Question

Please provide a brief commentary about the following:

Inventory can be defined as a stored or warehoused resource used for current or future use and can be raw materials, or finished goods for sale. When a business loses control of inventory, it can have negative financial ramifications. Excessive and low inventory levels, or the wrong kind of inventory are just some examples of what can go wrong with inventory levels. As a top-level manager, formulate a system to control inventory that includes planning, forecasting demand, controlling levels, and feedback and revision methods.

Answer 1

According to the Merriam-Webster dictionary, inventory control can be defined as the “coordination and supervision of the supply, storage, distribution, and recording of materials to maintain quantities adequate for current customer needs without excessive supply or loss.”

When it comes to wholesalers and distributors of durable goods, inventory control can be further defined as the process employed to maximize a company’s use of inventory. The goal of inventory control is to generate the maximum profit from the least amount of inventory investment without hindering customer satisfaction levels or order fill rates.

Following are the popular Inventory Control Systems that are being used by big manufacturers and the retail units:

1. ABC Inventory Control System
2. Three-Bin System
3. Just-in-Time (JIT) System
4. Outsourcing Inventory System
5. Computerized Inventory Control System
6. Fixed Order Quantity
7. Fixed Period Ordering

Automation can dramatically impact all phases of inventory management, including counting and monitoring of inventory items; recording and retrieval of item storage location; recording changes to inventory; and anticipating inventory needs, including inventory handling requirements. This is true even of stand-alone systems that are not integrated with other areas of the business, but many analysts indicate that productivity—and hence profitability—gains that are garnered through use of automated systems can be further increased when a business integrates its inventory control systems with other systems such as accounting and sales to better control inventory levels. As Dennis Eskow noted in PC Week, business executives are "increasingly integrating financial data, such as accounts receivable, with sales information that includes customer histories. The goal: to control inventory quarter to quarter, so it doesn't come back to bite the bottom line. Key components of an integrated system '¦ are general ledger, electronic data interchange, database connectivity, and connections to a range of vertical business applications."

Supplier Assistance

An effective way to manage inventory is to solicit the help of suppliers. Supplier-managed inventory gives the vendor access to the distributor's inventory data. The supplier generates purchase orders based on the distributor's needs. Distribution-intensive companies utilize vendor managed inventory controls to eliminate data-entry errors and to effectively manage the timing of purchase orders.

Ways To control inventory management :

Inventory Control Personnel

An efficient method for managing inventory is to hire a dedicated inventory control specialist. Inventory specialists manage all merchandise items that are on hand and in transit. They also perform adjustments, manage returns, validate received merchandise and implement inventory reporting strategies.

Purchase Software

Many businesses manage inventory by designing an inventory management database or purchasing inventory management software. Inventory management software enables distributors to customize the database to fit their individual needs.

Product Turnaround

All businesses have products that sell and products that sit on the shelves. A helpful way to manage inventory is to establish a system that pinpoints which products move quickly and which products take more time to sell.

Tracking System

Many businesses develop a tracking system to manage inventory and monitor turnaround times. Inventory tracking system formats range from spreadsheets to computer programs. They provide complete inventory control allowing business owners to organize item levels and take cycle counts in distribution centers or stock rooms.

A system built around material requirements planning

that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so that the planning can be kept valid at all times.