OM 107 Inv. Mngt. Control Module 2 Unit 6 8

Reference No: KLL-FO-ACAD-000 | Effectivity Date: August 3, 2020 | Revisions No.
: 00
VISION MISSION
A center of human development committed to the pursuit of wisdom, truth, Establish and maintain an academic environment promoting the pursuit of
justice, pride, dignity, and local/global competitiveness via a quality but excellence and the total development of its students as human beings,
affordable education for all qualified clients. with fear of God and love of country and fellowmen.
GOALS
Kolehiyo ng Lungsod ng Lipa aims to:
1. foster the spiritual, intellectual, social, moral, and creative life of its client via affordable but quality tertiary education;
2. provide the clients with reach and substantial, relevant, wide range of academic disciplines, expose them to varied curricular and co-curricular
experiences which nurture and enhance their personal dedications and commitments to social, moral, cultural, and economic transformations.
3. work with the government and the community and the pursuit of achieving national developmental goals; and
4. develop deserving and qualified clients with different skills of life existence and prepare them for local and global competitiveness
MODULE
SECOND Semester, AY 2021-2022
I. COURSE CODE/TITLE : OM 7 INVENTORY MANAGEMENT AND CONTROL
II. SUBJECT MATTER
SUBJECT MATTER Time-Frame

A. Inventory Management Techniques and Multichannel Inventory Week 12 - 13
Tracking
B. Inventory Accounting Week 14 – 15
C. Choosing an Inventory Management System Week 16 – 17
FINAL TERM EXAMINATION Week 18
III. COURSE OUTCOME

A. Inventory Management Techniques and Multichannel Inventory Tracking
a) Explain the different inventory Management Techniques
b) Determine the importance of Inventory Tracking in an organization
c) Deliberate the functions of Automated and Manual Inventory Tracking System
d) Recognize the difference of Automated versus Manual Inventory Tracking System
B. Inventory Accounting
a) Realize What is Inventory Accounting
b) Recognize the Key Terms in Inventory Accounting
c) Explain the Valuation Methods of Inventory
d) Analyze Inventory Accounting Software
Marawoy, Lipa City, Batangas 4217 | https://www.facebook.com/KLLOfficial/

C. Choosing an Inventory Management System
a) Explain and Define Inventory Management System and the benefits of using it
b) Recognize the key inventory management system features
c) Realize the additional features of Inventory Management System for Retailers
d) Analyze factors in choosing Inventory Management System
e) Discuss the importance of Inventory System Options
D. Inventory Management Techniques

a) Recognize and apply the different techniques in Inventory Management
IV. ENGAGEMENT
DIRECTIONS: Read and analyze the discussions.
Unit 6: Inventory Management Techniques and Multichannel Inventory Tracking
Unit 7: Inventory Accounting
Unit 8: Choosing an Inventory Management System
Unit 9: Inventory Management Techniques
V. ACTIVITIES
VI. OUTPUT (RESULT)

Submit your printed or soft copy at aldabadavenichole@gmail.com
VII. EVALUATION
Evaluation of results is based on the answers given and scores provided for each item.
Focus (Sharp, Distinct controlling point made about single topic) 20 %

Content (The presence of ideas developed through fact and principles) 20 %
Organization (Sophisticated arrangement of content with evident and or subtle transitions) 60 %
Total 100 %

VIII. REFERENCES
 Inventory Management PDF: A Complete Guide for 2020 (https://www.veeqo.com/wp-
content/uploads/pdf/inventory-management/inventory-management-pdf.pdf)
 Inventory Control and Management by Donald Waters, 2nd Edition
 https://www.primaseller.com/knowledge-base/inventory-management-guide/
Prepared by:
DAVE NICHOLE H. ALDABA, LPT

Instructor I
Recommending approval:
ELISA L. RICAFRANCA, MBA

Dean, College of Business Administration
Check and approved by:
BIBIANA JOCELYN D. CUASAY, Ed.D., Ph.D.

Module Editing Committee Chair
Noted by:
AQUILINO D. ARELLANO, Ed.D., Ph.D.

Vice President for Academics, Research and Extension

OM 107 – Inventory Management and Control
Unit 6
INVENTORY MANAGEMENT TECHNIQUES AND
MULTICHANNEL INVENTORY TRACKING
INVENTORY MANAGEMENT TECHNIQUES
These are necessary for a retailer or a particular business to deal as efficiently as possible with various
areas and tasks such as forecasting, purchasing, storing, and analyzing inventory, and it is up to the
convenience of the business to adapt any of the techniques. The use of appropriate techniques will help the
business achieve its goals and benefits, allowing it to gain a competitive advantage.
Inventory Management Techniques:

1. Choose an appropriate fulfilment option.
2. Take forecasting seriously.
3. Set reorder points for each product.
4. Use EOQ for optimal order quantities.
5. Give each variant a dedicated warehouse bin.
6. Sell older inventory first.
7. Prioritize with ABC analysis.
8. Always track your metrics.
9. Verify accuracy with regular counts.
10. Automate as much as possible.
1. CHOOSE AN APPROPRIATE FULFILMENT OPTION
As a retailer, your main goal is to sell your inventory. And, in the case of ecommerce, it usually means
storing and shipping it. One of the most crucial inventory management methods to master is deciding how
this fulfillment process will be carried out.

General options:
● Drop shipping. This is where you never see or hold inventory yourself. Instead, it is purchased as
each sales order comes in, and shipped directly to the customer.
Example. Let’s imagine you have an online store where you sell dog products.
As a drop shipper, you don’t need to buy hundreds or thousands of dollars or leashes in advance and
store them in a rented warehouse (or your garage) until you make a sale. Instead, you find a third-party
vendor who has the warehouse space to stock your items.
Once a customer purchases from you, your supplier (or suppliers, there can be many of them), takes
over the process and ships the product directly to your customer. You never need to deal with logistics
Your main task as a seller is to get the customers to your online store - do marketing for your drop
shipping store. You can do that from anywhere as long as you have a laptop and internet connection.
● Third-party logistics (3PL). This is where you would purchase inventory in bulk, but have it sent to
a 3PL service. They would then manage inventory and ship orders to your customers for a monthly
fee.
Example. The best 3pl companies in the Philippines further deliver error-free and productive freight
services, allowing businesses to concentrate on their core business processes. Our expert researchers assessed
the industry's most reputed names on quality, reliability, and ability to deliver services.
(Gothong Southern Supply Chain, F2 Logistics, 3PL Service Provider, Makati Express, K Line
Logistics, Majestic Group Global Logistics Inc., Ernest Logistics, Metro Combined Logistics Solution, CTSI
Logistics Philippines, Johnny Air Cargo, ATN, Super Hawk Logistics, Explorer Freight Corporation, and
Source Fit.)
● Self-fulfilment. This involves setting up your own facility and team. You’d be totally responsible for
controlling, managing and shipping inventory.
Example. Basically, your oneself will process all the orders of your customers.

