Inventory Control - Kendali Stok

Learn What is Possible with Better Inventory Software

2008-12-14T20:36:00.000-08:00

Learn What is Possible with Better Inventory Software

Gaining a tighter grip on your inventory doesn’t have to mean
purchasing an expensive supply-chain management application.
Manufacturers and distributors can achieve considerable benefits
from inventory management applications that include these musthave
features:
• Inventory tracking across multiple warehouses
• Inventory tracking in different locations within one facility
• Ability to track the unique serial or lot numbers of different
inventory items
• Ability to read and store bar codes
Manufacturers and distributors that support multiple warehouses
or a single warehouse need to accurately track their inventory.
Having real, or near real-time, information about stock quantities
and locations reduces stock-outs and improves customer
fulfillment. Understanding where inventory is stocked—and
how much is available—means you can quickly and reliably tell
customers about product availability.
Inventory is intrinsically tied to a company’s finances. Having
too much—or too little—inventory tips the delicate balance and
affects the all-important bottom line. Too much inventory reduces
a business’ cash flow. Too little can hurt order fulfillment and,
eventually, customer satisfaction.

Avoid Stock-outs
No one wants to tell a customer who is ready to buy that the
item is out of stock. To be on the safe side, manufacturers will
overstock to prevent stock-outs. Stock overages also crop up when
a product line is discontinued, leaving the manufacturer
with inventory that can’t be moved or must be sold at a greatly
reduced price. Without a reliable, accurate process for tracking
inventory in the warehouse or across multiple warehouses,
manufacturers can be left with too much stock on hand—which
can strike a blow to profitability.
Inventory management tools give the Purchasing Department
the information they need to order inventory when it reaches the
minimum level, thereby preventing both stock-outs that disappoint
customers as well as overstocking that affects revenue streams.
Manage Warranty Claims and Product Recalls
Serial numbers and lot numbers contain critical information
for manufacturers and distributors. These unique numbers are
assigned to individual items or groups of items, and they help
manufacturers and distributors track inventory as it progresses
through the supply chain.
By tracking the serial and lot numbers of the inventory they hold,
businesses can improve customer service and minimize risk. For
example, after a product recall, warehouses that track their stock
by serial or lot number can use the serial and lot numbers to find
and notify customers who have purchased the recalled products.
This information also comes in handy for questions about
warranties. When customers return products they claim are under
warranty, sellers can quickly check the products’ warranties. This
valuable information eliminates unnecessary warranty payments.
Save Time and Reduce Errors
The easiest method to collect serial and lot numbers is with
bar-code scanners. These handheld scanners read the bar
codes on boxes and pallets as they enter the warehouse and
transmit that information to the inventory management system.
Manufacturers and distributors scan the bar codes on boxes and
pallets to understand stock activity from the time it arrives at the
warehouse to when it ships. Bar-code information records the
item type and amount, plus it can detail where the inventory is
located in the warehouse. Having easy access to this information
makes shipping and packing easier, and it makes cycle counts
readily available.
Bar-code tracking also takes care of the tedious (and potentially
error-filled) manual entry of the numbers and letters assigned
to each stock item. And it saves more time during picking/
packing and counting inventory. Instead of employees spending
hours physically counting stock and manually inputting data
into spreadsheets, they can use bar-code tracking. Bar-code
tracking helps business owners keep critical inventory information
accurate and readily available.

Document Gaps or Weaknesses in Your Inventory Management

2008-12-14T20:33:00.000-08:00

Document Gaps or Weaknesses in Your Inventory Management

Savvy manufacturing and distribution companies realize that how

well they control inventory and track the flow of stock into and
through their warehouses can make or break their business.

