INVENTORY MANAGEMENT

  1. Inventory Management

-Is the supervision of non-capitalized assets (inventory) and stock items. A component of SCM, inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale.

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  1. Basics of Inventory Management.

a) Location

  • on site, off site, drop ship.

b) Identity

  • Stock Keeping Unit (SKU)
    -I.D label
    -Unit of measure

c) Record
-All information will be recorded on paper as manually or computer

  1. Five costs in Inventory Management

b) Capital Costs
-Costs of investment, insurance costs, interest on working capital

c) Storage space costs
-Include storage requirements for all categories of inventories

d) Service Costs - Volume that is related and inventory insurance

e) Risks Costs

  • Damages and shrinkage costs

a) Ordering Costs

  • Known as procurement costs, costs that are associated with the processing and chasing of purchase order, transportation,quality inspection and etc.
  1. Three service classes in Inventory Management

b) Critical

  • where the services or goods are quickly needed
    -for instance, medical emergency

c)Non-critical

  • Not necessary urgent but gives the benefits.
  • For instance, computer

a) Schedule Delivery

  • Should know the time for delivery, how many truck should load, and make sure the production line are managed effectively.
  1. Strategies to better manage inventories

b) Consider inventory optimization tools

  • Best inventory policies for each product at each node in the supply chain.


  • Typically stand-alone software tools that use data from WMS and ERP systems.

a) ABC analysis and ABC classification

  • Fastest moving products in inventory should be located closest to the shipping staging and receiving area.

c) Automated Demand Forecasting

  • Can be used to take the guesswork out of how much inventory should be carried for a given period