Each of these options has its own benefits and drawbacks, with the best one depending entirely on
individual business requirements.
2. TAKE FORECASTING SERIOUSLY
It's tempting to cut corners when it comes to forecasting inventory needs. Instead, many retailers will
make educated guesses or simply buy inventory and hope it sells. This puts you at risk of having far too
much (or far too little) stock on hand at any given time. And the additional carrying costs will eat into profits
on a daily basis. The first step in forecasting your inventory needs is to make a rough estimate of your
expected sales. You'll need to set some forecast boundaries for this.
Make sure to use your past sales data in two ways:

● Short term. Look at sales over the past 30-90 days to indicate your short term sales trends and
demand for the inventory you hold. These should then be reviewed each month. If market trends or
actual sales performance is different than expected, then upcoming sales. Forecast can be adjusted
accordingly.
● Long term. Look at what sales were like at particular points in the year to indicate where sales tend
to spike and dip.
Example, a company may be doing a 30-day forecast for white Nike sneakers. If they sold
37 units over the previous 30 days, then base demand would be 37. This just gives a starting point to work
from in our forecast. To increase accuracy, we’ll need to consider any trends and variables that may impact
demand.
3. SET REORDER POINTS FOR EACH PRODUCT
Reordering your products should be done as soon as possible. If you wait too long, you will run out
of stock. If you go too early, you'll end up with far more inventory than you need. This is why each product
(and, ideally, each product variant) should have its own reorder point, taking into consideration.

● Safety stock. An extra quantity of a product which is stored in the warehouse, so you don’t eat into
this emergency, backup stock unnecessarily. Because it serves as insurance against fluctuations in
demand.
● Lead time. So you can still cover sales demand while new products get shipped to your warehouse.
When calculating the reorder points for different SKUs, the lead time it will take to replenish
inventory is factored in to ensure inventory levels don't reach zero.
● Daily Average Usage. The number of sales made in an average day of that particular item.
Here’s the formula to work out exact reorder points:
Apply this to each product in your inventory. As soon as a product hits this level, it’s time to place a
new purchase order with suppliers.
Problem Solving Example.
Suppose you’re a perfume retailer who sells 200 bottles of perfume every day. Your vendor takes one
week to deliver each batch of perfumes you order. You keep enough excess stock for 5 days of sales, in case
of unexpected delays.
Now, what should your reorder point be?

Lead time = 7 days
Safety stock = 5 days x 200 bottles = 1000 bottles
ROP = (200 x 7) + 1000 = 2400 bottles
The order for the next batch of perfume should be placed when there are 2400 bottles left in your inventory.
4. USE EOQ FOR OPTIMAL ORDER QUANTITIES
Knowing when to place a new purchase order isn't enough. To keep carrying costs to a minimum,
you must determine how much stock to order at once. And one of the best inventory management techniques
for this is economic order quantity (EOQ). This is a calculation that aids in determining the optimal amount
of inventory to order each time. Helping to strike a balance between low ordering and carrying costs and
meeting demand.
The three variables involved are:

● Demand. The number of units sold over a given time period (usually a year).
● Relevant ordering cost. Total ordering cost per purchase order. This includes all staff, transportation
and any other costs associated with making each purchase order – but not the actual cost of the order
itself.
● Relevant carrying cost. Assume the item is in stock for the entire time period in question and
decipher the carrying cost per unit.
You’ll then put this into the following equation:

Problem Solving Example
The John Equipment Company estimates its carrying cost at 15% and it’s ordering cost at $9 per
order. The estimated annual requirement is 48,000 units at a price of $4 per unit.
1. What is the most economical number of units to order?
Annual requirement = 48,000 units

Ordering cost = $9 per order
Carrying cost = 15% of per-unit cost
Per unit cost = $4 per unit
EOQ = _/ 2 x AR x OC ÷ CC
= _/ 2 x 48,000 x 9 ÷ 4 x 15%
= _/ 864,000 ÷ .6
= _/ 1,440,000
= 1,200 units
5. GIVE EACH VARIANT A DEDICATED WAREHOUSE BIN

Organizing and arranging items in the warehouse is a critical component of effective
inventory management. Your team should be able to look at your system and quickly locate any
product. This entails designing bin locations with distinct labels for each product variant. It's best to
avoid complicated names; simplicity and ease of understanding reign supreme. As a result, numbers
and letters are the best way to go. Begin by labelling each row, shelf, and bin location as follows:

So you always know, for example, that all your blue t-shirts sized medium will be in Row A –Shelf
B – Bin 1 and the pattern can be continued like this.
6. SELL OLDER INVENTORY FIRST
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. It is also easier for management
when it comes to bookkeeping, because of its simplicity. It also means the company will be able to declare
more profit, making the business attractive to potential investors. Lastly, a more accurate figure can be
assigned to remaining inventory.
The advantages to the FIFO method are as follows:

● The method is easy to understand, universally accepted and trusted.
● FIFO follows the natural flow of inventory (oldest products are sold first, with accounting going by
those costs first). This makes bookkeeping easier with less chance of mistakes.
● Less waste (a company truly following the FIFO method will always be moving out the oldest
inventory first).
● Remaining products in inventory will be a better reflection of market value (this is because products
not sold have been built more recently).
● Higher profit.
● Financial statements are harder to manipulate.
The FIFO method gives a very accurate picture of a company’s finances. This information helps a
company plan for its future.
Disadvantages of FIFO method

The FIFO method can result in higher income tax for a business to pay, because the gap between
costs and profit is wider (than with LIFO).
A company also needs to be careful with the FIFO method in that it is not overstating profit. This can happen
when product costs rise and those later numbers are used in the cost of goods calculation, instead of the actual
costs.

7. PRIORITIZE ABC ANALYSIS
ABC analysis is a technique used in materials management and is used to categorize inventory. It
divides an inventory into three categories A, B and C items, where A- items have a very tight control with
accurate records and B-items have less tight control and good records. C-items have as simple as possible
control and minimal records.
Here’s how to perform an ABC analysis step-by-step:

1. Identify the Objective: An ABC analysis can help you meet one of two targets: lower procurement
costs or raise cash flow by optimizing inventory levels of the right items based on customer sales or
production.
2. Collect Data: The most common data to collect is the annual spend on each item. This data is in raw
purchase dollars. If it’s easy to calculate, you can gather the weighted cost, including gross profit
margin, ordering and carrying cost data.
3. Sort by Decreasing Order of Impact: Use the ABC analysis formula to rank each inventory item’s
order by cost — from highest to lowest impact.
4. Calculate the Sales Impact: For each inventory item, calculate its impact on sales as a percentage by
dividing the annual item cost by the aggregated total of all items spent. This number is the percent,
or fraction, that you will use to compare items in the list. Here’s the formula:
% Impact = (annual item cost) / (aggregated total of all items spent) x 100
5. Sort Items into Buy Classes: Once you define the classes, work on contract renegotiation, vendor
consolidation, shifting strategic sourcing methodology or implementing e-procurement. Making
changes in these areas can provide significant savings or ensure the in-stock availability of Class A
items. Take a holistic view rather than being strict about the 80/20 rule.
6. Analyze Classes: Once categories and strategic cost management are defined, schedule reviews to
monitor the success or failure of decisions.

