting/projection
• Barcoding & Scanning features
• Improved, actionable inventory analysis
• Configurability
• Integration and Interfaces
• On-premise versus Software as a Service and Cloud
system
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(

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(

philip.ermita@perpetualdalta.edu.ph
ermita.philip@gmail.com

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