1、 Floyd D. Hedrick“Inventory” to many small business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money Tied up until the inventory leaves the company as purc
2、hased products. Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts money into the cash register. In a literal sense, inventory refers lo stocks of anything necessary lo do business. These stocks represent a large portion of the business investment and must
3、 be well managed in order to maximize profils. In facl, many small businesses cannot absorb the types of losses arising from poor inventory management. Unless invenlories are controlled, they are unreliable, inefficient and costly.SUCCESSFUL INVENTORY MANAGEMENTSuccessful inventory management involv
4、es balancing the costs of inventory with the benefits of inventory. Many small business owners fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of money tied up in inventory. This fine line between k
5、eeping too much inventory and not enough is not the managers only concern. Others include: Maintaining a wide assortment of stock but not spreading the rapidly moving ones too thin: Increasing inventory turnover - but not sacrificing the service level: Keeping slock low - but not sacrificing service
6、 or performance. Obtaining lower prices by making volume purchases - but not ending up with slow-moving invenlory: and having an adequate invemory on hand - but not gelling caught with obsolete items.The degree of success in addressing these concerns is easier to gauge for some than for others. For
7、example, computing the inventory turnover ratio is a simple measure of managerial performance. This value gives a rough guideline by which managers can set goals and evaluate performance, but it must be realized that the turnover rate varies with the function ol inventory, the type of business and h
8、ow the ratio is calculated (whether on sales or cost of goods sold). Average inventory turnover ratios for individual industries can be obtained from trade associations.One of the most important aspects of inventory control is to have the items in stock at the moment they are needed. This includes g
9、oing into the market to buy the goods early enough to ensure delivery at the proper time. Thus, buying requires advance planning to determine inventory needs for each time period and then making the commitments without procrastination.For retailers, planning ahead is very crucial. Since they offer n
10、ew items for sale months before the actual calendar date for the beginning of the new season, it is imperative that buying plans be formulated, early enough to allow for intelligent buying without any last minute panic purchases. The main reason for this early offering for sale of new items is that
11、the retailer regards the calendar date for the beginning of Ihe new season as the merchandise date for ihe end of the old season. For example, many retailers view March 21 as the end of the spring season, June 21 as the end of summer and December 21 as Ihe end of winter.Part of your purchasing plan
12、must include accounting for the depletion of the inventory. Before a decision can be made as to the level of inventory lo order, you must determine how long the inventory you have in stock will last.For instance, a retail firm must formulate a plan to ensure the sale of the greatest number of units.
13、 Likewise, a manufacturing business must formulate a plan to ensure enough inventory is on hand for production of a finished product.In summary, the purchasing plan detail: When commitments should be placed: When the first delivery should be received; When the inventory should be peaked; When reorde
14、rs should no longer be placed: and When the item should no longer be in stock.Well planned purchases affect the price, delivery and availability of products forsale.CONTROLLING YOUR INVENTORYTo maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establi
15、sh adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control. They are listed below, from simplest to most complex. Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In
16、 very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items. Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of theinventory is counted every so many days on a reg
17、ular basis. Click sheet control enables the manager to record the item as il is used on a sheel of paper. Such information is then used for reorder purposes. Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use t
18、he stub to record the item that was sold.As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence o
19、f computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer.Point-of-sale terminals relay information on each ite
20、m used or sold. The manager receives information printouts at regular intervals for review and action.Off-line point-of-sale terminals relay information directly to the suppliers computer who uses the information to ship additional items automatically to the buyer/inventory manager.The final method
21、for inventory control is done by an outside agency. A manufacturers representative visits the large retailer on a scheduled basis, takes Ihe stock count and writes the reorder. Unwanted merchandise is removed from stock and returned lo Ihe manufacturer Ihrough a predetermined, authorized procedure.A
22、 principal goal for many of the methods described above is to determine the minimum possible annual cost of ordering and stocking each item. Two major control values are used: 1) the order quantity, that is, the size and frequency of order: and 2) the reorder point, that is, the minimum stock level
23、at which additional quantities are ordered. The Economic Order Quantity (EOQ) formula is one widely used method of computing the minimum annual cost for ordering and stocking each item. The EOQ computation takes into account the cost of placing an order, the annual sales rate, the unit cost、and the
24、cost of carrying invenlory. Many books on management practices describe the EOQ model in detail.DEVELOPMENTS IN INVENTORY MANAGEMENTIn recenl years, two approaches have had a major inipacl on inventory management: Material Requirements Planning (MRP) and Just-In-Time (JIT andKanban). Their applicati
25、on is primarily within manufacturing but suppliers might find new requirements placed on them and sometimes buyers of manufactured items will experience a difference in delivery.Material requirements planning is basically an information system in which sales arc converted dircctly into loads on the
26、facility by sub-unit and time period. Materials are scheduled more closely, thereby reducing inventories, and delivery times become shorter and more predictable. Its primary use is with products composed of many components. MRP systems are practical for smaller firms. The computer system is only one
27、 part of the total project which is usually long-term, taking one to three years lo develop.Just-in-time inventory management is an approach which works to eliminate inventories rather than optimize them. The inventory of raw materials and work-in-process falls to that needed in a single day. This i
28、s accomplished by reducing set-up times and lead times so that small lots may be ordered. Suppliers may have to make several deliveries a day or move close to the user plants to support this plan.TIPS FOR BETTER INVENTORY MANAGEMENTAt time of delivery. Verify count - Make sure you are receiving as m
29、any cartons as arc listed on the delivery rcccipt. Carefully examine cach carton for visible damage If damage is visible, note it on the delivery receipt and have Ihe driver sign your copy. After delivery, immediately open all cartons and inspcct for merchandise damage.When damage is discovered: Ret
30、ain damaged items - All damaged materials must be held at Ihe point received. Call carrier to report damage and request inspection. Confirm call in writingThis is not mandatory but it is one way to protect yourself.Carrier inspection of damaged items. Have all damaged items in the receiving area - M
31、ake certain the damaged items have not moved from the receiving area prior to inspection by carrier. After carrier /inspector prepares damage report, carefully read before signing.After inspeclion: Keep damaged materials Damaged materials should not be used or disposed of without permission by the c
32、arrier. Do not return damaged items without wrillen aulhorization from shipper/supplier.SPECIAL TIPS FOR MANUFACTURERSIf you are in the business of bidding, specifications play a very important role. In writing specifications, the following elements should be considered. Do not request features or quality thai are not necessary for the items intended use. Include full descriptions of any tesling lo be performed. Include procedures for adding optional items. Describe the quality of the items in clear terms.The following aclion
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