A thorough ABC analysis begins with identifying the objective you’re trying to reach. Once you have
that, collect the necessary information to categorize the items. Once the classes are in place, closely track
and make decisions based on the resulting data
8. ALWAYS TRACK YOUR METRICS
Inventory metrics are indicators that help you monitor, measure, and assess your performance – and
thus, give you some keys to optimize your processes as well as improve them. They focus on a specific area
and goals in order to spot trends and identify weaknesses.
⮚ Inventory turnover is a financial ratio showing how many times a company has sold and
replaced inventory during a given period. A company can then divide the days in the period by the
inventory turnover formula to calculate the days it takes to sell the inventory on hand.
Inventory Turnover Formula and Calculation
Where:
COGS = Cost of Goods Sold
And:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Companies can also calculate inventory turnover by:
1. Calculating the average inventory, which is done by dividing the sum of beginning inventory and
ending inventory by two.
2. Dividing sales by average inventory.

⮚ Inventory write-off is an accounting term for the formal recognition of a portion of a company's
inventory that no longer has value. An inventory write-off may be recorded in one of two ways. It
may be expensed directly to the cost of goods sold (COGS) account, or it may offset the inventory
asset account in a contra asset account, commonly referred to as the allowance for obsolete
inventory or inventory reserve.
Special Consideration
Large, recurring inventory write-offs can indicate that a company has poor inventory management.
The company may be purchasing excessive or duplicate inventory because it has lost track of certain
items, or it is using existing inventory inefficiently. Companies that don't want to admit to such
problems may resort to dishonest techniques to reduce the apparent size of the obsolete or unusable
inventory. These tactics may constitute inventory fraud.
⮚ Gross margin return on investment (GMROI) is an inventory profitability evaluation ratio that
analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by
dividing the gross margin by the average inventory cost and is used often in the retail industry.
GMROI is also known as the gross margin return on inventory investment (GMROII).
The GMROI is a useful measure as it helps the investor or manager see the average amount that the
inventory returns above its cost. A ratio higher than one means the firm is selling the merchandise for
more than what it costs the firm to acquire it and shows that the business has a good balance between
its sales, margin, and cost of inventory.
The formula for the GMROI is as follows:
⮚ Sell-through rate measures the amount of inventory that is sold within a given period relative to the
amount of inventory received within the same period. Strictly speaking, sell-through rate estimates

how quickly a company can sell its inventory, converting it to revenue. Essentially, it is among the
most important key performance indicators (KPI) in inventory management. Most notably, it is
commonly employed in the retail industry.
The sell-through rate is a helpful metric that reveals how fast a company is turning over its inventory
within a certain period. It can guide the company in making any necessary adjustments to its inventory
strategy.
Sell-through rate is calculated using the formula below:
⮚ Day’s inventory outstanding (DIO) is the average number of days that a company holds
its inventory before selling it. The day’s inventory outstanding calculation shows how quickly a
company can turn inventory into cash. It is a liquidity metric and also an indicator of a company’s
operational and financial efficiency. Day’s inventory outstanding is also known as “inventory days
of supply,” “days in inventory,” or “the inventory period.”
The formula for day’s inventory outstanding is as follows:

Days Inventory Outstanding = (Average inventory / Cost of sales) x Number of days in period
Where:
Average inventory = (Beginning inventory + Ending inventory) / 2
Cost of Sales is also known as Costs of Goods Sold
Days in Period means the number of days in the period, such as an accounting period, that is being examined
– the period may be any time frame – a week, a quarter, or annually
⮚ Backorder Rate
The total number of customer orders delayed (backordered) due to the company being out of stock
divided by the total number of customer orders placed over the same period of time, as a percentage.

Calculation Instructions
Two values are used to calculate this KPI: (1) the number of customer orders that are delayed in
shipment due to the company being out of stock, and (2) the total number of customer orders placed during
the same measurement period. An order is defined as backordered or delayed if the order is held or shipped
late due to a lack of inventory availability.
Backorder Formula:
(Number of Customer Orders Delayed due to Backorder / Total Number of Customer Orders Placed) * 100
9. VERIFY ACCURACY WITH REGULAR COUNTS
A stocktake (also known as an inventory count) is a way of keeping track of what products are
currently in stock and in what quantities.
Doing a stocktake helps you determine the amount and condition of the products you have in stock in a retail
space or warehouse. By carrying out a stocktake you are able to check your actual stock against the figures
you have recorded in your inventory tracking spreadsheets or tools. Do they match? If not, you can start
asking why, and implement plans and procedures to reduce the discrepancy.
There are several different stocktake methods and best practices. For example, while some companies choose
to count stock once a year or quarterly, others carry out rolling stocktakes (cyclic counting).
Cycle Counting
When it comes to your warehouse efficiency, moving to cycle stock counts can be a game-changer.
With cycle stock counts, you assign your team ‘partial’ stocktakes or inventory counting tasks to complete
on a regular, continuous basis. This means that your inventory gets counted in chunks throughout the year,
allowing you to avoid
Using barcode scanners for cycle counts can add yet another layer of efficiency to your physical inventory
checks. They completely eliminate the need for tags or messy paperwork, and allow your team members to
complete their weekly counting quotas quickly and accurately.

Spot Checking
A spot check stocktake will often be scheduled, but will sometimes be random. It is a manual check
on stock in the premises, or cash in the till. Spot check stocktakes enable you to ensure that there are no
discrepancies between what your software and reports think you have and what you actually have. A random
spot check stocktake is a good idea if you think theft may be occurring within your business.
10. AUTOMATE AS MUCH AS POSSIBLE
An automated inventory management system is software capable of doing many repetitive inventory
management tasks on its own with little human effort.
Automated inventory management systems are used by retailers, wholesalers, distributors, and other
businesses that have to track inventory. These systems were originally only for companies with budgets and
inventory that warranted the help.
Benefits of Automated inventory management system

1. Real-time inventory visibility
2. Reduces human error
3. Time savings
Features of Automated inventory management system
Stock reordering
The right solution will enable you to set thresholds of what you consider to be low stock for any or
all of your items. Anytime that item’s count reaches that threshold, the system will automatically place an
order with your vendor for your preferred restock amount.
Barcode Scanning
When your staff needs to run an inventory count to check for loss or manually add in an item for
whatever reason, the inventory software can take all the item’s SKU and other data from a barcode scan,
rather than by having a person manually enter all the data.

