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Explain the importance of inventory management
Explain the importance of inventory management
Explain the importance of inventory management
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The business year will come to a close for many companies on December 31. An integral part of the closing process is the tedious and time-consuming annual physical inventory. Having endured just a few of these, I have the following suggestions to help make the process go a little smoother.
Send out notifications to all affected parties
Notify your suppliers that you will not allow deliveries while the physical inventory is in progress. Place a "non-delivery" notice on your purchase orders. Notify all transportation companies that regularly service your facility of the delivery and shipment restrictions. This will allow them to use their time more efficiently and they will appreciate your cooperation. Notify your auditors or accountants and arrange for count verifications by their staff.
Advise your sales people and customers of the shut down or non-shipment period. Publish a cutoff date for placement of orders to ship before the shut down.
Inform your employees well enough in advance to avoid a conflict with vacation schedules. This will also allow them to incorporate the tasks in their regular work schedules.
Print and distribute a schedule of all planned activities during the physical inventory. Make sure it lists who is responsible for each task.
Do some housekeeping
Clean up the storeroom area (sweep and remove all trash). Straighten up the inventory items for easy counting and make sure each item is contained within its assigned location. Avoid storing similar items in adjacent locations if possible. Make sure all items are clearly identified. Consolidate all quantities for the same item to reduce the number of locations wherever possible. Combine quantities into larger units for ease of counting (i.e. stacks or packs of 20). Make sure all storage locations are definitive and clearly marked.
Identify damaged goods and move them to a designated location or return them to the vendor for credit. Identify obsolete inventory and move it to a special storage location. Dispose of it as soon as possible to eliminate the cost of storing and monitoring it. Dust, spoilage, last year's inventory tags and / or cobwebs are telltale signs of obsolete or excess inventory. Have the counters note these observations on the count sheets for further review and action when the physical inventory is over.
Update the warehouse floor plans with accurate stocking locations. Determine what is not to be counted such as warehouse equipment, packing supplies and miscellaneous items not on the inventory records.
AWG is faced with logistical challenges similar to others in the industry. The largest logistical challenge on a daily basis at AWG is their finite timeline between restocking and outgoing shipments to retailers. Any deviation from the schedule due to an extenuating circumstance (labor strike, weather event, ...
Six flags is a company that has 29 theme parks with a Chief Corporate Engineer, Larry Chickola. Larry overseas all the projects for the parks and has teams of engineers that help take care of technical issues and building and construction. All six flags projects have a comprehensive plan for completing the work in a timely fashion. They have written statements as to what work is to be done and dated schedules for completion. They also have to include tasks and sub tasks all being figured into the budget. There is a “work package,” which is a group of activities assigned to break down each task and sub task to fit these into manageable quotas. They feel this is the key to managing logistics.
We will also be tracking down direct verification of inventory that is held by public warehouses or outside keepers. Auditors will think through Costco’s actions for assessing warehouse’s performance, internal auditor’s report on warehouse’s internal control, and reconcile Costco’s record of inventory to warehouse’s statement. We will also account for any crack in receiving and shipping records. Auditors will test for appropriate authorization for inventory purchase, obtain purchase journals linked to vendor’s accounts, receiving reports and purchase orders. We will also review right of entry to accounting system linked to inventory to decide relevance of system access, review relevance of inventory write-offs and track the moving of inventory from one warehouse to receiving of the other warehouse.
This can be accomplished by using disciplined delivery time windows, developing close relationships with a small group of reliable transportation carriers, and shipping only what is needed at a particular time, which means small lots being delivered more frequently often using partially filled trucks” (Taylor, 2013, p. 6).
In addition, on day 105, the reorder quantity was 13,200. This approach was effective as it increased the number of inventory kits available for production. In total, the company used $2,059,000 to increase its inventory levels. The increased inventory levels and the readjustments of reorder points enabled the factory to increase the number of jobs accepted each day as well as to reduce the number of jobs waiting for kits. In addition, there was a high number of kits queued at station one from day 80 which was accompanied by increased utilization of station one. Besides, we were able to reduce the lead time for all the orders and this enabled the company to increase its revenues.
