INVENTORY MANAGEMENT

INVENTORY MANAGEMENT

1. Process of ordering, storing and using a company's inventory.

   • Inventory is one of its most valuable assets.

2. Economic Order Quantity

   • The optimum quantity of materials which can ideally be purchased each time most economically. Factors:
     • The cost of materials
     • The inventory carrying charges
     • The ordering cost.

3. Inventory Accounting: Ways to register

   • first-in-first-out (FIFO)
   • last-in-first-out (LIFO)
   • Average Cost

4. Inventory Accounting: Types

   • Periodic Inventory
     • Measure the cost of goods sold and inventory levels at the beginning of a period.
   • Perpetual Inventory
     • Used by businesses such as retailers with multiple outlets etc.
       • Product stock levels are always updated whenever a product is received or fulfilled to the customer.

5. Just in time (JIT)

   • Minimizes inventory and increases efficiency by receiving goods only as they need them for the production process.
     • Is popular with small businesses and major corporations.
     • Manufacturers can quickly move from one product to another
     • Spend less money on raw materials and minimize warehouse needs.

6. Material Requirements Planning

   • System for figuring out the materials and items needed to manufacture a given product.
   • 1. Estimating demand and the materials required to meet it
     • Determining customer demand and the requirements to meet it.
   • 2. Check demand against inventory and allocate resources
     • Checking demand against what you already have in inventory.
   • 3. Production scheduling
     • Calculate the amount of time and labor required to complete manufacturing.
   • 4. Monitor the process
     • Monitor it for any issues.
   • Assures that materials and components will be available when needed.