Real-time data monitoring and forecasting
An automated inventory management system can create many reports that help you understand what’s
happening with your inventory, what items are selling well, what items are getting old, etc. Analysis that
previously would have taken hours to squeeze out of an Excel sheet takes seconds.
Moreover, inventory management software can also display your key reports and KPIs right on a single
dashboard so you can always keep the real-time data top of mind.
All this data can be used to make forecasts for what inventory you should buy going forward. (Some systems
can actually do the forecasting for you, as well.)
Run multichannel inventory tasks

An automated inventory management system will connect with any other sales channels that handle
your inventory, like your point-of-sale and ecommerce systems. As you make sales, record returns, ship
items, and more, your inventory management system will be constantly logging the location of, addition, and
reductions in inventory
Manage inventory control at multiple locations

An automated system can not only provide inventory tracking across your sales platforms, it can track
your inventory in all its various locations, like your warehouse and store locations, and through various points
of your supply chain. You’ll be able to see your total inventory, and then break it down by location.
MULTICHANNEL INVENTORY TRACKING
Inventory tracking is the art and science of monitoring stock levels and exactly where inventory is at
any one time. It is therefore one of the most fundamentally critical aspects of overall inventory management.
So this chapter of our guide covers the best practices in tracking inventory. We run through detailed
instructions on how to do this via manual spreadsheets (and provide a free template), as well as when to start
looking at an automated system.

WHAT IS INVENTORY TRACKING?
Inventory tracking is the recording of stock levels for each individual SKU across every location
items are stored and sold in. This can be done in several different ways - from pen and paper, to computerized
spreadsheets, and even automated systems.
Tracking inventory was once a relatively simple task. But it becomes more and more complex as
further sales channels and/or warehouses get added to a retail operation.
Failing to track inventory properly can lead to:

 Selling inventory, you don’t actually have in stock.
 Purchasing inventory, you don’t actually need.
 Filing inaccurate financial records and accounts.
Putting a system in place to track inventory (whether manual or automated) is therefore imperative
for ecommerce brands wanting to scale successfully.
INVENTORY TRACKING VIA SPREADSHEET
A commonly used inventory tracking option is to record everything via spreadsheet.

This is a form of periodic inventory system. So someone would be responsible for periodically
(usually at the end of each business day) updating the spreadsheet with the latest inventory goings in and out
(i.e. new sales and purchases).
Setting up your inventory tracking spreadsheet
A basic inventory tracker will cover three pillars:

1. Product data. Including details like names, variants, SKUs, cost price, selling price and beginning
inventory.
2. Purchase data. To track all purchase orders being made, each causing an addition to inventory levels.

3. Sales data. To track all sales orders being made, each causing a reduction to inventory levels.
We’ve created three separate tabs in our spreadsheet, one for each of these data pillars:
You’ll need to periodically enter and adjust information in all the tabs for optimal inventory tracking.
But the formulas will pull data between tabs, helping to automate the actual tracking process as much as
possible.
THE ‘PRODUCTS’ TAB

The ‘Products’ tab is where the most up-front work is done. You’ll need to input details about every
single product and variant that you have on-hand. Enter your product details for all the blue columns, and
the dark columns will be calculated automatically:
Key tips:
 Be consistent with how you format product names, sizes and colours.
 Make sure the SKUs match across everywhere this data is used.
 Calculate your reorder point for each product scientifically.
 Do not edit the black columns, these are calculated automatically from inputted data.
THE ‘PURCHASES’ TAB

The ‘Purchases’ tab is simply a running list of purchase orders in order to record and calculate
incoming inventory for each product variant.
Enter each variant within a PO as a separate line. Again, just focus on adding data to the blue columns
and the dark ones automatically generate:
To keep data consistent, there’s a drop down menu provided that pulls variant information in from
the ‘Products’ tab

The Delivery Date should also only be added when the product has actually been received and put
away ready for sale.
As soon as any delivery date is entered, the ordered amount will add to On-hand stock in the
‘Products’ tab. Leaving delivery date blank will keep it in the Stock to be received column:
Key tips:
● Enter each variant within a PO on a separate line.
● Leave Delivery Date blank until delivery is confirmed.
● Use the product drop down menu to ensure tabs can interchange accurate data.
THE ‘SALES’ TAB

The ‘Sales’ tab is a running list of sales orders in order to record and calculate outgoing inventory for
each product variant.
Just like the ‘Purchases’ tab, enter each variant within an order as a separate line. Once again, enter data to
only the blue columns and let the dark ones automatically generate:
Key tips:
● Enter each variant within a sales order on a separate line.
● Leave Shipped Date blank until shipment is confirmed.
● Use the product drop down menu to ensure tabs can interchange accurate data.
USING THE INVENTORY TRACKING SPREADSHEET

Entering each sales order manually should be avoided if possible. Most ecommerce platforms will
allow you to filter orders over a specific timeframe, then export all data to a CSV file.

ADVANTAGES & DISADVANTAGES OF USING SPREADSHEETS FOR BUSINESS
ADVANTAGES
1. Spreadsheets are free.
For most businesses, spreadsheet software is readily available and often free. Whether your company
uses Microsoft Excel or runs on Google Workspace’s Google Sheets, most people with an internet connection
can access a spreadsheet.
2. Spreadsheets require minimal training.

Whether you’ve used a spreadsheet to manage your personal finances, or have spent countless hours
building pivot tables for previous roles, chances are you’ve had some hands-on experience using
spreadsheets. Outside of building complicated formulas, recording information in spreadsheets is fairly
intuitive and does not require intensive training to get the hang of. This makes spreadsheets an accessible
option for teams that are scaling fast and don’t have time to train new employees to use complicated software.
3. Spreadsheets are customizable.

Spreadsheets are highly customizable, especially if you know how to use its multitude of formulas
and functions. You can create any type of document with a spreadsheet, even a calendar.
Because they’re so customizable, they can also be intimidating to use. You’re not even sure where to
begin unless there’s a spreadsheet template available for what you want to do. So if you do want to use
spreadsheets for business, it’s important that at least one of your team members knows how to customize a
spreadsheet to streamline a business process.
4. Spreadsheets can be more collaborative than other tools.

Most business tools these days provide some collaboration features. For instance, Trello allows teams
to manage projects in one interface. But no tool provides the same amount of visibility as a spreadsheet.

Spreadsheets can be freely edited by anyone on the team, so there’s an automatic increase in
collaboration. While other tools may bar some permissions based on team members’ titles or managerial
levels, there are no such restrictions with spreadsheets (unless you purposefully restrict permissions).
Do note that this is only true for online tools such as Google Sheets. A tool that’s downloaded on
your local drive, like Excel, wouldn’t be as collaborative, because the file is only available on your laptop.
5. it’s easy to manipulate and analyze data.