Develop tighter standards for inventory control. Work with suppliers to account for incoming inventory and compare stock levels to sales to determine losses. Identify ways implement loss control measures such as security, both physical and electronic surveillance, employee engagement with customers, and through ethics training with employees to prevent internal losses. Utilize inventory control measures further to develop a charitable donations program to allow donations of day old products to local food banks and other organizations such as schools, churches and for community fundraising events. For example, inventory day old products creating a list of items to be donated. Have inventory signed off by at least two members of staff, one of which should be a supervisor or store manager. Have a representative of the receiver of the donation review the list for accuracy and also sign off on the inventory list. Donation lists can then be used for regular inventory tracking and also as tool for proving tax deductible charitable donations for the company. This will foster higher ethical behavior for the company’s staff, lower losses due to consumer theft, and begin to create an environment of community involvement and charitable
Lastly, the stores and warehouses are not communicating well which is resulting in confusion for both parties. Store managers waste time by having to spend store hours on the phone with the DC to expedite demanded stock. This time waste can be avoided by properly organizing the warehouse and having informed workers who can get the job done right and on time. Also worth mentioning is the current condition of the warehouse; there is inventory underneath conveyors and scattered across aisles, making it harder to track down stock. Analysis &
Setup early warning system to inform customer about a potential stock out and supplier about a delayed order from CMO. This will help in reducing stock out situations.
... inventory turnover was found to be very low. The low inventory turnover ratio was an indicator of inadequacy, since inventory usually has a rate of return of zero (Inventory Turnover Ratio Interpretation, 2009). It also implied either poor sales or excess inventory. A low turnover rate indicated poor liquidity, convincible overstocking, and obsolescence, but it would have also reflected a planned inventory build-up in the case of material shortages or in anticipation of rapidly rising prices. (Inventory Turnover Ratio Interpretation, 2009) And a rapid and unexplained rise in the number of sales per day in receivables in addition to growing inventories to cover the shortage was noted. The interviewee (Public Accountant) could smell something suspicious which led him for more detailed procedures and proactive investigation at the end of which a fraud was detected.
It is undeniable that Inventory Management is an important key to success at Walmart this paper will discuss the two main methods of Inventory Management used by Wal-Mart: Material Requirements Planning and Just-in Time. Next we write about the technical means of keeping track of inventories like RFID tags. We conclude with discussing how
Inventory management can enhance the efficiency in operation of the supermarket. Supermarket must ensure that the correct levels of inventory are being maintained throughout the store, and that merchandise is purchased at the best price point as possible. Holding too much inventory on hand generate costs like carrying costs. Whereas having too little inventory on hand makes customers dissatisfied and it leads to declining
KLI could try a similar approach and have suppliers use the just-in-time (JIT) inventory system and keep levels high enough to sell out of products, but low enough to use residual space available.
Here are some recommendations for him to make changes. First, there are some strategies can be used in inventory control. The main problem of the inventory control is unable to respond with the changing demand. It is suggested the shops in Hogsmeadow Garden Centre to place more orders with smaller order batches each time. It is not necessary for the shops to place order in a fixed period of time, at the beginning of the season for Hogsmeadow Garden Centre. It is possible to place orders when the stocks reach minimal stock level, which means the minimal amount of safety inventory that are willing to keep on hand before replenishing the suppliers. (Colleen Rodericks, n.d.) This strategy is particularly beneficial for selling perishable goods, as it can reduce the inventory level of the shops. It enables the shops to lessen the problem of losing money by discounting and throwing away for the perished stocks. At the same time, it is important for the shops to use First-in-first-out (FIFO) method for perishable products. FIFO method means selling the oldest products first, and the selling the new purchased products later. (Colleen Rodericks, n.d.) It is crucial for products with limited-life, like plants. As the oldest products are supposed to perish earlier, it is better to sell them earlier so as to reduce throwing away the perished products. Reducing the order batches and using FIFO method can reduce the products to be thrown, the costs of inventory can be reduced and the profitability of Hogsmeadow Garden Centre can be
Inventory can be explained as any assets that are held for future use or sale. Inventories are held for a variety of reasons, such as customer demand for end items, smoothing production, a hedge against stock outs and price increases, and economical purchasing. It is very costly and wasteful to keep large inventory on hand. The new technology and application quantitative tools and techniques for inventory management have permitted decrease in inventory. Top management needs to understand the role that inventories have on a company’s financial performance, operational efficiency, and customer satisfaction and strike the proper balance in meeting strategic objectives. They are responsible in keeping sufficient inventories to meet demand of the customers by sustaining the lower cost as possible. Inventories are required for a business to operate efficiently and effectively. Inventory management is a very significant part of basic operations activities. Most businesses and general organizations obtain most of their revenue through the sale of inventory.
Production scheduling: create appropriate schedules for all the level on the organization, maximize of efficiency of