Wednesday, July 30, 2008

Inventory management theory

Anyone familiar with distribution over the last several decades has been privy to the financial theory of inventory management. The foremost measure is the turn-and-earn theory of inventory management.
Much of inventory management historically has focused on a single performance statistic, increasing turns. Modern enterprise resource planning (ERP) systems deliver reasonably complex forecasting and economic order quantity (EOQ) calculations, which enhance buy-side management and maximize turns.
Both turn-and-earn indices and GMROI are common metrics formed from the inventory management school of wholesaling.A little known detriment of the attention to inventory management is that company officers look at the asset base and buy-side costs and don’t focus on creating value in the market place.
Inventory management is a critical component of an efficient supply chain that, in turn, can be the fulcrum for success in the business.

Inventory control

Inventory control.
Inventory is money on the shelf. National averages for a typical shop range from $10,000 to $20,000 worth of inventory and 30 percent of that inventory is dead! A 21-month study conducted recently on what shop owners sell and what they stock, revealed that 11 percent of shop owners sell spark plugs but don't stock them, while 18 percent stock spark plugs but don't have what they need.

What is the purpose of inventory? Many shop owners think it's there to facilitate shop operation by reducing rack time and increasing gross profit. In reality, however, inventory exists to improve your level of service. How? The right amount of the right part numbers will provide you with what you need when you need it, without enormous stress on your operating capital.
Consider the following two methods of inventory control. Last In First Out (LIFO) means that when there is more than one of a given part number, you sell the last one received, first. The rationale being that the newest is probably the most expensive. First In First Out (FIFO) means that when there is more than one of a given part number, you sell the one you've had the longest, first. The rationale? To keep your stock rotating. Whether you use LIFO or FIFO, the actual transfers are only taking place on paper. The old dusty part may be pulled off the shelf, but it's the new expensive one that's reduced from inventory. Ask your bookkeeper which is the correct method for your business.

Compare the value of your inventory to the value of some piece of your equipment. When you purchased the expensive piece of equipment, you probably considered various things. You probably shopped for the best price and considered return on investment. If the equipment wouldn't pay for itself, you probably would not have purchased it. After the purchase, you monitored your investment to maximize its use and, therefore, its return.

All the same rules apply to your inventory investment. There are some fundamental differences, however, between your inventory investment and your capital investments. Your equipment is depreciable, while your inventory is taxable. Your capital investments happen suddenly, while your inventory value creeps up gradually. At some point, most shop owners end up with a large inventory investment on which they pay taxes, yet rarely do they monitor or control it properly. Face it, it's a time-consuming process in an industry that holds time at such a premium that you charge for it in six-minute increments.

Asset management

Asset management is a complete and structured approach to the long-term management of assets as tools for the efficient and valuable delivery of community benefits. An association called world road association (PIARC) has adopted an OECD definition of asset management. Road asset management means managing a road network that is roads, bridges, traffic facilities, etc to satisfy the requirements of business and private road users, at the lowest possible cost over a long period of time. Asset management is being advocated as an essential improvement for the manufacturing, process, and production industries.

Inventory reduction

Inventory management also is about eliminating excess inventory, improving inventory turn rates, increasing inventory turnover, and meeting on time delivery. Excess inventory ties up money and needs to be reduced in order to free up cash for investment in revenue-growth activities. One of the major problems to inventory reduction is the mistaken notion that improved inventory control management is all that is required to improve inventory rates, increase inventory turnover and provides an on going inventory reduction program. Certainly, lack of control contributes to excessive inventory, but often an organizations negative reaction to material shortages, and that the major focus of most material groups is to supply required inventory and not look for ways to improve inventory turns, is the driving factor in poor performance in inventory reduction.Many companies have achieved inventory reduction and improved on time delivery by implementing systems such as Enterprise Resource Planning (ERP), Just in Time (JIT), Kaban, and other approaches to inventory management, and these systems do reduce inventory and improve inventory turnover, but there is still room for improvement. There are some basic steps that any company can use to improve inventory turnover and make inventory management more effective:

Set a realistic objective for inventory levels.
Identify those items that are in excess of acceptable inventory levels
Identify obsolete and defective inventory.
Make a list of actions to be taken to reduce the inventory
Devise new procedures to help eliminate future build up of inventory.
Measure, measure, measure

Inventory management system

The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control activities are:
Sales Forecasting or Demand Management
Sales and Operations Planning
Production Planning
Material Requirements Planning
Inventory Reduction

The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory Management and Inventory Control.

Inventory management and inventory control

Inventory Management and Inventory Control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many changes in market demand, new opportunities due to worldwide marketing, global sourcing of materials, and new manufacturing technology, means many companies need to change their Inventory Management approach and change the process for Inventory Control.

Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.

Inventory management methods

Inventory management methods includes following:
1)the simplest method, the purchase man periodically reviews the stock, perhaps visually; to see what inventory items are in short supplies and places order when he thinks a minimum level has been reached or when the inventory of a particular item is exhausted. No inventory levels are kept on records. Obviously, such a method is likely to incur excessive purchasing and carrying costs on the one hand and stock out costs on the other. While excess purchase would lead to excessive investment in obsolete or slow moving goods, shortage or inventory may disrupt production or sales may be permanently lost.

To improve upon the visual method a re-order line may be drawn in the bin or storage area so that when stock reaches this line, order will be placed. The re-order line in the bin would be high enough to cover normal usage until the new order arrives. A variation of this method is to use the two bins systems: an order is placed when the working stock bin is empty.

Another inventory management approach is through the perpetual inventory system. Managers are already familiar with the principles and procedures of this system. Another method used to assist in the control of inventory is the ABC classification. Here the inventory items are classified into groups, usually three, according to the annual cost of the item used and ranked according to the rupee value of the usage. It may, however , be pointed out here that ABC analysis is not actually a control system in itself: it shows the way to decide which items are most in need of strict control system. It is ultimately the management who decides how best to control each class of items.

Inventory control

The appropriate production and inventory management (also known as inventory control) policy is a key factor for modern enterprises’ success in competitive environment.Production and inventory control systems such as MRP systems, and kanban control systems (KCS) have been the subject of intensive research for several years.
The most important objective or inventory control is to determine and maintain an optimum level of investment in the inventory. Most companies have now successfully installed one or the other system of inventory planning and control. The inventory control models range from very simple methods to highly sophisticated mathematical inventory models.

