chapter 4

• inventory management- refers to the process of ordering, storing, and using a company’s inventory
• Inventory management- includes the management of raw materials, components, and finished products, as well as warehousing and processing such items
• Benefits of inventory analysis

  1. Improves cash flow
  2. reduce stock outs
  3. Increases customer satisfaction
  4. reduces project delays
  5. improves pricing from suppliers and vendors
• Inventory Analysis

  improves cash flow- helps you to identify and re-order items you sell often so you don’t spend money on inventory that moves slowly
• Inventory analysis

  Reduce stock-out- when you understand which inventory customers want most, you can better anticipate demand and prevent stockouts
• Inventory Analysis

  Increases customer satisfaction- analyzing inventory offers insight to into what and how customers purchase goods.
• Inventory Analysis

  Reduce project delays- helps you understand when to re-order and how to avoid late shipments
• Inventory Analysis

  Improves pricing from suppliers and vendors- can lead you to order high volumes of products regularly rather than small volumes on a less reliable schedule
• Types of inventory

  • Raw materials
  • Components
  • Work in Progress (WIP)
  • Finished Goods
  • Maintenance, Repair, and Operations (MRO) Goods
  • Packing and Packaging Materials
  • Safety and stock and anticipation stock
  • Decoupling inventory
  • Cycle inventory
  • Service inventory
  • Transit inventory
  • Theoretical inventory
  • Excess inventory
• Excess inventory- also known as obsolete inventory
• theoretical inventory- also called book inventory
• transit inventory- also known as pipeline inventory
• service inventory- is a management accounting concept that refers how much service a business can provide in a given period
• cycle inventory- companies order cycle inventory in lots to get the right amount of stock for the lowest storage cost
• decoupling inventory- is the term used for extra items or WIP kept at each production line station to prevent work stoppages
• safety stock and anticipation stocks- is the extra inventory a company buys and stores to cover unexpected events
• packing and packaging materials

  3 types of packing materials

  1. Primary packing- protects product and make it usable
  2. Secondary packing- packaging of the finished good and can include label or SKU information
  3. Tertiary packing- bulk packaging for transport
• Maintenance, Repair and Operation (MRO) Goods- supply that supports making a product or the maintenance of a business
• Finished Goods- items that are ready to sell
• Work in Progress (WIP)- refers to items in production and includes raw materials or components, labor, overhead, and even packing materials
• Components- they are the materials a company uses to create and finish products
• Raw materials- uses to create and finished products
• 5 benefits of inventory management

  • keeps tracks of your inventory and offer a centralized view of stock
  • controls your costs by making stock reports for analyzing your inventory
  • improves your delivery by managing stock-out and meeting customer expectations
  • manages planning and forecasting by analyzing data trends
  • reduces the time for managing inventory by keeping records in place