Basic Concepts of Inventory Management

In every businesses ad organization in the society, all of the functions are linked and connected with one another and usually overlaps. There are several important aspects such as supply chain management, inventory and logistics that make the businesses delivery function’s backbone. In other words, these key aspects are factors for every marketing manager and the finance controller. Inventory management is an extremely important key aspect.

This determines the supply chain’s health and how it brings impacts to the balance sheet’s health. All of the organizations, cooperatives and companies are striving to achieve and obtain the optimum inventory so that it can meet the needed requirements and they can avoid an under or over inventory that might bring a big impact to the financial statistics.

Even though the industrial management has huge advances in some certain areas like Lean Manufacturing, Flow Manufacturing, Supply Chain Management and Electronic Commerce, still, Inventory Management continues to be a big and main matter in a lot of organizations. There is no guarantee in installing your latest software and saying the most trending catchwords compared in a good inventory management. This is where people who are professionals and truly trained people use the economic tools that makes to the desired result.

Inventory Management always tends to get active and dynamic. This key aspect needs a continuous and wary assessment with regards to the internal and external factors. It is taken controlled through a thorough review and planning. The organizations all have distinct departments and job function that you call inventory planner who does the monitoring, controlling and reviewing the inventory thing continuously. It is also interfaced with procurement, production and finance department.

A good inventory system will make the process of monitoring and tracking so much easier for the management to conduct a research or survey that is why this is really plays an important role. It keeps track of orders that are purchased in the market and materials that were supplied to some sites of a certain company.

If you define what inventory is, this means as the physical goods’ idle stock that has an economic value. This is held in numerous forms in the custody of the organization that waits packing, transforming, processing and using in a particular future time.

To aid consumption and sale in the future, every organization that are in to the production, sale, trading and assistance of a certain product are necessary to hold stocks of many physical resources. It can be observed that these organizations keep inventories for a lot of reasons while an inventory is a necessary thing for any business. This includes the physical necessities, hypothetical purposes, useful purposes and etc.

Balancing a lot of responsibilities of inventory management only means one thing; the three characteristics of an inventory needed to be given attention. There something to do with time if you are talking about the first key aspect of inventory management.

This means trying to understand the time that will be taken by the supplier in processing an order executing a delivery when it comes to materials that were acquired for an insertion in the entire inventory. This Inventory Management demands for a concrete understanding on how long it is for them to take those materials transferred out of an inventory that was established. It was made possible to understand when the orders are going to be placed and how many components are needed to be ordered so that the production will run smoothly.

Another key for an effective inventory management is to calculate what is called as a buffer stock. These buffer stocks are additional units that exceed the minimum amount that are needed to obtain the level of production. For an instance, it was determined by the manager that is a better idea for them to maintain a couple of additional units of a machine if there are cases and situations that might arise.

Having this buffer is a great factor to lessen the possibility of getting the production interrupted because of the lack of important units in the supply inventory.

Delivering of resources and movements of these materials to the operational process is not limited to be documented in inventory management. It is also important for those materials to go to through the numerous operational phases. Naturally known as good and work in a progress inventory, it is a big help to identify the necessities in order to adjust the ordering amounts through the tracking materials they have used to generate finished goods before these raw materials get seriously low or inflated into a critical level.

Inventory Management has something to do in keeping the precise records of the goods that were finished and already prepared for shipment. It usually means that the posting of the making of the goods that are newly completed to the inventory amounts the same as the subtracting of the finished good buyers to the most recent shipments.

There is sometimes a sub-sort that contains in the finished products’ inventory to make up any goods that were returned and the reclassified as restored or good quality when a certain company is giving in return for a policy in a place. Precisely obtaining the numbers on the goods inventory that were finished makes it likely to quickly take the information to the sale personnel on to what things are available and all set for shipment at any time.

Besides from maintaining the volume’s control and the movement of a lot of inventories, the inventory management does some procedures as well to make it more possible for them to prepare correct accounts that are being used in accessing in any taxes in terms of each inventory type.

Without this exact data that are regarding with the units of volume with in each stage of the general operation, the tax amounts are could not be accurately calculated by the companies. This would lead them to underpaying taxes due and probably experiencing the rigid penalties of the independent audit as it happened.