Inventory management problem

Inventory management is a key problem in several industries, (car renting, storehouse space renting, etc.). It consists of managing a given fleet of equipment in order to satisfy requests to use it. When requests exceed the stock of available equipment, a decision has to be made, either to subcontract some requests to another provider or to purchase new pieces of equipment. The main difficulty lies in the fact that a subcontracted request must be subcontracted for all the duration of the request. For example, if a subcontracted car is rented to a given customer, this customer will keep the subcontracted car for all the duration of the rental. In this paper, we propose a set of benchmark problem instances, derived from real-world inventory management problems.

Effective inventory management

Inventory management associates with many administrative tasks. Depending on the size and complexity of your business, they may be done as part of an administrator's duties, or by a dedicated inventory controller.

For security reasons, it's good practice to have different staff responsible for finance and inventory.

Typical paperwork to be processed includes:

* delivery and supplier notes for incoming goods
* purchase orders, receipts and credit notes
* returns notes
* requisitions and issue notes for outgoing goods

Inventory can tie up a large slice of your business capital, so accurate information about stock levels and values is essential for your company's accounting.

Figures should be checked systematically, either through a regular audit of stock - stocktaking - or an ongoing programme of checking stock - rolling stocktake.

If the figures don't add up, you need to investigate as there could be stock security problems or a failure in the system.

Health and safety aspects of Inventory management are related to the nature of the stock itself. Issues such as where and how items are stored, how they are moved and who moves them might be significant - depending on what they are.

Inventory provisioning

Inventory provisioning, a relatively new concept for media companies, capitalizes on rapid advancements in targeting technology to address the increasing competition for inventory across competing sales channels. Most efforts have been largely defensive to date, protecting certain key placements, imposing broad restrictions based on advertiser or product type and protecting isolated pockets of high-value sales. As inventory becomes increasingly scarce, effective provisioning will wecome more critical.
Inventory management important question: How much inventory of which type should be taken to market, and through which sales channels, to maximize revenue?

Inventory prediction

Inventory prediction plays important role in inventory management. It lets publishers more accurately estimate revenue by understanding future supply, but the complexity of user targeting makes it difficult to do so effectively. Without it, revenue planning is largely guesswork, as sales forces must then sell inventory they may not have while relying on arduous, manual order-clearance processes.

Sunday, July 27, 2008

Inventory Controller

Inventory controllers are professionals who specialize in the management of the various types of inventories that are maintained by companies as part of the standard process of conducting business. In general, the inventory controller is charged with the task of keeping the level of the inventory within perimeters that are considered to be high enough to allow the company to function at optimum efficiency, but low enough to create the least amount of tax liability for the corporation.

Often a large corporation will employ more than one inventory controller, with each member of the inventory controller staff assigned the task of overseeing the functions of one or more inventory types within the business. Since any given company, especially a manufacturing corporation, will maintain inventories that range from raw stock to manufacturing supplies to finished goods, the task of efficient inventory control is often easier with several controllers working to ensure that all types of inventory are managed properly.

One inventory controller may have the responsibility of managing the supplies inventory, often by tracking the daily issues and usage of machine parts and other materials essential to the operation of the plants that produce goods offered by the company. Generally, an inventory controller that is focused on supplies or maintenance inventories will employ an ordering process that is based on average usage. Essentially, this means utilizing history about the past usage patterns of an item combined with the average amount of time it takes a vendor to deliver an order of the item once it is placed. This strategy allows the inventory controller to place orders so that the plant never runs out of necessary parts and resources, but helps to prevent large amounts of parts running up the net worth of the inventory.

An inventory controller may also be charged with the responsibility of maintaining the finished goods inventory for a single plant or the entire company. This will involve keeping a constant track of daily production that is added to the current inventory of sellable goods, less the goods that are shipped to fulfill orders. Sales departments often interact regularly with a finished goods inventory controller to determine if there are products in stock that can be used to fulfill a customer request.

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Continuous inventory

The continuous inventory is a means of maintaining a systematized documenting process that is always in agreement with the physical stock on hand. As items are removed from the stock or supply area for use or consumption, the continuous inventory detail is adjusted to note the reduction in physical inventory. Many businesses use this method to ensure that needed goods are on hand at all times, and as a reminder to re-order certain key products when necessary.

The maintenance of a continuous inventory is common with manufacturing facilities, where there is a constant need to replace worn parts on production machinery. Generally, a supplies area is established somewhere on the production site, and a supplies manager is charged with overseeing both the physical and book inventory situations. Often, individuals who need to obtain parts or other supplies as part of maintenance and repair operations will approach the manager with a written request of what is needed. The manager enters the storage area for the physical inventory, retrieves the item or items, and delivers them to the requesting party. At this juncture, the supplies manager can utilize the written product request to deduct the items from the book inventory, bringing the physical and the written inventory back into sync.

In many manufacturing situations, there are periodic reconciliation processes that double check the book inventory against the physical inventory. For example, a company may require that there be a physical hand count of all goods in the physical inventory at least twice per calendar year. The results of the hand count are compared to the book inventory and adjustments made as needed. This process acts as a secondary check and balance system to assure the stability of a continuous inventory.

One major benefit of the continuous inventory approach is that it makes it easy to schedule re-ordering of key parts and supplies once the inventory level reaches a designated low point. When posting recent disbursals to the book inventory, the supplies manager will note when the number of units in the physical inventory slip below a certain point, and begin the process of executing an order for additional units. This process helps to ensure there are always enough parts and supplies on hand to keep the production machinery running properly.
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Inventory costing methods

Inventory represents a large (if not the largest) portion of assets and, as such, makes up an important part of the balance sheet. It is, therefore, crucial for investors who are analyzing stocks to understand how inventory is valued.
Inventory is defined as assets that are intended for sale, are in process of being produced for sale or are to be used in producing goods.
The accounting method that a company decides to use to determine the costs of inventory can directly impact the balance sheet, income statement and statement of cash flow. There are three inventory-costing methods that are widely used by both public and private companies:
  • First-In, First-Out (FIFO) - This method assumes that the first unit making its way into inventory is the first sold.
  • Last-In, First-Out (LIFO) - This method assumes that the last unit making its way into inventory is sold first. The older inventory, therefore, is left over at the end of the accounting period.
  • Average Cost - This method is quite straightforward; it takes the weighted average of all units available for sale during the accounting period and then uses that average cost to determine the value of COGS and ending inventor.

