Stock management

Maintaining the best level of stock is not easy. It is a balancing act.
The competing needs are:
- Minimize the investment in stock
- Be able to satisfy customer needs 100% of the time
- Never have stock that cannot be sold or used within a determined time-frame
There is no more critical part of a business than the inventory area.
There are various styles of stock management with probably the most drastic being JIT (Just in Time).
Often seen in the automotive industry, this is great when everybody works to the “plan”. But this can leave a business up for ransom if there is a single hiccup in your suppliers’ supply chain. Be very wary of this style.
If your components or raw materials can be purchased on a one day (or less) lead time, inventory control is not critical compared with a business that imports parts.
All accounting systems give you a stock/inventory module (sometimes optional).Check here new inventory management software

Managing inventory

Dedicate positions for managing inventory. Make sure you have control of which employees are affecting your inventory. This is especially true in manufacturing operations where the priorities of machine operators and production supervisors are meeting the production schedule, keeping the machines running, and ensuring the quality of the product being produced. Inventory accuracy will never be a primary responsibility of these types of positions. Once you come to this realization, it is easy to see the benefits of putting your inventory and material handling responsibilities in the hands of people whose primary responsibility is inventory. Also, within your material handling/warehouse positions you should limit the people doing miscellaneous type inventory adjustments.
Storage Areas will also affect accuracy. Crowded unorganized areas become "black holes" for missing product. Crowded areas also cause increase damage to product that is often disposed of without inventory corrections being made. High-density storage makes it very difficult to accurately count the product. Maintaining proper lighting, shelf and product labeling, and organization makes it easier to stock, pick, and count product thus increasing levels of accuracy.
The more you know about how your specific inventory system works, the more successful you'll be in optimizing its features.
(c)Dave Piasecki

Inventory accuracy

Maintaining inventory accuracy must be an integral part of the attitude of the organization. Like quality, customer service, and plant safety, accuracy must be promoted throughout the organization as everyone's responsibility. This attitude must start at the top levels. Yeah I know all you managers and execs out there want an accurate inventory but are you doing your part through your decisions and business practices to promote it. Processes are often shortcut in the name of "Customer Service" (this also applies to processes for Quality, Inventory Management, and Production Plans) that reduce or eliminate the effectiveness of the plan, which in the long run will reduce your ability to service your customers. Remember that these plans are designed to meet the needs of the customer, don't compromise them.
Procedure Documentation is the part where you use the previously defined processes to document the procedures the employees will follow to maintain inventory integrity. The procedures documented here should not be limited to inventory issues.You will have to count it to determine the accuracy, as well as determining areas needing additional evaluation. Year-end physical inventories are tools used by accountants and do very little for inventory accuracy. You should count your inventory on a continuous basis (cycle counting) to maintain high levels of accuracy. This is one of the best ways of identifying problem areas on a timely basis and providing an environment conducive to continuous improvement.


(c) Dave Piasecki

Consignment Inventory

Consignment Inventory is inventory that is in the possession of the customer, but is still owned by the supplier.
The supplier places some of his inventory in his customer’s possession (in their store or warehouse) and allows them to sell or consume directly from his stock. The customer purchases the inventory only after he has resold or consumed it.
There is a potential side benefit to consignment inventory in that some shared information that results from the consignment process could be useful to the supplier in his inventory management. Unfortunately, this information is rarely integrated into their planning systems. Some of this may be due to laziness or negligence on the part of the supplier, but there are also valid reasons why this information is not utilized. The primary one being that it requires very different system logic to utilize customer inventory levels in your planning processes; if consignment inventory is only a small part of you business, it may not be cost-effective to add the complexity to your planning systems to utilize this limited information.
The nature of consignment inventory is that “change of ownership” is unrelated to the shipment/receipt processes. This is contrary to the basic design of most inventory/accounting system’s transactional processes. Because of this, most inventory system’s do not handle consignment inventory very well. This forces many businesses to manage consignment inventory with manual off-line processes (sending reports back and forth, maintaining data in spreadsheets, etc). Not only is this time consuming, but it also creates many opportunities for errors because the additional transactions necessary for consignment inventory can get rather complicated and are highly dependent on accurate information sharing. If this process is not monitored closely, you can end up in a situation where reconciling your consignment inventory becomes a nightmare.If consignment inventory is a significant part of your business you need to look for software that focuses on consignment inventory or look into modifying your current system to add this functionality.

Inventory evaluation

Inventory is one of the largest out-of-pocket expenditures for a company and can have the greatest after-the-fact impact on profit performance.The evaluation of an inventory is greatly aided by accurately defining the key categories that make up that inventory.Poor inventory accounting practices can destroy a company without management knowing what is happening.

Inventory Management and the Warehouse Management System

The Inventory Management system can be extended by the Warehouse Management system (LE-WM) which manages storage bins in complex warehouse structures. While Inventory Management manages the stocks by quantity and value, the Warehouse Management component reflects the special structure of a warehouse, and monitors the allocation of the storage bins and any transfer transactions in the warehouse.
If goods receipts are planned, Materials Planning can monitor the stocks of ordered or manufactured materials and achieve an optimal inventory balance.Unless receipts are planned, the system cannot track materials that have been ordered. Planned receipts, therefore, are crucial to regulating the level of inventory in the warehouse.

Inventory management - developments

In recent years, two approaches have had a major impact on inventory management: Material Requirements Planning (MRP) and Just-In-Time (JIT and Kanban). Their application is primarily within manufacturing but suppliers might find new requirements placed on them and sometimes buyers of manufactured items will experience a difference in delivery.Material requirements planning is basically an information system in which sales are converted directly into loads on the facility by sub-unit and time period. Materials are scheduled more closely, thereby reducing inventories, and delivery times become shorter and more predictable. Its primary use is with products composed of many components. MRP systems are practical for smaller firms. The computer system is only one part of the total project which is usually long-term, taking one to three years to develop.
Just-in-time inventory management is an approach which works to eliminate inventories rather than optimize them. The inventory of raw materials and work-in-process falls to that needed in a single day. This is accomplished by reducing set-up times and lead times so that small lots may be ordered. Suppliers may have to make several deliveries a day or move close to the user plants to support this plan.



(с)By: Floyd D. Hedrick, Library of Congress, Washington, D.C.

Frank C. Barnes, P.E., Ph.D., University of North Carolina at Charlotte

Edward W. Davis, University of Virginia, Charlottesville

D. Clay Whybark, Indiana University, Bloomington

Murray Krieger

Inventory control tips

As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence of computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer.

• Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action.
• Off-line point-of-sale terminals relay information directly to the supplier's computer who uses the information to ship additional items automatically to the buyer/inventory manager.
• The final method for inventory control is done by an outside agency. A manufacturer's representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise

Inventory control important aspects

One of the most important aspects of inventory control is to have the items in stock at the moment they are needed.To maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establish adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control:

• Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items.
• Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of the inventory is counted every so many days on a regular basis.
• Click sheet control enables the manager to record the item as it is used on a sheet of paper. Such information is then used for reorder purposes.
• Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item that was sold.

Successful Inventory management

Many small businesses cannot absorb the types of losses arising from poor inventory management.
Successful inventory management involves balancing the costs of inventory with the benefits of inventory.This fine line between keeping too much inventory and not enough is not the manager's only concern but also:

• Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin;
• Increasing inventory turnover -- but not sacrificing the service level;
• Keeping stock low -- but not sacrificing service or performance.
• Obtaining lower prices by making volume purchases -- but not ending up with slow-moving inventory;
• Having an adequate inventory on hand -- but not getting caught with obsolete items.