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INVENTORY MANAGEMENT (What are the basics in inventory management? Briefly…
INVENTORY MANAGEMENT
What are the basics in inventory management? Briefly explain.
Location
On-site
Off-site
Drop Ship
Identify
Stock keeping unit
I.D. Labels
Units of Measure
Things like “pcs”, “ea”, “lbs”, or “bags”, give meaning to quantities, and they belong in their own separate place, outside of descriptions and the numeric quantity fields. Using well-created and consistent units of measure will make stock levels, shipping quantities, and ordering quantities easier to understand.
Plan
Push
Pull
Records
Paper
PC
Define inventory management
Inventory management is the management of inventory and stock. As an element of supply chain management, inventory management includes aspects such as controlling and overseeing ordering inventory, storage of inventory, and controlling the amount of product for sale.
Inventory management is all about having the right inventory at the right quantity, in the right place, at the right time, and at the right cost.
Explain five costs that involved in inventory management.
Financial Costs
This includes everything related to the investment made in inventory, including costs like interest on working capital.
Financing costs can be complex depending on the business.
Stock-Out Costs
They include sales that are lost, both short and long term, when a desired item is not available; the costs associated with back ordering the missing item; or expenses related to stopping the production line because a component part has not arrived.
Carrying Costs
Inventory storage and maintenance involves various types of costs namely inventory storage cost and cost of capital.
Inventory carrying involves Inventory storage and management either using in house facilities or external warehouses owned and managed by third party vendors Inventory carrying involves Inventory storage and management either using in house facilities or external warehouses owned and managed by third party vendors
Ordering Costs/ Set Up Cost
Also known as procurement cost
Ordering costs are those fees associated with placing an order, including expenses related to personnel in purchasing department, communications, and the handling of related paper work.
Cost associated with the processing and chasing of the purchase order, transportation, quality inspection and so on.
Example: Costs to develop production schedule, resources
Purchase Costs
Nominal cost of inventory
Purchase price of the items or raw materials or the production cost if produced within the organization
It may be constant or may vary based on variations in quality
Briefly explain three service classes in inventory management.
Critical
Products that needed quickly.
Example: Medical Emergency.
Non Critical
Reasonable time frame.
Not necessary urgent.
Example: Computer, Building materials.
Scheduled Delivery
Build for particular customers.
What are the strategies to better manage inventories? Briefly explain.
Vendor Managed Inventory
A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributor’s inventory levels.
Postponement Logistics
Postponement in logistics is delaying the creation of the final product until the last possible time.