Despite this realization, many manufacturers and distributors

face stock shortages and overages, shrinkage, obsolescence,
operation disruptions, purchasing problems, and difficulty picking
and packing shipments. The following examples illustrate what can
go wrong when a manufacturer does not have the right inventory
management tools to fit its needs.
A maker of emergency transport equipment receives an order from
a large customer. They commit to delivering the products because
they “think” they have enough raw materials at one location to
make the products; however, when going to production, they find
out they are short one component at that location. They will have
to transfer inventory from one location to another, delaying the
delivery to the customer. This unexpected delay is potentially
a deal breaker. In the meantime, they have too many of some
components (overage) and not enough of others (shortage) at
different locations. All these missteps could have been prevented
with proper inventory control.
Another example is from a distributor of children’s toys. When
the toy maker recognized that shipments of trains included lead,
it recalled certain serial and lot numbers. Unfortunately, the
distributor had incomplete records of which customers received
these recalled products and had to spend long hours tracking
down the information before contacting its customers about
the recall.
For many manufacturers, picking and shipping products takes
more time than warranted. The warehouse staff stores inventory
as meticulously as possible, but they don’t have a reliable,
rigorous process for tracking where the inventory is located.
Instead, they rely on memory and past experience. Sometimes
this loose methodology serves them well. Other times, it’s like a
scavenger hunt that wastes valuable time.
These types of operational breakdowns are not unusual among
manufacturers and distributors. Many small to mid-sized
companies are doing the best they can with spreadsheets or
simple inventory tracking applications. They have used this
process for years; it’s kind to the budget; and it’s familiar to the
staff. With a few minor adjustments, though, they can introduce
advanced inventory management features that will kick their
business into high gear.

Business Encyclopedia: Inventory Control

2008-12-03T19:41:00.000-08:00

Business Encyclopedia: Inventory Control

Inventory control is the implementation of management's inventory policies in a manner that assures that the goals of inventory management are met. Wise control of inventory is often a critical factor in the success of businesses in which inventories are significant. The goal of inventory control is to be sure that optimum levels of inventories are available, that there are minimal stockouts (i.e., running out of stock), and that inventory is maintained in a safe, secure place and is always readily accessible to the proper personnel.

Policies relate to what levels of inventories are to be maintained and which vendors will be supplying the inventory. How and when inventories will be replenished, how inventory records are created, managed, and analyzed, and what aspects of inventory management will be outsourced are also important components of proper inventory management.

In the Beginning

Prior to the eighteenth century, possessing inventory was considered a sign of wealth. Generally, the more inventory you had, the more prosperous you were. Inventory existed as stores of wheat, herds of cattle, and rooms full of pottery or other manufactured goods.

This phenomenon occurred for good reason. There were a number of concerns for business-people then. Communication was difficult and unreliable, easily interrupted, and often took long periods of time to complete. Stocks were difficult to obtain, and supply was uncertain, erratic, and subject to a wide variety of pitfalls. Quality was inconsistent. More often than not, receiving credit for a purchase was not an option and a person had to pay for merchandise before taking possession of it. The financial markets were not as complex or as willing to meet the needs of business as they are today. In addition, the pace of life was a lot slower. Because change occurred gradually, it was relatively easy to forecast market needs, trends, and desires. Businesses were able to maintain large quantities of goods without fear of sudden shifts in the market, and these inventories served as buffers in the supply line. Customers had a sense of security, knowing that there was a ready supply of merchandise in storage, and that comfort often helped to minimize hoarding.

In the eighteenth and early nineteenth centuries, markets were very specialized. There was often one supplier for each market in each area of business. Except for the basic necessities of life, there was much local specialization and distinct specialization by region. For example, although there might be more than one grist-mill in a community, there would often be only one general store. If customers were unhappy with their existing supplier, they had to suffer some inconvenience to find an alternate source because of the monopolies that existed. This made it easier for businesses to market their products and allowed them to maintain large stocks if they had the capital to do so.

Inventory management was a concern then, as it is now. Inventories had to be monitored for accuracy and quality. They had to be protected from the elements, from theft, from spoiling, and from changes in the local economy. Tax laws could have an enormous impact on inventory levels.

The Early Twenty-First Century

Today's business world shares few similarities with yesterday's. Communication is quick, easy, reliable, and available through a host of media. Supply is certain and regular in most environments of merchandising and manufacturing. Tax laws are generally consistent and reliable. However, market changes can be abrupt and difficult to forecast. Global competition exists everywhere for almost everything. Products are available from anywhere in the world, with delivery possible within in one day in many cases. Competition is driving the price of most products down to minimum profit levels. Inventories are managed for minimum stocking levels and maximum turnover. In the twenty-first century, high inventory is a sign of either mismanagement or a troubled economy. It is expensive and wasteful to hold and maintain high inventory levels. Proper utilization of space is also a critical component in today's business world, whether one is a retailer, wholesaler, or a manufacturer.