Spreadsheets make it easy to manipulate data. You can add, subtract, divide, and multiply datasets;
create pivot tables; remove duplicates; retrieve data from other tabs; and search all rows and columns for a
certain phrase or parameter.
There’s a downside to this, however. You can easily break a spreadsheet if you accidentally remove
a piece of data that was part of a formula or calculation. It’s also easy to accidentally transfer a cell’s
information to another cell, and by the time you catch it, it may be too late to undo it. So you’d have to cross
your fingers and hope you remember the data.
6. You can integrate spreadsheets with certain tools.

This is especially true for Google Sheets, which is cloud-based. Using a tool such as Zapier or
Integromat, you can automatically upload spreadsheet data onto your CRM or into your project management
software — so long as the spreadsheet’s columns match the input fields on the software. If there’s a
mismatch, you can expect significant integration errors.
7. Spreadsheets are quick and easy to add into a workflow.

Whereas a dedicated system, such as a piece of sales software, may take time for users to adopt,
spreadsheets pose no such challenges. Once you create a spreadsheet and share it among team members, it’s
easy to integrate into the team’s workflow — regardless of your team’s size.

8. Spreadsheets are fantastic tools for financial documents.
There’s no other tool like a spreadsheet for creating financial documents such as balance sheets,
business budgets, and cash flow statements. Once you’re ready to export the revenue and asset data from
your bookkeeping tool, it’s as easy as plugging in the numbers and generating a new spreadsheet statement
every quarter.
9. You have access to countless spreadsheet templates.

Earlier, I mentioned that to use a spreadsheet for your use case, you’d likely need a template.
Otherwise, it’d be hard to create a spreadsheet that works for you and your team. The good news is that many
templates exist for both Excel and Google Sheets. You can find nearly a hundred examples in Hub Spot’s
business template library.
10. You can visualize data (with caveats).

You can use spreadsheets to visualize data — but you must know how to. On a tool such as the Hub
Spot CRM, you simply need to access the reporting dashboards tool to see your data visualized automatically.
Spreadsheets can do the same thing, but you’ll need to know how to appropriately choose the data so that
you don’t get an error.
Once you learn how to handle a spreadsheet’s visualization tools, you can create charts and graphs
with ease.
To summarize, spreadsheets may be sufficient for startups in the very early stages, but these
advantages are often short-lived. Over time, spreadsheets can become more trouble than they're worth.
Even for a small company, managing customer information through spreadsheets is at best
unproductive and at worst downright dangerous for a variety of reasons. Now let’s discuss the disadvantages
of using spreadsheets to track customer information and business data.

DISADVANTAGES
1. Spreadsheets are not secure.
As opposed to a dedicated system that requires access to log in, spreadsheets can be disseminated to
anyone, anywhere with the simple send of an email. This makes it easy for a disgruntled or dishonest
employee to share leads and customer data with external contacts (read: your competitors).
2. it’s hard to tell who edited the spreadsheet.

While spreadsheets are excellent collaborative tools that allow anyone in your team to add
information, it’s hard to tell who edited a cell. This can make it difficult to pinpoint the appropriate party if
an error happens or if something else goes amiss with the sheet.
In sales specifically, establishing an orderly system to divvy up leads and customers when you're
working from spreadsheets is tough. Unless you train your reps to take meticulous notes and follow a rigorous
documentation process, there's no indication of who last reached out to a customer or prospect, what the
content of the message was, and when the interaction took place.
3. There will be multiple versions of the truth.

Everyone might start out working from the same data, but it probably won't stay that way for long.
Every time a rep makes a change to the master spreadsheet, they'll need to upload it to a central repository
for the edits to be communicated to the rest of the team.
And if they forget to do that, you'll have several versions of the "single" spreadsheet — all with
slightly different data. How will you know which one is right? That's a sure recipe for creating a messy sales
process.
4. Spreadsheets are prone to errors.

Well, spreadsheets aren’t prone to errors, but its users certainly are. (Guilty.)

With so many people having their hands on a single spreadsheet, and with so many edits and
calculations happening at once, it’s natural that spreadsheets will contain some type of error. If you're hoping
for accuracy, don't expect to get it from spreadsheets. That’s why it’s wise to invest in a database software
that can quickly and accurately resolve errors on its own, or flag them to you for fixing it. Because the worst
part about spreadsheets, especially large ones, is that it’s easy to miss errors unless you’re continuously
combing it row-by-row.
5. Reporting is painful.
It's hard enough compiling all the various versions of a spreadsheet into one master copy, but then
managers have to assemble meaningful reports based on the data. As anyone who has tried to report from
Excel knows, it's not for the faint of heart. And the more complex your data, the harder reporting becomes.
6. Visualizing data is difficult.

As mentioned, users can create charts and graphs in spreadsheets. But "create" is the key word.
Assembling any kind of data visualization in a spreadsheet is time-consuming and frustrating. Managers
could opt to skip the visuals altogether — after all, they're not necessary. But presenting a spreadsheet
thousands of rows long is guaranteed to make your team members’ eyes cross.
7. Critical customer data is at everyday life's mercy.

If you’re using Excel, you risk losing data. Lots of data. Data that lives solely on individual computers
can be lost forever if your laptop takes a tumble or gets doused in coffee. While Google Sheets is a great
alternative, it can also be subject to data loss if you lose your internet connection.
8. There’s no native integration with business systems.

If you want to connect your spreadsheets to the other systems you use, you’d have to hope that an
integration exists on Zapier or a similar tool. If it doesn’t, you’re out of luck, and you’d have to manually
transfer the data over to the other systems.

A lack of integration means that customers and prospects might receive redundant information... or
none at all. Neither of these scenarios translates into sales or growth for your business.
9. Spreadsheets make it harder for managers to manage team members.

To effectively coach and mentor, managers need to have visibility into the daily actions and processes
of their team members. This is all but impossible to do through spreadsheets. Both team members and
managers will quickly become frustrated with the seemingly endless cycle of uploading, downloading,
attaching, and emailing spreadsheets.
A much better alternative is a project management tool or a CRM that keeps record of all rep activity.
10. Spreadsheets don’t offer mobile access.

This is bad for any team, but it’s especially bad for sales. Mobile access to sales systems has been
proven to increase rep productivity — by as much as 24%, according to some estimations. But regardless of
the other virtues of spreadsheets, they're not exactly mobile-friendly. Dragging out a laptop each and every
time you need to enter or change customer data gets old in a hurry.
In comparison, the Hub Spot CRM offers a mobile app for reps to quickly enter their activity.
11. Spreadsheets are difficult to scale.

