ABC ANALYSIS: METHOD OF INVENTORY CONTROL AND MANAGEMENT

OPTIMAL LEVEL OF PRODUCT AVAILABILITY.

Make a resume of each one.

What is Inventory Control?

Inventory control is the process of tracking and managing inventory. This includes
the ordering, shipping, and receiving of inventory and storage and disposal of
inventory. Inventory control monitors the movement and storage of inventory to
ensure that inventory levels are maintained at an optimal level.

The goal of inventory control is to minimize the cost of inventory while maximizing
inventory turnover. In other words, inventory control strives to find the perfect
balance between having too much inventory and not enough inventory.

Difference Between Inventory Control and Inventory Management

Inventory management is a broader term that encompasses inventory control and

other aspects of inventory such as forecasting, planning, and replenishment.

Inventory control is a narrower term focusing on tracking and managing inventory.

Methods and Techniques of Inventory Control

Inventory control uses different techniques and methods. However, the four
common inventory control methods are:

 ABC Analysis
 Last In, First Out (LIFO) & First In, First Out (FIFO)
 Batch Tracking
 Safety Stock

ABC Analysis

ABC analysis is an inventory categorization method that divides inventory into

three categories:
  A items are the top priority and should be given the most attention.
 B items are important but not to the same degree as A items.
 C items are the least important and are given the least attention.

TIPS TO GET STARTED WITH INVENTORY CONTROL

 Evaluate your inventory needs regularly.

 Develop a system for tracking inventory levels and movements.
 Monitor inventory levels closely and adjust them as needed.
 Ensure that your inventory management system is integrated with your
accounting and POS systems.
 Check inventory levels regularly and take corrective action if necessary.
 Review your inventory control procedures regularly and make changes as
needed.
 Perform regular inventory counts and reconcile them with your inventory
records.

In conclusion, inventory control is a process that allows businesses to track and

manage their inventory. There are different methods of inventory control, each with
its benefits and drawbacks. By understanding the different inventory control
methods and choosing the one that best suits your needs, you can improve your
inventory management processes and bottom line.
OPTIMAL LEVEL OF PRODUCT AVAILABILITY

Optimal inventory levels are the ideal quantities of products that you should have in
a fulfillment center(s) at any given time. By optimizing inventory levels, you reduce
the risk of common inventory issues, from high storage costs to out-of-stock items.

THE IMPORTANCE OF THE LEVEL OF PRODUCT AVAILABILITY

The level of product availability is measured using the cycle service level of the fill
rate.

The service rate: The amount of customer demand satisfied from available
inventory.

The level of product availability

- Supply chain’s performance.

A high level of product availability

- Large inventories
- Costs for the supply chain.
- Balance between the level of availability and the cost of inventory.

FACTORS AFFECTING OPTIMAL LEVEL OF PRODUCT AVAILABILITY

Consider the case of Tiger, a large mail order company selling apparel, among
which ski jackets.

The selling season for ski jackets is from November to February.

Before the start of the selling season, the buyer at Tiger purchases the entire
season’s supply of ski jackets from the manufacturer.

When deciding the level of product availability, the manager at Tiger has to
balance the los from having too many unsold jackets and the lost profit from turning
away customers.
The cost of overstocking (Co) = The loss incurred by a firm for each unsold unit at
the end of the selling season.

The cost of understocking (Cu) = The margin lost by a firm for each lost sale
because of stockout.

The relationship between the cost of overstocking and the cost of understocking
determine the optimal level of product availability.

The supply chain profitability can be increased by reducing the uncertainty that
affects demand, in order to reduce both the the cost of overstocking and the cost of
understocking.

To do,so, the following levers can be considered:

1. improving the forecasts accuracy;

2. reduce the lead time;

3. postponement;

4. tailored sourcing.

BUY-BACK CONTRACT

A manufacturer can increase the quantity the retailer purchases by offering to buy
back any leftover units at the end of the season at a fraction of the purchase price.