Obsolete Inventory

Obsolete Inventory (also called "dead inventory" or "excess inventory") is s term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company.

Large amounts of obsolete inventory are a warning sign for investors: they can be symptomatic of poor products, poor management forecasts of demand, and poor inventory management. Looking at the amount of obsolete inventory a company creates will give investors an idea of how well the product is selling and of how effective the company's inventory process is.

Beginning and ending inventory

Beginning inventory is the book value of goods, inputs, or materials available for use or sale at the beginning of an inventory accounting period.
Beginning inventory is similar to ending inventory except that it is adjusted for any accounting discrepancies. BI is an important figure for companies because they use it to gauge new ordering requirements and to forecast future sales. Company managers can be evaluated based on their levels of beginning inventory and inventory turnover.
Ending inventory is used to gauge whether companies have overestimated their need for inputs and production requirements.

Periodic Inventory

Periodic inventory is a method of inventory valuation for financial reporting purposes where a physical count of the inventory is performed at specific intervals. This accounting method for inventory valuation only keeps track of the inventory at the beginning of a period, the purchases made and the sales during the same period and is recorded under the asset section of the balance sheet.
With this valuation method, it is much harder to track which individual items were destroyed or stolen, but a cross-reference can be made with the sales revenue to get a rough estimate of what was sold versus what was not. Many see this method as being inferior to the perpetual inventory method, which keeps track of inventory at the point of sale.

This system is typically used by small businesses that can't afford or don't need an electronic tracking system (i.e. the bar code system).

Perpetual Inventory

Perpetual Inventory is an accounting method of maintaining up-to-date property records that accurately reflect the level of goods on hand.
The current balance of inventory is sustained daily by the addition of inventory to the account when goods are received and the deduction from the account when they are used. This method, as opposed to a yearly or monthly calculation, allows for a company to have more timely and accurate data on inventories

Back orders

A cost incurred by a business when it is unable to fill an order and must complete it later. A backorder cost can be discrete, as in the cost to replace a specific piece of inventory, or intangible, such as the effects of poor customer service. Backorder costs are usually computed and displayed on a per-unit basis.
Backorder costs are important for companies to track, as the relationship between holding costs of inventory and backorder costs will determine whether a company should over- or under-produce. If the carrying cost of inventory is less than backorder costs (this is true in most cases), the company should over-produce and keep an inventory.
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About Inventory - simply

Inventory is the total amount of goods and/or materials contained in a store or factory at any given time. Store owners need to know the precise number of items on their shelves and storage areas in order to place orders or control losses. Factory managers need to know how many units of their products are available for customer orders. Restaurants need to order more food based on their current supplies and menu needs. All of these business rely on an inventory count to provide answers.

The word 'inventory' can refer to both the total amount of goods and the act of counting them. Many companies take an inventory of their supplies on a regular basis in order to avoid running out of popular items. Others take an inventory to insure the number of items ordered matches the actual number of items counted physically. Shortages or overages after an inventory can indicate a problem with theft (called 'shrinkage' in retail circles) or inaccurate accounting practices.

Restaurants and other retail businesses which take frequent inventories may use a 'par' system based on the results. The inventory itself may reveal 10 apples, 12 oranges and 8 bananas on the produce shelf, for example. The preferred number of each item is listed on a 'par sheet', a master list of all the items in the restaurant. If the par sheet calls for 20 apples, 15 oranges and 10 bananas, then the manager knows to place an order for 10 apples, 3 oranges and 2 bananas to reach the par number. This same principle holds true for any other retail business with a number of different product lines.

Companies also take an inventory every quarter in order to generate numbers for financial reports and tax records. Ideally, most companies want to have just enough inventory to meet current orders. Having too many products languishing in a warehouse can make a company look less appealing to investors and potential customers. Quite often a company will offer significant discounts if the inventory numbers are high and sales are low. This is commonly seen in new car dealerships as the manufacturers release the next year's models before the current vehicles on the lot have been sold. Furniture companies may also offer 'inventory reduction sales' in order to clear out their showrooms for newer merchandise

Thursday, July 24, 2008

How to manage your stock properly

Buy stock when it suits you, not the supplier

Many businesses buy when the sales representative calls in or if they are offered a discount. You should buy stock when it suits you and your needs, not those of your supplier. Discounts can be a big trap. Ask yourself why they are discounting. Do they know something you don’t? Is there a new product coming up that will supersede the sale item? You need to measure the cost of having that stock sitting around against the discount being offered. If it’s going to cause cashflow problems, perhaps it’s not worth it.
Invest in a stock management system

Stocktaking is a necessary evil. You need to check stock levels regularly, not only for tax purposes, but to know your profit levels.

There are literally thousands of stock management systems available which can reduce the need for manual stocktaking. These systems report on stock searching, stock receiving, bar-coding, special pricing, sales orders, picking and packing, dispatch register, order fulfillment, product specifications, stock usage and reordering requirements.

Obsolete stock can be a real hiding place for cash. It can be heartbreaking to have to sell items at a loss, but if they are going to sit there forever, you may as well turn them into working capital to spend on better selling items.

If you have good records you are also more likely to know just how much you are purchasing from suppliers. This puts you in a better bargaining position when it’s time to renegotiate.
Watch top performers

Finally, keep an eye on industry benchmarks. Good benchmarks should include stock days for the low, average and top performers in your industry. You will find the stock days of top performers are fewer than those of the others.

In a nutshell, shortening the length of time stock sits in your store room will free up working capital to spend on other things like advertising, salaries and expansion.

Has your business reaped the rewards of better stock management? What worked for you?

Stock on hand

Stock needs to be available for sale when your customer is ready to buy. But because it sucks up cash to have it waiting to be sold, it is good stock management to keep stock on the shelf for the shortest possible time.

