Introduction
Inventories consist of actual stocks of materials, works in process, and finished goods and services that an organisation holds in its possession. The cost of the inventory is determined at the purchase price, and it reflects the cost required to acquire, manufacture, store and hold the inventory until it is sold and shipped. The effectiveness of inventory management directly influences the financial health and production of an organisation. Without proper inventory selection, storage and organization, an organisation may be unable to keep up with demand, face costly stock-outs, overstock, obsolete and shelf-life-expired items, or other supply chain breakdowns. Additionally, large stocks of inventories require working capital and storage space, further adding to operational costs.
inventory planning & control
Inventory planning and control are both vital elements in the management of a company inventory. Inventory planning requires purchasing and production planning related to the company’s supply chain, while inventory control is the process of maintaining and controlling the levels of inventory. Inventory planning is the process of forecasting inventory needs, and determining inventory levels, lead time in which new stock must be ordered and replenished, as well as the cost of holding the inventory. This is decided based on factors such as demand, cost, and its effect on cash flow.
Inventory control is also a part of the inventory planning process, and is implemented as a method for keeping track of the companys inventory. This includes tracking stock levels and ensuring that an optimum level of inventory is maintained at all times. Inventory control is especially important with high-value items when accurate stock levels are necessary. Inventory control will also ensure that the inventory is stored properly and kept in good condition. This may mean taking steps such as climate control to ensure the items are not damaged or ruined by the elements.
Inventory management
Inventory management is the process of controlling and monitoring the inventory of a company, such as its raw materials, finished goods, and merchandise. It also includes ordering and receiving, stocking, storage and storage locations, and organization of the inventory. Proper inventory management ensures that the company has the necessary stock levels to meet demand, while reducing the company’s overall cost of holding inventory.
Inventory management also involves forecasting and planning for future stock needs and levels. This requires an understanding of the demand for the company’s products or services, and predicting the supply of necessary materials and finished goods, in order to meet the demand. This is done through to the use of inventory optimization models, which use sophisticated mathematical optimization software to help determine the optimal stock levels for a company.
Conclusion
Inventory management is an important part of running a business. Effective inventory planning and control allows businesses to optimize their stock levels, while reducing the cost of holding inventory. This can in turn lead to increased profits and efficiency, as the business is able to better predict the supply and demand, while still meeting customer needs. By utilizing the right inventory planning and control systems, a business can reduce the cost of holding inventory, increase working capital, and maximize profits.
