Assignment: Procurement, Inventory & Warehouse Management. Q1: What are the objectives of inventory management?
To achieve satisfactory levels of customer
Smooth-out variations in operation performances
Avoid stock-out and shortage of material
Safeguard against price changes and inflation
Take advantage of quality discounts
Goals & Objectives of an Inventory-Control System
An inventory-control system is the mechanism within a company that is used for efficient management of the movement and storage of goods and the related flow of information. Product resellers have access to technology-driven software programs that help optimize inventory control, which is critical in achieving business success. Getting product to customers on time and as inexpensively as possible are the main goals of an inventory-control system.
Making sure that your customers have access to products when they need or want them is a key service issue in inventory control. Your system should include a well-outlined replenishment system, where critical inventory levels at a store result in swift shipments from your distribution center or directly from a vendor. Given the time and effort put into promoting products to attract customer interest, you want inventory on hand when they come to buy. Avoid Excess Inventory
Optimized inventory control actually balances a fine line between too much and too little. In fact, a main reason companies have gone to just-in-time systems and advanced software solutions is to avoid having excess inventory while trying to meet demand. Carrying too much inventory in distribution centers or retail stores is costly. It takes up space, employee time, utility costs and limits floor space for selling. Plus, perishable items or products with expiration dates must be thrown out if you can't sell them. Move Goods Efficiently
Efficiency in inventory means the ability to quickly receive and store products as they come in and retrieve and ship when they go out. Every extra second spent in these processes adds to the costs of inventory management. Plus, efficient distribution is a customer satisfaction issue for trade channel sellers and retailers. Retailers expect suppliers to meet prescribed delivery timetables, and customers expect customized orders and products to arrive on time. Maximize Profit Margins
Well-managed inventory control is often a key in meeting profit margin objectives. Gross profit margin is the difference between revenue earned from sales and the costs of goods sold. Take away fixed costs including buildings, utilities and labor and you get to operating margin. Investing as little as possible in inventory control while meeting the other objectives is critical in earning profit and growing your business. How to Design an Inventory Control System
The purpose of an inventory control system is twofold. The primary function is to ensure that a small business meets customer needs -- that products are available when customers want them. But proper inventory control can also help maximize profits for a small-business owner, while reducing potential theft and loss. Large firms, such as Walmart, maximize profits by using supply-chain or just-in-time inventory-control methods. Small businesses can use a mix of technology, proper accounting and effective operations to ensure inventory is always available for customers while avoiding costly overstock problems.
Determine your customer needs -- that is, how much product are your customers buying, and how much do you expect them to buy in the near and distant future? Use a method called "forecasting" to determine what your customers are likely to buy in the next day, week, month and year, based on what they bought in the previous 12 months. Since forecasts are never 100 percent accurate, plan to have an amount of "safety" inventory on hand to cover potential shortages. You can also plan to include a safety lead time that will let you...
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