Once your company — and your customer list — starts growing, sales spreadsheets will need to as
well. However, the bigger the spreadsheet, the more likely it is to contain errors and broken formulas. Not to
mention that large spreadsheets are exponentially more unwieldy for users and administrators alike.
Spreadsheets sound like a hard “no,” don’t they? But when do you use a spreadsheet over other
types of tools? Let’s go over those instances now.

WHEN TO USE A SPREADSHEET
When You Want to Manage a Large Dataset At One Time

Spreadsheets are an excellent tool when you need to handle and manipulate a large dataset on a one-
time basis. Let’s say you’ve exported all traffic data for your website, and you want to find the pages that
earned the most traffic. Spreadsheets can help you see that data for a single date or a single time range rather
quickly in one familiar interface.
However, if you want to track traffic over time, spreadsheets aren’t the best tool, because you’d have
to export the dataset each time you want to access it. There’s also no way to visualize the data easily. You
still could, but you’d have to use complicated formulas to retrieve data and visualize it properly.
When Your Company is Just Starting Out

Spreadsheets are cheap — and sometimes free, as is the case with Google Sheets. When a company
first starts out, the money isn't exactly rolling in. Startups devote all of their cash to their product — and
make do with the equivalent of duct tape on the operations side.
This means that when it’s time to track customer and contact data, spreadsheets are the natural choice.
It makes sense, too. When you only have a handful of customers, it’s easy to simply pop their information
into a spreadsheet and share it with the one or two salespeople on staff.
However, once your business starts growing, it’s important to upgrade to a database.
When No Dedicated Tool Exists for What You Want to Do
In some cases, there might not be a tool that can provide the dedicated organization and collaborative
features that spreadsheets offer.

For instance, let’s say that you’re part of a large writing team with distributed team members. You
may want a tool that allows you to see and sort through all the articles that everyone’s working on all at once,
instead of needing to click from project board to project board, as you’d need to do in a project management
software.
Spreadsheets are a great tool for that. Using formulas and functions, you can create a spreadsheet that
does exactly what you need it to do.
If you don’t fall under these camps, you’re better off using a database as opposed to a spreadsheet,
especially if you’re in sales.
ARE THE ADVANTAGES OF SPREADSHEETS WORTH BEARING THE DISADVANTAGES?

The benefit of using spreadsheets for business comes down to two main factors: They're free (with a
Microsoft Office or Google Workspace implementation), and they don't require training.
These are certainly valid reasons — especially for a small company without cash to burn or training
resources.
INVENTORY TRACKING VIA AUTOMATED SYSTEM

An automated inventory tracker effectively does the work of a spreadsheet, but without the manual
input needed.
It would connect to all sales channels together, and sync one live inventory figure between them all.
Meaning as soon as a sale is made anywhere, inventory levels are updated everywhere else in real-time:
HOW DOES AN AUTOMATED INVENTORY SYSTEM WORK?

Automated inventory management is how most modern retailers (both e-commerce and otherwise)
track and organize stock, supplies, and sales. An automated system allows retailers to manage inventory in
real-time, and make business-critical decisions in a timely fashion.
For example, if one of your products is running low on stock and reaching the predetermined reorder
point, then your inventory management software will automatically let you know (or even reorder for you).

You’ll know exactly which items are overselling or underselling, how each product is performing,
and how much profit you’re making. Then you can combine all of this information with your demand
forecasting, risk management, cash-flow forecasts, and projected profit margins for better, more accurate
planning.
WHY INVEST IN AN AUTOMATED INVENTORY MANAGEMENT SYSTEM?

When it comes to a retailer’s most significant assets, effective inventory management is high up there.
So, investing in the right automated inventory management system is a wise move.
BENEFITS OF AUTOMATED INVENTORY MANAGEMENT:
1. Save tons of time

Think of all those hours spent manually updating your inventory on Excel spreadsheets. With an
automated system, all your stock counts will be updated automatically and with precision across all your
channels. Every time an item is sold, returned, or received, your automation engine will register the action
and update the system without manual instruction—leaving you with time to focus on what really matters.
2. Gain real-time visibility

Retail operating systems like Bright pearl help you to track your inventory levels in real-time. You’ll
be able to track how much inventory you have available in your warehouse(s), stock which needs to be picked
for current orders & stock on order from your suppliers.
Plus, with this heightened level of accuracy, you’ll never disappoint customers with stock-outs or
unfulfilled orders again.
3. Stop miscalculating stock-levels

Stock miscalculations are the bane of every retailer’s life. Luckily, an automated inventory
management solution makes this particular task so much easier. Inventory analytics monitor your customer
data to forecast your ideal inventory levels and carry out inventory stock replenishment as and when
necessary.

4. Enjoy increased accuracy
Manual entry falls victim to human error all too often. The solution? Remove any need for manual
inventory data entry altogether. When you automate your inventory management processes, the software
itself will administer data entry by adding, deleting, forecasting, and replenishing stock in real-time.
5. Scale-up with ease

Finally, automation can bring with it great scalability and opportunities for growth. Automated
inventory management software frees up time, is more accurate, and can deal with thousands of transactions
each day without risk of error.
A retail operating system like Bright pearl is even more scalable. Supported by a robust automation
engine, Bright pearl gives you the freedom to add more sales channels to your portfolio without ever having
to worry about whether or not you have the workforce to implement and manage increased backend
operations.
AUTOMATED VS MANUAL INVENTORY TRACKING

There are pros and cons to both spreadsheet and automated inventory tracking methods. Let’s have a
look through a few of the highlights:
Spreadsheet pros
● Most of us know how to use and edit a spreadsheet.
● Many templates available to help you create your own.
● Cheap and cost-effective option for start-ups.
● can be updated fairly quickly.
Spreadsheet cons
● inputting data and checking accuracy is hugely time-consuming.
● Spreadsheets (and your sales channels) won’t be updated automatically as stock levels change, meaning
you can easily oversell without realizing.

● Different employees may edit and update spreadsheets without making others aware of changes, causing
confusion and disrupting the order process.
Automated system pros

● saves time by near-eliminating manual data entry.
● Frees up resources that can be re-directed towards company growth.
● brings a consistent, scalable experience for customers across every sales channel.
● New sales channels can be easily opened up without adding to workload.
● Many systems offer an extensive portfolio of features beyond simple inventory tracking – such as order
management, picking and packing, etc.
Automated system cons

● Pricing must be factored into your current financial plan.
● Staff may require training (though minimal, depending on the system used).
Overall, spreadsheets may be a viable short term solution for start-ups dealing with low order
numbers and a small product catalogue. In today’s digital age, however, it’s generally accepted to not be a
scalable option for most ecommerce businesses. An automated system typically requires some level of
monetary investment. But it’s one that will prove its worth several times over when it comes to savings in
both time and resources.

Unit 7
Inventory Accounting
What is inventory accounting?

