Question

Critique each of the methods of inventory management and costing approaches

Answer 1

Methods of inventory management

If you're a business owner or a manufacturing manager, you know how difficult it can be to keep track of your inventory. Fortunately, there are several different methods of inventory management that can be implemented in order to assure you get the most out of your inventory tracing. The first and perhaps most important method is to use the barcode system. Barcodes assign special numbers to each and every item you're trying to track, all with an integrated system of data. Once you scan your inventory's barcodes, they automatically get decoded and entered into a database, which then allows you to track and maintain inventory quantities, pricing, and any other data you want to save. An important part of inventory management is controlling your inventory, in other words, knowing when stock gets low and when it needs to be re-ordered. There are various methods that can be used to control your inventory.

Most companies have a never-ending goal to find the best method to control one of their largest assets—their inventory. Many different methods of inventory control exist, from the very basic to the very complex. All methods aim toward one target—to have the lowest total cost of ownership while having the highest possible service levels. Some methods find a balance between the cost and service components,

a) Avoid Spoilage

b) Avoid Dead Stock

c) Save on Storage Costs

Costing approaches

Costs can be simply defined as the money or resources associated with a purchase / business transaction or any other activity. Different industries adopt different methods of ascertaining costs of their products depending on the nature of the production and the type of output

The issues discussed here are not new and they are not unique either to IT services or to the education sector. Many models have tried to resolve the problems that stem from traditional budgeting and costing approaches. Some well documented examples include:

1. Zero Based Costing (1980s)

2. Activity Based Costing – ABC (1990s)

3. Portfolio Management (2000s)