Modern retailers and manufacturers are equipped with an array of tools and support mechanisms to enable them to manage inventory. Technology is used in almost every area of inventory management to help control, monitor, and analyze inventory. Computers, especially, play an enormous role in modern inventory management.

Inventory Management Systems

Ongoing analyses of both inventory management and manufacturing processes have led to innovative management systems, such as just-in-time inventory or the economic-order quantity decision model.

Just-in-time inventory is a process developed by the Japanese based on a process invented by Henry Ford. David Wren (1999) descibes how the process started:

Henry Ford managed to cut his inventory by forty million dollars by changing how he obtained materials to produce automobiles. Through a process called vertical integration, Ford purchased mines and smelting operations to better control the source and supply of material to produce cars. In this way, he was able to reduce his standing inventory and increase turnover. In the 1950's, Taiichi Ohno, a mechanical engineer working for Toyota Motorcar Company, refined this process into what we know today as Just-in-Time inventory (p. 1).

Just-in-time inventory usually requires a dominant face—a major partner that has the resources to start the process and keep it organized and controlled—that organizes the flow and communication so that all the parties in the supply process know exactly how many parts are needed to complete a cycle and how much time is needed in between cycles. By having and sharing this information, companies are able to deliver just the right amount of product or inventory at a given time. This requires a close working relationship between all the parties involved and greatly minimizes the amount of standing or idle inventory.

In the economic-order quantity decision model, an analysis is made to determine the optimum quantity of product needed to minimize total manufacturing or production costs. In other words, through a complex analysis, management attempts to determine the minimum amount of product needed to do the job and still keep the cost of inventory as low as possible. This analysis considers the amount of time needed to generate an order; to process, manufacture, organize, and ship each product; to receive, inventory, store, and consume each product; and to process the paperwork upon receipt through the final payment process. This is a more independent process than just-in-time inventory; by allowing for a variety of suppliers to participate, it ensures competitiveness. Many companies today employ a mixture of both processes in order to maintain independence yet still have a close relationship with suppliers. Retailers, for example, work closely with suppliers to maintain the lowest possible inventories but still have enough products to satisfy customer demand. Often, companies have access to information about each other's inventory levels, allowing management to further analyze inventories to ensure that each is carrying the correct amount of stock to satisfy market needs and maintain minimum levels.

The Inventory Process

Inventory is generally ordered by computer, through a modem, directly from a supplier or manufacturer. The persons ordering the product have an inventory sales or usage history, which enables them to properly forecast short-term needs and also to know which products are not being sold or consumed. The computer helps management with control by tying in with the sales or manufacturing department. Whenever a sale is made or units of a product are consumed in the manufacturing process, the product is deleted from inventory and made part of a history file that can be reviewed manually or automatically, depending on how management wishes to organize that department. The supplier and the buyer often have a close working relationship; the buyer will keep the supplier informed about product changes and developments in the industry in order to maintain proper stock levels, and the supplier will often dedicate equipment and personnel to assist the buyer.

Even though small companies may work closely with larger suppliers, it is still very important that these small companies manage their inventory properly. Goods need to be stored in a suitable warehouse that meets the needs of the products; some products require refrigeration, for example, while others require a warm and dry environment. Space is usually a critical factor in this ever-shrinking world: It is important to have enough space to meet the needs of customers and keep the warehouse from becoming overcrowded. Inventory needs to be monitored to prevent theft and inaccuracies. Taking physical inventory—physically checking each item against a list of items on hand—is a routine that should be performed a number of times a year. At the very least, inventories should always be checked each year just before the end of the fiscal year and compared against " book" or quantities listed as on hand in the computer or manual ledger. Adjustments can then be made to correct any inaccuracies. Taking inventory more than once a year, and thus looking at stocks over shorter periods of time, often results in discovering accounting or processing errors. It also serves as a notice to employees that management is watching the inventory closely, often deterring pilferage.

