Inventory Management BMI3C PDF

Summary

This document provides a summary of inventory management concepts and calculations for a secondary school Business Management class, BMI3C. It covers different types of inventory controls, calculations for inventory turnover, and emphasizes the importance of matching inventory levels to customer demand.

Full Transcript

Inventory Management BMI3C Success Criteria I will be successful when I can ………………………… list and explain the 4 types of inventory controls Calculate inventory turnover Discuss the importance of matching inventory levels with customer demand Inventory Management Controlling the goods within a bus...

Inventory Management BMI3C Success Criteria I will be successful when I can ………………………… list and explain the 4 types of inventory controls Calculate inventory turnover Discuss the importance of matching inventory levels with customer demand Inventory Management Controlling the goods within a business Integral part of the supply chain ◦Determines how much of a product a business needs and when they need it Controls: ◦Overstocks ◦Out-of-stocks ◦Shrinkage ◦Turnover Overstock When you have more stock than you can sell in a reasonable period of time Storing inventory ◦ Costs money ◦ Uses up space ◦ Ties up capital Old stock can quickly depreciate It’s often worth reducing the price on old stock in order to get rid of it Out-of-Stock Running out of inventory means you lose sales It also might make customers angry, costing you future sales Which is worse? Over-stock, or Out-of-Stock? Why? Shrinkage Inventory that is lost due to: ◦ Breakage ◦ Damage ◦ Theft Effective inventory management ◦ Prevents these things from happening ◦ Records when they do happen Use security, shipping receivers, inventory counts Turnover The number of times a business sells its inventory in one year Shows how fast inventory is moving Different industries have standard turnover rates Formula: Cost of inventory Sold in 12 months = Turnover Average Inventory Investment for 12 months Turnover Low turnover = overstock High turnover = frequent out-of-stock

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