Objectives of inventory management system
- To provide undisturbed supply of production at minimalistic cost
- Provide an unperturbed supply of sales at minimum cost
- Provide uninterrupted customer service levels at a minimum cost
What is a good inventory management system?
- Has a good starting count
- Good implemented policies
- People who follow these policies
- An in-place system that tracks all activities in inventory
- Has units of measure
- Has short and distinct unit numbers
- Has good location names which are not ambiguous
- Has good location names which are well organised
Inventory management strategies
Just in time- The method involves companies to receive items as and when required instead of maintaining inventories.
Materials requirement planning- The method involves scheduling delivery based on sales assumptions.
How can inventory buildups happen?
Inventory build ups can happen due to:
- Bad quality of inventory
- Production delays buildups
Inventory in transit
Goods and materials which are with the transporter, but has the ownership of the firm
The amount of product that a business owns in stock
Encouraging the purchase of inventory items by agents or retailers in an effort to avail the volume bonus or to maintain the agency's status
Inventory management information system
A database used for effective management of data which is required for effective warehouse inventory management
The mathematical formula or equation that helps in determining the economic order quantity and the frequency of ordering so that the services /products to customers keeps on getting supplied without getting delayed.
The condition in which the actual value of inventory on balance sheet gets deteriorated due to overstocking or demand shortage making the inventory unsaleable.