Think of stock as fifty dollar bills piled up in your stock room. This is a good incentive to manage stock at every stage. Vital to this objective is knowing the sales cycle of your products, that is, how long it takes from when goods arrive until they are sold. The time goods are sitting in stock is called stock days. One way to calculate stock days using your financial reports is as follows:

Stock on hand ÷ Cost of goods x Time period = Stock days

Stock on hand means the dollar value of stock in store at a given date. Cost of goods means the direct cost of getting the goods ready for sale including purchasing, freight and store costs but not fixed overheads like administration, wages or advertising. Time period is the reporting period upon which you are basing the other two numbers.

Stock management

An ergonomic study was carried out in two warehouse superstores of a leading company in the retail sector which specializes in office supplies.
In this study close attention was paid to the interaction between stock volume, its movements on the sales floor, and the available storage space. Results indicate that an imbalance between the amount of stock and the available storage space results in three types of consequences:
(1) risk factors related to the development of musculoskeletal disorders such as extra manual materials handling operations, awkward postures and an increased physical workload;
(2) increased risks of accidents, particularly related to loss of balance and falls from heights; and
(3) impacts on productivity and quality of service offered to customers in the form of time wasted, stock losses and customer dissatisfaction.

The solutions proposed relate to the implementation of strategies that maximize the use of storage space, a more appropriate management of this storage space, and recognition for team work among employees involved in the manual handling activities of the various products and goods. Although important parameters to consider were identified at the time of an intervention on stock management, the importance of doing a store by store analysis of the impact of the company's policies on stock management is emphasized. Relevance to industry Stock management is at the core of warehouse superstores' common activities, but very little is known about its impacts on daily manual materials handling activities of employees. This study describes some of the factors that must be considered to prevent negative impacts related to dysfunctions in stock management in the emerging sector of warehouse superstores.

Inventory control

Inventories include raw materials, component parts, work in process, finished goods, packing and packaging materials, and general supplies. The control of inventories, vital to the financial strength of a firm, in general involves deciding at what points in the production system stocks shall be held and what their form and size are to be. As some unit costs increase with inventory...

a code number, typically used as a machine-readable bar code, assigned to a single item of inventory. As part of a system for inventory control, the SKU represents the smallest unit of a product that can be sold from inventory, purchased, or added to inventory. Applied to wholesale, retail, or production operations, the SKU can assist in monitoring transactions, tracking customer spending...
*Inventory planning and control systems

Inventory control is another important phase of production management. Inventories include raw materials, component parts, work in process, finished goods, packing and packaging materials, and general supplies. Although the effective use of financial resources is generally regarded as beyond the responsibility of production management, many manufacturing firms with large inventories (some...

UPCs encode individual products at the stock keeping unit (SKU) level, allowing a manufacturer or retailer to track the number of units sold during a specified time period. This type of tracking can be an important aspect of just-in-time inventory management. The UPC is maintained by the Uniform Code Council (UCC), a nonprofit organization located in Lawrenceville, New Jersey, U.S. Founded in...

Inventtory Control

What is Inventory Control?
Inventory Control is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and hide from the customer the fact that manufacture/supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials. You must make ensure that all stock is in control to prevent overstocking and losing expired stock which go to loss.

Inventory Control Ideas
Several inventory management ideas that will help you optimize inventory turnover and minimize out-of-stocks:
• Establish clear-cut goals for buyers; make sure buyers understand how their jobs are measured. Inventory turns by category, gross margin, and out-of-stocks (or incidences of backorders) are good places to start keeping score.
• Conduct regular cycle counts -- at least monthly. Establish a counting calendar that specifies the days of the month to count specific products. Adjust quantities in your computer system as discrepancies are uncovered; this procedure will prevent big surprises at year end. Conducting cycle counts on schedule should be a condition of employment for whoever is in charge of this critical task.
• Discuss with your software vendor the effect on inventory counts when processing inventory receipts on sku's that are showing negative quantities. Ask your software vendor for advice on procedures to avoid compounding problems.
• Make sure that your inventory receiver is not just whoever happens to be available at the time a new shipment arrives. Assign accountability to one or more specific individuals to receive inventory.

Proper Inventory Control
Inventory or stock as it is also called, can devastate a business. A business carrying inventory has a much more difficult chance of survival, as opposed to a business rendering a mere service. A service business has a reasonable shot at surviving. Many business owners have major concerns with their inventory.
Herewith, some of the most common difficulties associated with inventory, and its most probable causes.
a) Business is booming, but cash flow is slow. (Debtors leniency/mark-ups)
b) Business is slow, but inventory is low or short. (Shrinkage /pilferage)
c) Lack of cash to "stock up". (Cash flow planning)
d) Inventory on hand remains high. (Slow moving inventories)
e) Cannot find sufficient inventory. (Planning)
f) Remain in a loss position. (All of the above)

Administration and accounting for inventory should become a habit. A lot of savvy is also required if you going to make your inventory carrying business succeed.

• Start by doing a proper inventory count on hand and valuation.
• Identify slow or slow moving items in your inventory lists.
• List inventory that becomes obsolete rapidly (highly important with restaurants)
• If possible, code inventory items electronically.
• Research mark-up and margins, and implement a reasonable gross profit margin. (If it is too high, the goods will not sell, if it is too low you will remain stuck in a cash flow rut).
• Prepare a spreadsheet for your incoming and outgoing inventory. If an advanced point of sales system is in place, which interfaces with your accounting system, even better.
• Consider taking out insurance for possible inventory losses, like fire, theft or natural disasters.
• Stay on top of your inventory on a daily basis.
The most advanced computerized inventory system however is not enough. Regular inventory checks, is of paramount importance.

What is the definition of inventory control system?

An inventory control system is an integrated package of software and hardware used in warehouse operations, and elsewhere, to monitor the quantity, location and status of inventory as well as the related shipping, receiving, picking and putaway processes. In common usage, the term may also refer to just the software components.