Inventory accounting is all about how a business would show the stock it holds in its financial records
- balance sheets, profit & loss (P&L) reports, etc. This is typically more complex than it sounds as inventory
is often a 'live figure' that's constantly changing as sales are made and more stock purchased.
In retail, this can cover three types of inventory or production phases:
1. Raw materials.
2. In-progress items
3. Finished products ready for sale.
Your on-hand, unsold inventory needs to be included as an asset in end-of-year financial records.
Meaning the crux of the matter in all this is to correctly track both the cost of any inventory sold and place
an accurate value on the unsold inventory being held at the end of each accounting period.
Any increase or decrease in the value of goods affects your inventory value figure. This then, in
turn, affects the value of your overall business.
Inventory accounting key terms
There are two key terms retailers need to be aware of when it comes to inventory accounting:
1. Cost of goods sold (COGS). The direct costs of producing any goods sold by a company.
2. Ending inventory (EI). The value of any unsold, on-hand inventory at the end of an accounting period.
Cost of goods sold (COGS)
Cost of goods sold (COGS) is a core element of measuring a retail business’s profitability and
inventory value.
As the name suggests, COGS refers to the amount it cost a business to produce the products it sold,
including everything that went into it - materials, labor, tools used, etc. But (crucially) without factoring in
costs not directly tied to the production process - like shipping, advertising and sales force costs, etc.

As a result, COGS helps you determine the amount of gross profit made in one or more sales.
For example:
If you sell an item valued at $50 and the COGS is $30, your company has achieved a gross profit of
$20. It’s a simple formula, though it can become more complex if manufacturing your own products.
All inventory sold will be listed under the COGS account in your income statement at the end of
each business year.
Calculating COGS
To calculate cost of goods sold (COGS) for an accounting period, you'll need to:
1. Determine what costs can be associated with the production process of your specific products -
like labor, raw materials, tools, etc.
2. Take the cost of beginning inventory (BI).
3. Add the cost of newly purchased inventory during the period in question.
4. Subtract leftover, unsold inventory at the end of the accounting period.

Ending inventory (EI)
It's highly likely that a business will not sell the entirety of its inventory at the end of each accounting
period. Meaning any on-hand, unsold stock becomes an asset that must be valued and included in financial
statements.
This is referred to as ending inventory (EI), and is actually quite simple at first glance.
1. Take the beginning inventory (the units carried over from the end of the previous financial
period).
2. Add any newly purchased inventory throughout the accounting period.
3. Subtract any units sold.
4. And this leaves the final inventory figure to be included as a company asset.
However:
We need to assign an actual value to the unsold inventory figure (i.e. how much this company asset is
worth in monetary terms). And this is where it can become a lot more complicated.
This is because:
 Numerous purchases of new stock and raw materials are usually made during a typical 12-month
accounting period.

 Each purchase may have come at a different cost per unit.
 Sales are also being made at the same time, turning inventory into cash.
So which cost per unit figure do you use to value unsold inventory when there are so many
moving parts in a typical accounting period? This is where inventory valuation methods come into play.
Inventory valuation methods
Sticking to a specific method for inventory valuation is critical for consistent, accurate and (most
importantly) legally acceptable financial statements.
There are three main valuation methods retail companies use for inventory accounting:
1. First In, First Out (FIFO).
2. Last In, First Out (LIFO).
3. Average Cost Method.
You'll just need to stipulate which one is being used when submitting financial records and accounts.
FIFO
FIFO is a useful inventory management technique to actually use in the handling of stock in your
warehouse. But it's also a method of valuing unsold inventory.
It assumes inventory that was purchased first, is also the first to be sold. So the oldest on-hand
inventory available is what will be used to fulfill an order.
There are a number of benefits to the FIFO method. Primarily, companies selling perishable goods
(food and drinks) face less risk of their products spoiling or crossing best-before sale date. They can establish
a smooth supply chain and ensure their clients receive the freshest items in their inventory.
All products received and sold must be recorded individually when using the FIFO accounting
method. It’s possible that the FIFO system can lead businesses to under or overestimate the value of inventory
in the future, due to market changes down the line.

LIFO
The LIFO approach works on the assumption that the most recent products added to your inventory
are the first ones to be sold first.
This system works well for retail businesses specializing in non-perishable goods or those with a low
risk of obsolescence. It can also increase COGS and lessen net profit (therefore reducing annual tax liability)
if more recently purchased goods are more expensive.
Note: LIFO is an acceptable inventory accounting method in the US only.
Average Cost
Average Cost (or weighted-average) inventory accounting method is totally different to the previous
two.
This applies to businesses that choose not to track cost per inventory unit for each separate purchase
delivery. Instead, inventory value is based on the average cost of items throughout the relevant period.
You can work out the average cost by simply dividing the overall cost of products for sale by the total
number in the inventory.
Using inventory accounting software
Inventory accounting can be a time-intensive, frustrating process for retail businesses especially small
or independent teams.
But it doesn't have to be a rush of spreadsheets and paper receipts the week before every tax deadline.
There's reliable accounting software available to help automate and digitize as much as possible, the main
two being:
1. Xero
2. QuickBooks
These programs won't 'do your accounts for you'. But they will make it much simpler to organize and
present come the end of tax year.
Both Xero and QuickBooks do also have tools available to help with the inventory side of accounting.

However:
They are accounting softwares at heart. Meaning the inventory management functionality within
them is relatively basic and underdeveloped.
So for growing retail and ecommerce businesses, it's recommended to:
1. Utilize a high-quality inventory management software as master of stock.
2. Ensure this software has a direct Xero integration or QuickBooks integration to push relevant data
across.
This leaves you with the best of both worlds - two high-quality softwares automating as much of your
inventory and accounting processes as possible.

Unit 8
Choosing an Inventory Management System
What is an inventory management system?

An inventory management system is a piece of software used to track inventory items in a business,
and oversee all the processes involved in stock optimization. Any system’s bottom line goal is to ensure the
right inventory is available, in the right amounts , at the right time - with as few manual tasks involved as
possible.
Benefits of using an inventory system

Any business selling and storing physical goods must track inventory in one way or another.
Otherwise, items would be in complete chaos with stock consistency and fulfillment made almost impossible.
Tracking can be done via pen & paper or spreadsheets. But using an automated, computerized system
has many benefits:
● Less time wasted on manual tasks.
● More consistent customer experience.
● Stock levels updated in real-time.
● Reduced labor costs.
● More insightful analytics and reports.
● Faster fulfillment from being better organized.
● Less cash wasted on unnecessary inventory and storage.
● Company becomes more easily scalable.
Overall, automated inventory management systems are powerful tools for retail businesses. In the
short term, they help overcome the operational challenges associated with modern day multichannel and
omnichannel ecommerce. While in the long term, they make growth easier by reducing the reliance on
manual processes and individual people.

