Inventory Management
INVENTORY MANAGEMENT * Types of Inventory * Inventory Costs * Independent – Demand Items and Inventory Costs * Inventory Monitoring * Production Management Systems * Other Issues in Inventory Management
What is Inventory? * An investment in the sense that it requires that the firm tie up its money, thereby forgoing certain other earnings opportunities. * The higher a firm’s average inventories, the larger the dollar investment and cost required and vice versa.
Meaning and Component of Inventory Management * It involves the control of the assets that are produced to be solid in the normal course of the firm’s operations. * Primarily involve questions of how much inventory should be ordered and when the order should be placed. * Accumulated either by purchase or production. * In a particularly period, Inventory costs are assigned too expense for the portion sold, and to assets for the portion not solid. * Generally, classified according to the nature of demand as dependent–demand items or independent–demand items.
Purpose of Inventory Management * To uncouple the operations of the firm. * To make each function of the business independent of each other function. * Delays or shutdowns in one area no longer affect the production and sale of the final product.
Two aspects of Inventory require some elaboration. * Types of inventory * Appropriate level of inventory
TYPES OF INVENTORY
The general categories of inventories include: * Raw Materials Inventory * Work – in – Process Inventory * Finished Goods Inventory
Raw Materials Inventory * These are items purchased and used as primary inputs in the production of finished products. * It gives the firm flexibility in purchasing; buying does not have to be geared directly to production. * Consists of basic materials purchased from other firms to be used in the
What is Inventory? * An investment in the sense that it requires that the firm tie up its money, thereby forgoing certain other earnings opportunities. * The higher a firm’s average inventories, the larger the dollar investment and cost required and vice versa.
Meaning and Component of Inventory Management * It involves the control of the assets that are produced to be solid in the normal course of the firm’s operations. * Primarily involve questions of how much inventory should be ordered and when the order should be placed. * Accumulated either by purchase or production. * In a particularly period, Inventory costs are assigned too expense for the portion sold, and to assets for the portion not solid. * Generally, classified according to the nature of demand as dependent–demand items or independent–demand items.
Purpose of Inventory Management * To uncouple the operations of the firm. * To make each function of the business independent of each other function. * Delays or shutdowns in one area no longer affect the production and sale of the final product.
Two aspects of Inventory require some elaboration. * Types of inventory * Appropriate level of inventory
TYPES OF INVENTORY
The general categories of inventories include: * Raw Materials Inventory * Work – in – Process Inventory * Finished Goods Inventory
Raw Materials Inventory * These are items purchased and used as primary inputs in the production of finished products. * It gives the firm flexibility in purchasing; buying does not have to be geared directly to production. * Consists of basic materials purchased from other firms to be used in the