An inventory control system may be used to automate a sales order fulfillment process. Such a system contains a list of order to be filled, and then prompts workers to pick the necessary items, and provides them with packaging and shipping information


1. Purchase cost
2. Order/setup cost
3. Holding Cost
4. Stockout cost
In the inventory analysis relevant costs are considered
Purchase Cost
· Unit purchase price - from an external source
· Unit production cost – produced internally
· Unit production cost includes direct labour, direct material and factory overhead
Order/Setup Cost
· Expense of issuing a purchase order to an outside supplier or from internal
production setup costs
· Vary directly with number of orders or setups
· Order cost includes transportation cost, and cost for requisition, analysing
vendors, writing purchase orders, transportation cost to transport the order,
receiving materials, inspecting materials, following up orders and doing the
process necessary to complete the transaction
Holding Cost or Carrying Cost
· Cost associated with investing in inventory and maintaining the physical
investment in storage
· Contains capital costs, taxes, insurance, handling, storage, shrinkage,
obsolescence, and deterioration
Stockout Costs
· Economic consequence of an external or an internal shortage
· External shortage – when customer’s order is not filled
· Internal Shortage – When an order of a group or department is not filled
· External shortages can incur backorder cost, present profit loss and future profit
· Internal shortage can result in lost production and delay in completion date


Major goals
· Minimise inventory investment
· Maximise customer service
· Assure efficient plant operation
Common Subgoals
· Low unit cost
· High inventory turnover
· Consistency of quality
· Favourable supplier relation
· Continuity of supply
Inventory turnover
· A performance measure for inventory control
· It is the velocity with which materials move through the organisation
· It is the ratio of the annual cost of goods sold (from income statement) to the
average or current inventory investment (from balance sheet)
· This ratio computes

Inventory management tips -part 3

Here are some of the most common techniques for lowering inventory levels.
11. Purchase Minimums: Compare the total cost of ownership for purchased products as quoted prices with no minimums to reduced prices with minimums to determine if the reduced prices really provide savings.

12. Implement SKU-specific Purchase Transaction Costs: Purchase transaction costs aren't normally SKU-specific. However, reflecting any extraordinarily low receiving costs associated with specific SKUs will serve to reduce inventory for them. The opposite, of course, is also true.

13. Get Demand Plans from Downstream: Hard information on upcoming needs from customers reduces demand variability, thus reducing the safety stock required for a given customer service level.

14. Send Demand Plans Upstream: Sharing demand forecasts with suppliers is more indirect, however, in the long run it will serve to reduce the supplier's finished goods inventory and associated costs and, with effective negotiation, perhaps yield lower prices.

15. Don't Stock It: Manufacturing or purchasing to order when the acquisition and customer lead time relationships and order quantity relationships allow it is a very direct way to reduce inventory, providing that the acquisition capacity exceeds the potential short-term demand rate.

16. Cross-dock Customer Shipments: With effective use of joint replenishment, the potential increases in inbound transportation costs associated with purchasing to order can be mitigated. Cross-docking customer shipments can facilitate purchasing to order even when the order quantity relationship would have otherwise dictated purchasing to inventory. In a similar manner, aggregating purchase requirements for multiple DCs into a single order and cross-docking to multiple DCs effectively reduces purchase transaction costs and reduces cycle stock inventory.

17. Keep In Stock, But Not Everywhere: In multiple DC tier environments, stocking certain SKUs in fewer/upstream facilities as opposed to more/downstream facilities yields obvious benefits. Likewise, within a single tier of DCs, not every SKU deserves to be stocked in every DC.

18. Extend Payment Terms: When negotiating long- term purchase agreements, getting the best payment terms at a given unit price is the most direct way to increase the portion of inventory funded by the vendor. If improving payment terms can be coupled with increased turnover, then the improvement in working capital effectiveness is significant.

19. Take Advantage of Price/Quantity Breaks: Taking price/quantity breaks into account when purchasing for replenishment seems an obvious way to reduce the inventory investment, but seems to be frequently overlooked. Often this is a result of either not quantifying breaks at the time of sourcing or negotiation, not having an effortless way to take them into account, or through lack of understanding of the impact of purchasing larger quantities at reduced unit cost.

20. Transfer Instead of Purchase: When inventory of an overstock SKU in one location needs to be purchased to replenish inventory in another location, transfers are a smart way to reduce inventory. Be careful that additional warehousing and transportation expenses aren't unnecessarily incurred so the reduction in holding cost does not exceed the cost to transfer.

Inventory management tips- part 4

Here are some of the most common techniques for lowering inventory levels.
Consider Liquidation: Although there will always be a short-term price to pay on the P&L and the balance sheet, when it is absolutely clear that the value to be gained through liquidation-whether through sale at reduced price, sale as distressed product, salvage, or charitable donation-is greater than the most optimistic estimate of future gross margin from conventional product sales, then liquidation is the best decision.

Try Merge-In-Transit: The concept of in-transit product merging-where, for example, two things are shipped from different locations and then married in transit so that they reach the customer as a single shipment-can be seen as a technique for reducing inventory if the need for the customer to simultaneously receive multiple SKUs is taken as a requirement. If the need for simultaneous receipt is a given, then the concept eliminates the need for inventorying the individual SKUs together. To some extent, merge-in-transit represents an extension of postponement beyond the distribution center walls.

Get Help From Friends: Collaborative Planning and Replenishment (CPFR) is an open set of pre-defined business processes and IT/communications standards created to facilitate collaboration between supply chain partners. CPFR can reduce inventories through inventory balance, forecast, demand and other data visibility and associated collaboration in the planning area.

Use Vendor-managed Inventory (VMI): With the appropriate incentives, allowing suppliers to assume the responsibility for replenishment of your inventory, because of their visibility into both their own inventory and production schedule and your demand data, can almost always reduce your inventory.

Implement Vendor Stocking Programs (VSP): Used primarily for maintenance inventories but applicable to all, VSPs require a supplier to commit to an extremely high service level for delivery of specific SKUs within a fixed time at a pre-defined mark-up over cost. VSPs can reduce or eliminate inventories for slow-moving products.

Inventory management tips -part 2

Here are some of the most common techniques for lowering inventory levels.
6. Forecast Events: If one-time demand clutters the sales history, or if one-time demand events are part of the future, then they need to be taken into account in any forecasting done-both in terms of editing them from history and in terms of incorporating future events into the routine demand forecast.

7. Think Postponement: For parent products from which multiple SKUs can be manufactured, only partially completing manufacturing, placing semi-finished product in inventory, and then completing manufacturing of the final SKUs to order reduces total inventory. In a similar manner, component products from which final SKUs may be assembled can be purchased to inventory and then the final SKUs assembled to order, providing that the time for assembly doesn't exceed the customer lead time.