Key inventory management system features
It’s important to note that systems can be very different from one another. So when choosing an
inventory management system, retailers should ensure that all the necessary features are included.
Here’s an overview of what to look out for:

 Live syncing. A live, central stock figure is kept in one system, and accurately reflected across all
sales channels and warehouses in real-time.
 Forecasting. Past sales data can be used to forecast demand and plan for upcoming inventory
requirements.
 Re-ordering. Purchase orders can be created and managed so stock can be replenished quickly and
easily.
 Suppliers. All suppliers and vendors can be organized in one system, and easily contacted if purchase
orders need creating, changing or chasing up.
 Barcode scanning. System is compatible with barcode scanning to enable easier tracking and
identification of products.
 Stock notifications. Can set up notifications and alerts to signify when a product has hit its pre-
defined reorder point and needs replenishing.
 Reports. Provides insightful data and analysis on sales, products and warehouses in order to make
better inventory decisions going forward.
 Returns processing. Return orders can be handled with returned inventory easily written-off or
added back into stock.
 Multiple warehouses. Manage stock across several warehouses, stores and locations in one system.
 Integrations. Connect the system to all necessary sales channels, POS systems, shipping carriers,
accounting softwares, etc. - and/or can build desired integrations via an open API.
 Cycle counts. Assigns weekly inventory counting tasks to your warehouse team so stock is
perpetually kept up-to-date with minimal discrepancies.
 Automations & rules. Stock rules can be created to show different available amounts for individual
sales channels and locations.

 Bundles. Products can be grouped together to sell in kits and bundles while still maintaining an
accurate central inventory figure.
Additional features for retailers

Managing a retail business isn't all about inventory. There are many other aspects that companies
might need to handle in order to run a smooth operation.
So when choosing an inventory management system, it's important to also consider what additional
features it has beyond just stock control.
It's not unreasonable to expect a system to be able to handle:

 Order management. Automatically importing orders from all your sales channels to easily view
and edit in one centralized place.
 Shipping & fulfillment. Directly integrating with shipping carriers to view quotes, print labels and
ship orders.
 Picking & packing. Creating and organizing picking lists and packing tasks via either paper
printouts or digital scanner.
 Warehouse management. Organizing warehouse inventory, creating automations and handling
tasks like new stock put away, pick & pack, physical counts, etc.
 Returns management. Giving all your teams one place to handle return tasks from start to finish -
like creating returns, booking back into stock and processing refunds.
 Wholesale orders. Creating and issuing invoices, taking phone orders, processing payments, and
then actually fulfilling and shipping B2B orders.
 Accounting. Either in the system itself, or by integrating directly with specific accounting tools to
push sales and inventory data across.
These are all key operational tasks when it comes to running a retail and/or ecommerce company. And
they will all likely need some kind of software to handle them in a scalable way and to an acceptable
standard for customers.

Choosing an inventory management system
Here are the key points to take into consideration when choosing an inventory management system:
 Timing. There are several signs you've outgrown a standard inventory tracker and require a more
automated system. These include things like constant overselling, inventory errors and spending more
time on manual operational tasks than on growth.
 Integrations. Create a list of must-have integrations, e.g. ecommerce platform, marketplace,
shipping, POS, 3PL, etc. It's important that any new inventory system integrates with these directly
(and doesn't require an additional app or piece of software managed by another company). Failing
this, is there an open API to create new integrations?
 Features. Create a list of must-have features from the ones we've discussed above. Do you need/want
your new inventory system to be able to also ship orders or enable digital picking? Do you do a lot
of wholesale orders and need this managed well? Do you manufacture your own products and need
a system to handle raw material types of inventory?
 Ease-of-use. It's possible that you'll need some less technically-minded staff members to use your
inventory system. So is it relatively easy for these people to learn and understand the software's UI?
 Support. You'll likely need support getting set up and to receive help quickly if something goes
wrong. Does the system you're looking at offer support during your typical working hours? Does this
include phone, chat or just email support? And what's the quality rated like online?
 Development. Any software used is going to be powering a critical part of your business, so finding
one driven by innovation and built on the latest technology is critical. Is the software you're looking
at being actively developed and improved on a regular basis? How often are new features being
released and bugs being fixed?
Every business is slightly different. So take these things into consideration when choosing an inventory
management system, but also do it within the context of what's necessary for your individual business needs.

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Reference No: KLL-FO-ACAD-000 | Effectivity Date: August 3, 2020 | Revisions No.

I. COURSE CODE/TITLE : OM 7 INVENTORY MANAGEMENT AND CONTROL

II. SUBJECT MATTER

SUBJECT MATTER Time-Frame

III. COURSE OUTCOME

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D. Inventory Management Techniques

DIRECTIONS: Read and analyze the discussions.

Unit 6: Inventory Management Techniques and Multichannel Inventory Tracking

Unit 7: Inventory Accounting

Unit 8: Choosing an Inventory Management System

Unit 9: Inventory Management Techniques

VI. OUTPUT (RESULT)

Focus (Sharp, Distinct controlling point made about single topic) 20 %

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DAVE NICHOLE H. ALDABA, LPT

ELISA L. RICAFRANCA, MBA

Check and approved by:

BIBIANA JOCELYN D. CUASAY, Ed.D., Ph.D.

AQUILINO D. ARELLANO, Ed.D., Ph.D.

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INVENTORY MANAGEMENT TECHNIQUES AND

MULTICHANNEL INVENTORY TRACKING

INVENTORY MANAGEMENT TECHNIQUES

Inventory Management Techniques:

1. CHOOSE AN APPROPRIATE FULFILMENT OPTION

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2. TAKE FORECASTING SERIOUSLY

Make sure to use your past sales data in two ways:

3. SET REORDER POINTS FOR EACH PRODUCT

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Here’s the formula to work out exact reorder points:

Problem Solving Example.

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4. USE EOQ FOR OPTIMAL ORDER QUANTITIES

The three variables involved are:

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1. What is the most economical number of units to order?

Annual requirement = 48,000 units

5. GIVE EACH VARIANT A DEDICATED WAREHOUSE BIN

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6. SELL OLDER INVENTORY FIRST

The advantages to the FIFO method are as follows:

Disadvantages of FIFO method

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Here’s how to perform an ABC analysis step-by-step:

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8. ALWAYS TRACK YOUR METRICS

Inventory Turnover Formula and Calculation

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The formula for the GMROI is as follows:

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Sell-through rate is calculated using the formula below:

The formula for day’s inventory outstanding is as follows:

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9. VERIFY ACCURACY WITH REGULAR COUNTS

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10. AUTOMATE AS MUCH AS POSSIBLE

Benefits of Automated inventory management system

Features of Automated inventory management system

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Run multichannel inventory tasks

Manage inventory control at multiple locations