Defdefinitions of Inventory Management Essay
The overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. A business’s inventory Is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold.
It also costs money to store, track and Insure Inventory. Inventories that are mismanaged can create significant uncial problems for a business, whether the mismanagement results in an Inventory glut or an Inventory shortage. Explanation Successful inventory management involves creating a purchasing plan that will ensure that items are available when they are needed (but that neither too much nor too little is purchased) and keeping track of existing inventory and its use.
Two common inventory-management strategies are the just-in-time method, where companies plan to receive Items as they are needed rather than maintaining high Inventory levels, and materials requirement planning, which schedules material liveries based on sales forecasts. Source: http://www. Investigated. Com/terms/I/ inventory-management. Asp Inventory Management Inventory management Is mainly about Identifying the amount and the position of
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Inventory management is imperative as it helps to defend the Intended course of production against the chance of running out of important materials or goods. Inventory management also includes making essential connections between the replenishment lead time of goods, asset management, the carrying costs of inventory, future inventory price forecasting, hysterical inventory, available space for inventory, demand forecasting and much more. By balancing these competing requirements, a company will discover their optimal Inventory levels.
This is an ongoing process, as the firm will need to shift and adjust as it changes and expands. Push, pull Simply put, inventory management is driven first by the customers who pull goods out of the inventory, and second by the company who push the goods out of inventory due to orders and demand. Source: http://www. E-economic. Com/ countersignature/accounting-words/elementary- management Activities 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 companies Inventory Is the largest Item In the current assets category, inventory problems can and do contribute to losses or even business failures. Also www. Objectifications. Com/definition/inventory-management. HTML#ixzz2aT4Xx6dI In any business or organization, all functions are interlinked and connected to each other and are often overlapping.
Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function. Therefore these functions are extremely important to marketing managers as well as finance controllers. Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures. Inventory is always dynamic.
Inventory management requires constant and careful evaluation of external and internal actors and control through planning and review. Most of the organizations have a separate department or Job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments. Defining Inventory Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.
Any organization which is into production, trading, sale and service of a product will necessarily hold stock of arioso physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc. From the above definition the following points stand out with reference to inventory: 0 All organizations engaged in production or sale of products hold inventory in one form or other. Inventory can be in complete state or incomplete state. 0 Inventory is held to facilitate future consumption, sale or further processing/value addition. All inventoried resources have economic value and can be considered as assets of the organization. Different Types of Inventory Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds inventory of raw materials and consumables required for production. It also holds inventory of semi-finished goods at various stages in the plant with various departments.
Finished goods inventory is held at plant, FOG Stores, distribution centers etc. Further both raw materials and finished goods those that are in transit at various locations also form a part of inventory pending upon who owns the inventory at the particular Juncture. Finished goods inventory is held by the organization at various stocking points or with dealers and stockiest until it reaches the market and end customers. Besides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products.