8. Rationalize SKUs: Removal of inappropriate product from the product line can be a controversy-ridden process, but may reduce inventory significantly if handled in a constructive manner, as follows:

* Develop consensus on the objective of maximizing profit
* Develop activity-based costs for each SKU and separate them into three groups:
o Those with selling prices that create positive gross margin
o Those with selling prices that cover their variable cost but do not completely cover their fixed cost
o Those with selling prices that do not cover their variable cost
* Quantify the sales volume correlations between SKUs, based on the analysis of both individual orders and aggregate order patterns by customer
* Identify the combination of SKUs which maximizes profit on a fully-absorbed basis

9. Reduce Lead Times for Product Acquisition: For either manufactured or purchased product, any reduction in lead time, whether supplier lead time, transportation time or receiving cycle time, provides a one-time, permanent reduction in cycle stock inventory proportional to the throughput level of the SKU and the degree of lead time reduction. In a similar manner, reducing lead time variability and increasing inbound unit-, SKU-, or order-fill rates both increase supply reliability and reduce safety stock inventory for a given customer service level.

10. Implement Common Supplier Joint Procurement for Purchased Products: Joint procurement of multiple SKUs from a common supplier serves to effectively reduce unit purchase transaction costs and thereby reduces both cycle stock inventory and annual purchase transaction expenses. In a similar manner, joint procurement of multiple SKUs from different suppliers located in close physical proximity and consolidation of inbound (LTL) volume to form full TLs serves to reduce the incremental transportation cost portion of purchase transaction costs and reduce cycle stock inventory.

Inventory management tips -1

Inventory policies drive two types of costs-operating expenses and working capital requirements. The latest "Logistics Cost and Service Report" published by Establish Inc./Herbert W. Davis and Company, indicates that, while total logistics costs as a percent of sales are falling and most individual companies have succeeded in reducing inventory levels; total logistics costs per hundredweight are increasing, and inventory costs as a percent of total logistics cost are increasing.

In many organizations, however, the opportunities to reduce inventory costs are often not addressed at all or are not completely exploited. If your organization needs help taking money out of inventory there are strategies you can employ today that will provide payoff.
Some of these strategies address having less active inventory, others how you purchase active inventory, and still others require transferring inventory or relying on vendors for better inventory management. Regardless of which you choose to explore, proactive inventory management policies will make a difference in your operations. Here are some of the most common techniques for lowering inventory levels.

1. Base Cycle Stock on Economics: For purchased products, getting a handle on your acquisition transaction costs will either reduce average inventory or allow for reducing purchasing and receiving labor. For manufactured products, if production equipment changeover costs are in a similar state, getting them in place will either reduce average inventory through shorter runs or allow for reducing changeover and receiving labor through longer runs.

2. Control Order Transaction Costs: In the office, use the computer to generate purchase orders (POs), EDI for PO transmission, advance shipping notices (ASNs) to reduce expediting, and historical vendor performance to prioritize expediting to lower purchasing costs. In the manufacturing plant, pre-planning; pre-staging of needed parts or materials; use of special tools or equipment; changeover initiation prior to completion of the previous run; teamwork and work-division; maintaining equipment temperatures; and minimizing QA / QC work all reduce cycle stock inventory. In the distribution center (DC), pallet manifest-based receiving processes, counting scales, statistics-based inspection and checking, bar code scanners for data entry, certifying key vendors to eliminate receiving functions, and stocking forward storage locations first and reserve locations second can all reduce purchase transaction costs and cycle stock accordingly.

3. Lower Inventory Holding Costs: Improve space utilization in leased, contract, or public warehouses (or to minimize or delay expansion of owned facilities) through narrow aisle handling equipment, mezzanines, layout, or more appropriate storage modes.

4. Base Safety Stock on Customer Service: Using the appropriate number of product classes, setting the dividing lines between each class in the best manner, updating safety stock levels dynamically, and basing the service levels for each class on the financial goals of the business all serve to either reduce safety stock inventory or reduce out-of-stock situations and increase revenue.

5. Use Routine Demand Forecasting: Using manually edited arithmetic forecasting models to reduce forecast error will reduce overstocking, backorders, and DC returns from stores, holding inventory levels closer to only that required to support the desired customer service level.

Inventory control-2

There are many administrative tasks associated with stock control. Depending on the size and complexity of your business, they may be done as part of an administrator's duties, or by a dedicated stock controller.

For security reasons, it's good practice to have different staff responsible for finance and stock.

Typical paperwork to be processed includes:

* delivery and supplier notes for incoming goods
* purchase orders, receipts and credit notes
* returns notes
* requisitions and issue notes for outgoing goods

Stock can tie up a large slice of your business capital, so accurate information about stock levels and values is essential for your company's accounting.

Figures should be checked systematically, either through a regular audit of stock - stocktaking - or an ongoing programme of checking stock - rolling stocktake.

If the figures don't add up, you need to investigate as there could be stock security problems or a failure in the system.
Health and safety

Health and safety aspects of stock control are related to the nature of the stock itself. Issues such as where and how items are stored, how they are moved and who moves them might be significant - depending on what they are.

You might have hazardous materials on your premises, goods that deteriorate with time or items that are very heavy or awkward to move.

Inventory management definitions

Inventory management -it is policies, procedures, and techniques employed in maintaining the optimum number or amount of each inventory item. The objective of inventory management is to provide uninterrupted production, sales, and/or customer-service levels at the minimum cost. Since, for many firms, inventory is the largest item in the current assets category, inventory problems can and do contribute to losses or even business failures.