Alarm systems and closed-circuit television are just a few of the ways inventories can be monitored. Making sure that everyone allowed into inventory management systems has and uses his or her own password is critical to effective inventory control. By having redundant systems, management can also compare the two to make sure there is a balance. If they go too far out of balance, management is alerted.

In the End

Maintaining a clean, orderly, properly lighted, and secure warehouse or stockroom is the basic key to maintaining inventory control. Adding computer technology to aid in management and administration creates a system that is current and competitive. Properly training employees in modern techniques and standards results in a system that will be effective and profitable.

(See also: Costs)

Bibliography

Burt, John. (1992). "Controlling Inventory in Process Inventories: Integration is the Key." Production & Inventory Management, 12 (February): 25,29.

Christensen, David L. (1997). "Inventory reviews: Inventory control may sound easy when you read it in textbooks, but auditors need more than theory to perform successful reviews." Internal Auditor. 54 (October): 50-53.

Lines, Anthony. (1992). "Taking Stock of Stock Control." Malaysian Accountant. (April): 27-28.

Malburg, Christopher R. (1994). Controller's and Treasurer's Desk Reference. New York: McGraw-Hill.

Thomas, Michael F., and Mackey, James T. (1994). "Activity-Based Cost Variances for Just-in-Times." Management Accounting IMA, 75 (April): 49-54.

Wren, Daniel A. (1999). "Just-in-Time Inventory." Knowledge Management Magazine, September: 1.

Accounting Dictionary: Inventory Control

2008-12-03T19:40:00.000-08:00

Accounting Dictionary:

Inventory Control

Monitoring the supplies, raw materials, work-in-process, and finished goods by various accounting and reporting methods. Some controls are the maintenance of detailed stock records showing receipts and issuances; inventory ledger showing quantities and dollars; and written policies regarding purchasing, receiving, inspection, and handling. Periodic inventory counts should occur to verify that the inventory amounts per books physically exist. A good system of inventory control assists in reducing inventory ordering and carrying costs.

Sales Forecasting

2008-12-03T18:55:00.000-08:00

Sales Forecasting covers a wide range of activities which include some of the following:
- Sales Objectives -
- Demand Management -
- Trend Forecasting -
- Sales Forecasting Planning -
- Sales Tracking -

Sales Forecasting is a key factor in any company's success, and should include Demand Forecasting, Trend Forecasting and sales and marketing plans. Accurate Sales Forecasting allows a company to effectively control inventory, production facilities, labor, inventory levels and logistics, and is the base of which most all other operations within the company function.

Sales Forecasting allows a company to better negotiate contracts for raw material, logistics and vendor supplied assemblies. An Accurate Sales Forecast provides for a smother running operation with less last minute rushes to fulfill customer requirements. Many company's that are successful in accurate Sales Forecasting share a common structure of these forecasting parameters:

1. An Independent group is responsible for the Sales Forecasting program.
2. Demand forecasting, trend forecasting and future sales and marketing plans are included in the final Sales Forecast.
3. Good communication thru out the company of the Sales Forecasting process and results.
4. A collaborative effort is required from all departments that are effective by the Sales Forecast.
5. Measure, Measure, Measure

An independent group should be set up to deal with the Sales Forecasting process and is essential for a truly collaborative effort. This group must be independent of all other departments and held accountable for the Sales Forecasting process and final accuracy. The focus of this group is to inform, collect and analyze, follow up and prepare an accurate Sales Forecasting. Because they are independent of all departments this group is able to work with all groups without those groups worrying about conflicting agendas or goals.

The Sales Forecasting groups goal is to produce two documents, the Sales Forecast and the Sales Forecast Plan. The Sales Forecast is what future sales would be without any restrictions such as material availability, production restraints etc. The Sales Forecast Plan uses the Sales Forecast and factors in all of the restraints that prohibit meeting the demand. These two documents advise management of the sales potential and how best to implement a plan to meet it.

The start of each Sales Forecasting period is the end of the previous Sales Forecasting results. The Sales Forecasting group must carefully measuring the results, and any reasons why the forecast plan was not met. By using this information in the next period will greatly increase the accuracy of all future Sales Forecasting efforts.