Inventory Management BMI3C PDF

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