Inventory control

Successful, well-organized businesses rely heavily on inventory management systems to make
certain that adequate inventory levels are on hand to satisfy their customer demand. The Inventory
Control module for the Sage BusinessWorks Accounting system provides this level of control by
offering high-end features normally reserved for large companies, including light manufacturing
capabilities, serial number tracking, and multi-warehouse support. Inventory Control even features
an image library that allows you to assign a picture to each part.
Improved customer service leads to increased profitability. And, when integrated with the Accounts
Receivable and Order Entry modules, Inventory Control can significantly boost your customer
service levels while operating as the cornerstone of an effective manufacturing or distribution
solution. For more complex project management, Inventory Control can be coupled with the
Job Cost module to help track all inventory-related expenses for a project. Inventory tracking is
enhanced even more when integrated with the Custom Office module, which creates detailed
spreadsheets to provide further analysis of inventory performance.
The Inventory Control system offers comprehensive reporting capabilities to keep you on top of
inventory status. It can help you bring about the creation of new or improved purchasing policies,
sales policies, pricing methods, and even enhanced customer service. By leveraging Sage
BusinessWorks, you have the tools to create an inventory system with the depth to meet your
company’s needs for years to come.

Inventory Control and Stock

Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time, and how you keep track of it.

It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock.

Efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.

Inventory management

Inventory Management involves the control of assets being produced for the purposes of sale in the normal course of the company's operations. The goal of effective inventory management is to minimize the total costs - direct and indirect - that are associated with holding inventories. However, the importance of inventory management to the company depends upon the extent of investment in inventory.

The task of inventory planning can be highly complex in manufacturing environments. At the same time, it rests on fundamental principles. The system used for inventory must tie into the operations of the firm. Inventory planning and management must be responsive to the needs of the firm. The firm should design systems, including reports that allow it to make proper business decisions

Inventory control

The basic function of stock (inventory) is to insulate the production process from changes in the environment .

Note here that although we refer in this note to manufacturing, other industries also have stock e.g. the stock of money in a bank available to be distributed to customers, the stock of policemen in an area, etc).

One point to note from the above diagram is that most of the activities are a cost - it is only at the final point (sales of finished goods) that we get revenue to set against our costs and hopefully make a profit (= revenue - cost). Hence if we have cost associated with stock we need to deal with that stock in an Effective, Efficient and Economic manner (the 3E's as I tend to term it).

The question then arises: how much stock should we have? It is this simple question that inventory control theory attempts to answer.

There are two extreme answers to this question:

a lot

  • this ensures that we never run out
  • is an easy way of managing stock
  • is expensive in stock costs, cheap in management costs

none/very little

  • this is known (effectively) as Just-in-Time (JIT)
  • is a difficult way of managing stock
  • is cheap in stock costs, expensive in management costs

We shall consider the problem of ordering raw material stock but the same basic theory can be applied to the problem of:

  • deciding the finished goods stock; and
  • deciding the size of a batch in a batch production process.

The costs that we need to consider so that we can decide the amount of stock to have can be divided into stock holding costs and stock ordering (and receiving) costs as below. Note here that, conventionally, management costs are ignored here.

Holding costs - associated with keeping stock over time

  • storage costs
  • rent/depreciation
  • labour
  • overheads (e.g. heating, lighting, security)
  • money tied up (loss of interest, opportunity cost)
  • obsolescence costs (if left with stock at end of product life)
  • stock deterioration (lose money if product deteriorates whilst held)
  • theft/insurance

Ordering costs - associated with ordering and receiving an order

  • clerical/labour costs of processing orders
  • inspection and return of poor quality products
  • transport costs
  • handling costs

Note here that a stockout occurs when we have insufficient stock to supply customers. Usually stockouts occur in the order lead time, the time between placing an order and the arrival of that order.

Given a stockout the order may be lost completely or the customer may choose to backorder, i.e. to be prepared to wait until we have sufficient stock to supply their order.

Note here that whilst conceptually we can see that these cost elements are relevant it can often be difficult to arrive at an appropriate numeric figure (e.g. if the stock is stored in a building used for many other purposes, how then shall we decide an appropriate allocation of heating/lighting/security costs).

To see how we can decide the stock level to adopt consider the very simple model below.

Understanding Inventory Management

The prime objective for all supply chains is to provide clients with what they want, when they want it. Inventory management plays a central role in every supply chain’s need to satisfy its clients.

Inventory Solutions

Tompkins Associates helps companies develop an effective approach to inventory. We analyze the impact of internal and external factors to integrate inventory with purchasing, manufacturing, distribution, marketing and sales to create inventory policies that make sense. Tompkins solutions take into account:

  • Client needs and their influence on in-stock/fill rates, lead time and accuracy
  • Costs incurred from purchase transaction expenses, manufacturing set-up/changeover expenses, and more
  • Operations changes driven by promotions or recalls and SKU proliferation
  • Technology and its ability to provide trend, profiling and seasonality-based forecasting, trading partner visibility and planning collaboration
  • Corporate goals whether revenue, unit sales, or RONA/GMROI or A/P increase

We look at every area impacting your inventory to create a comprehensive inventory management strategy that will enhance financial performance and client satisfaction.

Understanding Inventory

Despite its importance to the supply chain, inventory is not universally well understood. It is variously characterized, both positively and negatively, as an economic asset to a non-income-producing use of capital funds. Only when considered in light of all quality, client service and economic factors—from the viewpoints of purchasing, manufacturing, sales and finance—does the whole picture of inventory become clear. No matter the viewpoint, effective inventory management is essential to supply chain competitiveness.

Lowering Inventory Costs

Recent industry reports show that inventory costs as a percent of total logistics costs are increasing. Despite this rise, many organizations have not taken full advantage of ways for lowering inventory costs. There are a number of proven strategies that will provide payoff in the inventory area, both in client service and in financial terms.

Some of these strategies for lowering inventory costs involve having less inventory while others involve owning less of the inventory you have. Regardless of which techniques you employ, proactive inventory management practices will make a measurable difference in your operations.

How to Optimize your Inventory

Managing inventory in the supply chain is critical to ensure high customer service levels. However, it is also a very costly asset to maintain. Having the right amount of inventory to meet customer requirements is critical. Find out what inventory best practices reduce inventory costs across the supply chain.

Here are 4 solutions to help keep you on top of your inventory.

  • Eliminate Dead Stock

    Smart retailers like The Gap and H&M have a markdown policy that clears merchandise in the store – no need to transport it and inventory it for many years. Make sure that you have a pro-active policy that clears dead stock.

  • Perform an ABC Analysis of your Inventory

    Pareto’s Law, otherwise known as the 80/20 rule applies to Inventory Management. For example, 80% of your sales are represented by 20% of your items. Let’s look at a hypothetical situation for a full-service food warehouse with 40,000 SKUs. Please refer to the the "ABC Analysis" table below.

