Inventory Management Essentials

Inventory Management Essentials- Complete Controller

Each organization requires an inventory to carry out the various activities to achieve its objectives as a successful business. Stock inventory is created when items are in standby mode before they are used or sold. A stock of items can be found at any stage of the process, initially as raw material, then processed stock, and finally, finished stock.ADP. Payroll – HR – Benefits

Types of Stock Inventory Management

Businesses rely on different types of inventory to conduct their operations. Some of the most common types are:

  • Raw Material Inventory – Materials intended for production. This inventory allows the organization’s cost, production time, and priorities to determine continuous production and its size.
  • Work In Process Inventory – Materials in the production line waiting between different workstations. This inventory includes products that are allotted to different processing times of workstations.
  • Finished Goods Inventory – Inventory of finished products intended for sale and awaiting customer delivery.
  • Inventory of Supplementary Materials – Materials that do not directly participate in production but are necessary to complete the process. For example, office supplies, packaging materials, and other products are included in indirect production.

Costs Associated with Inventory Management

Costs associated with inventory management differ depending on the production process and type of finished product. Following are costs related to inventory management for adequate bookkeeping records.

  • Cost of Labor – Includes all costs associated with those responsible for managing inventory. This cost includes salaries and wages paid to warehouse managers, clerks, and inventory holders.
  • Cost of IT – Includes purchasing and maintaining computers and software.
  • Cost of Management – Includes building procedures and approving and assimilating them into the system. For example, storage procedures, handling procedures, and delivery procedures.

Benefits Derived from Inventory Management

There are several benefits taken from effective inventory management for the success of a business and proper bookkeeping. Savings on inventory maintenance help optimize costs associated with inventory maintenance. They also include expenses related to repeat orders on other products.

Meeting supply times assists in proper inventory management. It enables ongoing production and meeting schedules and delivery times to be determined. Timely delivery will lead to additional orders and new customers for the business. This indicates that proper inventory management is effective in helping the company succeed.

Maximum utilization of production factors is another benefit of stock inventory management. Proper inventory management will enable a continuous production process and prevent downtime, delays, and idle time in the production process.Download A Free Financial Toolkit

LIFO Method – Last In, First Out

This inventory management method is also known as the stack method. The LIFO method determines that the last product that enters the inventory will be the first to be exported. LIFO is an effective method for products with a long shelf life.

FIFO Method – First In, First Out

According to FIFO stock management, the first product that enters is the last product that leaves the manufacturing facility. It considers the product’s shelf life and the validity of the warranty received from the supplier against the product.

JIT – Just In Time

This is one of the most common inventory management methods for products with high maintenance costs. According to this method, a company will order products from the manufacturer precisely at the time of purchase. According to consumption, inventory management is the most economical model for inventory management but requires a high level of control and analysis for demand forecasting and delivery time management.

Inventory Management and IT Services

Inventory management software allows a business to track every exit and entry from the inventory of items in the various warehouses of the organization. Inventory management software is a system module that includes sales and purchasing modules to enable data integration and greater manageability, control, and analysis for maintaining costs associated with inventory management.CorpNet. Start A New Business Now

Linking the IT Sector with Warehouse for Effective Management

The warehouse and inventory management software will be essential to the organization’s inventory mechanism. The warehouse ensures proper maintenance of the various materials entering the facility, enables adequate inventory management, and provides exemplary service to the various factory departments. Inventory management software should allow quantitative inventory management and serial numbers for stock inventory management.

When done efficiently and professionally, warehouse management is one of the most essential conditions for successful logistics system management, stock management inventory, and bookkeeping. Both play a decisive role in helping a business succeed. Here are everyday activities that are carried out in a warehouse.

  • Handling of deliveries from suppliers
  • Inventory counts and complete control of inventory levels
  • Preparation of inventory and supply to various departments through transportation systems
  • Maintenance of physical conditions such as temperature, humidity, and pressure
  • Proximity restrictions for other materials
  • Regular maintenance
  • Receiving finished products from production
  • Receiving orders from customers
  • Preparing shipments to customers

Inventory Management with Serial Numbers

Inventory management according to serial numbers enables tracking transactions of every item and managing responsibility with the supplier and customer. Inventory management software allows a company to analyze inventory movements, such as displaying sales of items according to different periods per business needs. The software must provide information on the dead stock (unsold inventory) to alert the business of missing items when an item falls below a specified minimum level to reduce costs associated with inventory management.

A crucial part of inventory management software should be the ability to manage exchanges and returns of the customer. The inventory management software provider should be able to perform a variety of actions against any return of a customer or return to a supplier. For example, actions such as withdrawing a return certificate for monetary credit, replacing a product, substituting product X with product Y, and exchanging with withdrawal of liability apply if the product is under warranty.

How Can Software Help in Stock Inventory Management?

Inventory management assists with business inventory, tracking the entry and exit of items from stock and noting the speed and profitability of each sale. The inventory management module consists of a price list for each customer. The software can be helpful in the calculation of profit per invoice.

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