THE NEED FOR A BUSINESS INVENTORY
Every company uses at least some level of inventory management system. The best inventory management systems will not only maintain the product count, but also provide processable business intelligence, such as the identification of low and high performance products and sending orders notifications when stocks are low. Some key aspects such as supply chain management, logistics and inventory form the backbone of the commercial delivery function. The explosion of electronic commerce, compliance and expansion of relations with national and world business partners have created new challenges to accurately manage the inventory. Therefore, these functions are extremely important for marketing managers and financial controllers. There are several types of inventories;Such as the inventory of direct material, the inventory of work in progress and the inventory of finished products where the inventory of direct material includes the stock of raw material that the company has bought for its use in the production in the production.
Inventory management is a complex process, particularly for larger organizations, but the basic concepts are essentially the same regardless of the size or type of the organization. In inventory management, goods are delivered in the reception area of a warehouse in the form of raw materials or components and are placed in storage areas or shelves. The raw material, the unprocessed materials, the components or the partially finished assemblies that are required to build or produce a product are a main component in any supply chain. These are the basic components and the starting point for any final product, and guaranteeing an adequate supply and proper management of raw materials is fundamental. In addition, they represent an investment that affects the cash flow and financial health of a company, since the cost accumulates in the acquisition point and appears as a current asset in the general balance of the company. As a result, it is important to use best practices to administer the inventory of raw materials. There are two basic subcategories of raw materials. Direct materials are those that are incorporated into the final product, while indirect materials are not included in the final product, but include things such as oils, rags, cleaners, markers, gloves, support material and many other items used in themanufacture of final inventory articles. Both types must be included in the planning of materials to ensure that there is sufficient material available to build the required number of units to comply with sales or sales projection position.
On the other hand, the inventory of work in Progreso (“WIP”) is known as the raw materials that have been taken from the raw material store and are now in the process of conversion into final products. These are the partially processed raw materials found in the production floor and have not reached the stage in which they have become the final product. The idea of this type of inventory is that the capital that is locked in the form of a work inventory in progress can be invested elsewhere to achieve much better yields. Then finally the finished products are found;obtained after the application of the manufacturing processes in the raw materials and the semi-finished products that are sellable and its sale contributes fully to the income of the central operations of the company. In order for these types of inventories to be carried out, the maintenance, repair and operation inventory (MRO) is also necessary since it is a crucial part of any business when analyzing the supplies consumed during production that do not become part of the good of the goodfinished and are not central to the production of the company. Incredibly, MRO inventory control can generate savings and, when done well, a MRO management initiative can also reduce maintenance expense having benefits of greater maintenance productivity;lower indirect spending of supply, negotiation and acquisition of inventory, identification and appropriate follow -up.
Following this, companies that have not predicted or planned the replacement of stocks correctly, often remain with large amounts of obsolete stocks in their stores. The obsolete stock is an inventory that is in the balance of a company as a working capital linked to few promises of an investment return. The surpluses of obsolete stocks are often the result of a product rejected by the market, a poor management of the demand forecast as the stages of the product life cycle or inventory management processes deficient in multiple locations ofwarehouse. When we talk about surplus inventory, we refer to selected inventory articles that are slower to move than the rest of their products. Inventory management policies have cost implications. Decisions on how much inventory maintain the costs of articles, retention costs, order costs and shortage costs.
As there are various types of inventories with their respective aspects, there are also several models used by companies to carry out their inventories. Among them is the EOQ model that is a simple deterministic model that illustrates the compensation between orders and inventory costs and represents the order amount that minimizes the total possession and request costs of the year. In addition to this, there is the non -instant model in which the demand is decided by actions and based on the shortage;In other words, the accumulation rate. The objective of the quantity discount price assessment model is to use the rank proposed by the offeror and quantity prices to determine the probable amounts of purchase of items throughout the contract that is requested competitively. This helps to quickly and accurately estimate the purchase costs. Among other aspects, there are pending orders (“backorders”), which represent purchase orders made to the supplier for products that are already exhausted from a certain location that is attended. The pending order is the inventory sale process that the company does not have at hand and is carried out only when the demand is formally captured. These pending orders represent specific challenges in terms of inventory optimization, since the pending units are typically associated with a degree of urgency from the client.
It should be noted that the inventory can be one of the most valuable assets of a small business, which makes the security of the inventory crucial in a wide range of industries. Maintaining safe inventory depends on knowing what you have, where it is and how much it is worth, so it is essential to have good records. The inventory can be protected in several ways and with a series of tools, which include technology, labor and simple common sense. Without effective inventory management techniques, a business is more susceptible to expensive shortages and related problems. The security inventory is a small surplus amount of inventory that has a hand to protect against the variability in market demand and delivery deadlines;While it helps protection against unexpected demand peaks, compensation for inaccurate market forecasts and serves as a shock absorber for longer delivery deadlines than expected. In short, the benefits of this security measure are linked to the mitigation of problems that could seriously damage their business.
From an operational perspective, an inventory management system helps to face the challenge of ensuring that the correct level of inventory is in the right place at the right time. Inventory management is a collection of tools, techniques and strategies to store, track, deliver and order inventory which can do or undo a business. A large amount of capital, if not the majority of the capital of a company is wrapped in its inventory. Inventory problems can contribute to commercial losses, even failures. Proper supply chain management, on the other hand, can allow a business to prosper. Good inventory management achieves a balance between the amount of inventory that enters and leaves, controls the time and costs of non -capitalized assets and stocks, allowing a company to reach optimal profitability. For that reason, it is incredibly important.
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