    Only 5,000 items represent 75.7% of the annual sales volume. These SKUs are classified as ‘A’ items. They may include items such as milk, produce, bread and snack foods. To ensure a high level of customer service, it is imperative that these items have a high in-stock level. From a management perspective, it’s sensible to keep low inventory of ‘A’ items and arrange for frequent replenishments, reducing capital requirements. Conversely, the strategy best suited for ‘C’ items is to holding inventories and looking at other alternatives such as stockless buying (discussed next). As ‘B’ items fall in between, they should be reviewed less often than ‘A’ items, however if they are ‘key’ items that consumers want, must be treated like ‘A’ items. For example, a young mother will want to purchase diapers for her new-born along with milk & bread, but if diapers are a ‘B’ item it must be treated as an ‘A’ item to ensure high customer satisfaction.

  • Arrange Stockless Buying / Systems Contracting

    A good way to understand how this arrangement works is with an example. A small boat manufacturer requires fasteners & rivets to make boats. These are small-dollar value (i.e. ‘C’ class) items, however having the right sizes and quantities in inventory is essential to keeping on track to the monthly production schedule. Rather than buying large quantities of these items (and risk obsolescence with future design changes) the boat manufacturer arranged a stockless buying arrangement with the fastener supplier. This is how it works: The boat manufacturer would share its monthly production schedule with the supplier. The supplier is then responsible for ensuring that an adequate supply of materials is available at the manufacturer’s facility. There is a special secured area in which the supplier keeps the inventory. When a requisition request is generated in the manufacturer’s system, it allocates inventory to production. At this point an invoice is generated and the manufacturer pays for the materials it used. This introduces beneficial process efficiencies into the management of purchasing and inventory functions for both the manufacturer and the supplier.

  • Vendor Managed Inventory Systems

    Vendor managed inventory (VMI) systems have placed the responsibility for the replenishment function to the vendors. For example, Heinz, a manufacturer of ketchup, will arrange to have its products available to its customers (grocery retailers, mass merchants, etc.). They will monitor sales and send the right quantities at the right time to ensure consumers will find Heinz ketchup on store shelves. The purchasing/order processing functions are more streamlined, allowing the management team of Heinz’s customers to focus their efforts on other areas. VMI has evolved to Collaborative Planning, Forecasting and Replenishment, which included additional partners in the supply chain. Wal-Mart, a world leader in CPFR, has its own proprietary system called Retail Link, which gives all of its suppliers information on product sales history, inventories, in-stock percent, etc. across all of its retail locations over the last two years. Suppliers are responsible to maintain an in-stock level of 98.5%. The relationship works both ways. Wal-Mart provides this information for free to help its suppliers; however their suppliers must meet the 98.5% in-stock level if they would like to remain a Wal-Mart supplier.

Use the above four solutions to reduce inventory costs in your supply chain. One of the few remaining ways to drive down inventory costs are a result of organizations becoming more collaborative and sharing their data across the supply chain.

Negative inventory

Undisciplined inbound processing; non-compliant labels or inadequate/non-standardized label formats; inadequate returns processing; and lack of three-way matching leads to discrepancies in Inventory.
In order to avoid discrepancies invest in sophisticated, integrated, software that irrefutably reconciles inventory records with physical inventory through label compliance protocols, and inviolable, rules-based matching of the packing slip/invoice/warehouse receipt/and authorized purchase order. These rigorous business processes will manage inventory transfer internally and as inventory moves among suppliers and trading partners. Investments in sophisticated software have an irrefutable positive return; case study after case study proves it.

In addition to understanding the sources of negative inventory balances, it's also very important to understand their effects on planning and execution systems. In most planning systems, a negative item-level balance is treated the same as positive demand. Basically your system will tell you to make or buy more to offset the negative balance. Obviously this is a problem when a large negative balance occurs but can also create serious problems with small negative balances under certain conditions. For example, if you have an item that is set up as an "order as needed" item, meaning that you do not want to order or stock any unless you have actual demand (orders), an errant adjustment that drives the balance to -5 will result in a recommended buy of 5 pieces. Since "order as needed" is often associated with very slow moving or obsolete items, you may have just added to an obsolescence problem. In a manufacturing environment using MRP, a negative balance of a single end-item, will result in demand cascading throughout the bill of material structure, potentially resulting in unnecessary orders for hundreds of lower-level items. This is what occurs if your system handles negative balances as would normally be expected. Some programs, either purposely or due to poor programming practices, may not execute properly if they encounter a negative balance. They may ignore the records with negative balances or simply "blow up" because they weren't designed to incorporate negative balances into their calculations. Though there are valid reasons for not wanting a program to execute if it encounters a negative balance, there are also potential problems with this logic. You may actually need to take action, but because the calculations were suspended due to a negative balance, you did not get the information needed to initiate an action. Due to the complexities of demand-planning systems, especially MRP/DRP systems, there is no "best" way to handle negative balances within the programming. Execution systems such as warehouse management systems and manufacturing execution systems can also have problems with negative balances. While you may not be willing to modify your systems to handle negative balances in a specific way, you should at least understand what your systems are doing when they encounter negative balances. Ultimately, avoidance of negative balances in the first place is the best solution.

What is inventory management software?

Inventory management software is a system for tracking and reporting on the use and distribution of supplies or products. Software suitable for larger, multi-location operations is sometimes referred to as warehouse management software, but it generally performs the same functions on a larger scale.

Inventory management software features
Before you start investigating inventory management software, decide which features are most important to your business. Here are some of the standard features you should expect:

  • Inventory control – sets locations and shelf or bin numbers for each item in inventory. Tracks incoming and expiration dates as applicable.
  • Shipping – creates or imports sales orders to generate pick lists, packing slips, and shipping information. First in, first out (FIFO) or last in, first out (LIFO) as appropriate.
  • Receiving – manages the placement of incoming inventory, generates put lists.
  • Multiple units of measure – allows incoming items to be measured in pallets, but outgoing to be measured in cases or individual pieces.

More complex inventory management systems add workforce and warehouse management features, helping you create the most efficient approaches to both daily tasks and long-term planning.