IAF 716 Wk 7.1 Inventory Mgt & forecasting

IAF 716 Wk 7.1 Inventory Mgt & forecasting -...

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Unformatted text preview: Inventory Management and Forecasting Dr. Rama Srivastava Office: C2010 e: rama.srivastava@senecac.on.ca Inventory refers to the stock of resources , that possess economic value , held by an organization at any point of time. These resource stocks can be manpower, machines, capital goods or materials at various stages. Most important for businesses like- Merchandising & Manufacturing. But also important for Services- Restaurants, offices, Express delivery firms, Computer software companies Checking Inventory Physical Check Perpetual Inventory system (using scanners & bar-coding)- Track items made- Track items sold- Perpetual inventory system updates inventory accounts after each purchase or sale so the figures are current. It is fast, no extra labour Periodic Inventory system- Inventory account is updated on a periodic basis, at the end of each accounting period (e.g., monthly, quarterly) Auditors insist for a PHYSICAL CHECK. Walmart Puts Tracking Code in some products. ( a sophisticated inventory management tool to track the clothes it sells) The reasons for keeping stock Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this "lead time." Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory. Types of Inventories Most manufacturing organizations usually divide their "goods for sale" inventory into (Types) Raw materials - materials and components scheduled for use in making a product. Work in process , WIP - materials and components that have begun their transformation to finished goods. Finished goods - goods ready for sale to customers. Goods for resale - returned goods that are salable. Other examples- Spare parts, small tools, consumable supplies, packaging, waste products Financial impact of good inventory Management Reduce cost of goods sold (lower inventory of raw material, in process inventory and finished goods) Reduce general and administrative expenses (inventory carrying cost is reduced) Increase customer service level (fewer stockouts) Dependency of inventory Inventories can be divided into two categories according to dependency on other items....
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IAF 716 Wk 7.1 Inventory Mgt & forecasting -...

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