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Inventory Management - Coggle Diagram
Inventory Management
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Types of Inventories
Work in Progress
At any one time the production process will be converting raw materials and components into finished goods
Finished goods
Having been through the complete production process, goods may then be held in storage until sold and despatched to the customer
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Inventory holding cost
Opportunity cost
Working capital tied up in goods in storage could be put to another use. It might be used to pay of loans, buy new equipment or pay of suppliers early to gain an early-payment discount.
Storage Cost
Inventories have to be held in secure warehouses. They often require special conditions, such as refrigeration. Employees will be needed to guard and transport the goods.
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Just in time
this inventory-control method aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and completed products are produced to order.
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Advantage
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Costs of storage and inventory holding are reduced. Space released from holding of inventories can be used for a more productive purpose.
Much less chance of inventories becoming outdated or obsolescent. Fewer goods held in storage also reduces the risk of damage or wastage
Disadvantage
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Any failure to receive supplies of materials or components in time caused by, for example, a strike at the supplier’s factory, transport problems or IT failure will lead to expensive production delays.
