Sunday, 6 March 2016

Effective Inventory management

Get The Best Car Title Loan Proposal Effective inventory management enables a distributor to meet the expectations of a customer in product availability with each item so that the distributor's net profits are increased. Boundless is one company that helps you achieve that.
Inventory is divided into:
Base stock: That part of inventory which is replenished after being sold to its customers.
Safety stock: The second part of inventory which is stored for safeguarding against the uncertainty impact.
Costs of Inventory:
There are two kinds of inventory costs: Visible and Hidden Costs
A. Visible Costs are as follows:
·         Ordering Costs - costs of reloading inventory which further includes transportation, receiving, costs spent while searching suppliers and clerical costs involved in creating purchase orders.
·         Carrying Costs - the cost of holding an inventory item in inventory which also includes storage space costs, security, theft, deterioration and insurance costs.
·         Shortage Costs -  sales loss - temporary or permanent when demand cannot be met that is caused due to employee's idleness and extra machinery set ups due to disrupted manufacturing when the material is not available. It also is caused when quantity discounts are not available on procured materials and when sales are lost leading towards unhappy customers.
B. Hidden Costs can be fatal to your business and cause
·         No incentive for process improvement
·         Quality problems which are not identified immediately
·         Underlying issues that remain hidden and thus become difficult to resolve
·         reduction in responsiveness
·         increased lead times
How inventories can increase?
1. If lead times are not accurately anticipated then an inventory might increase.
2. If there are quality problems occurring then inventory may increase.
3. If demand increases unexpectedly
4. If order deliveries are late.

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