Qrb/501 Week 2
Inventory Systems Summary
Planning and Forecasting is a vital function of management especially as it is related to inventory management. Planning has four processes associated with it. They are establishing goals, formulating strategies, implementing the plan and evaluating its success. The planning process of inventory will assist the organization choose the correct inventory system resulting in reduced costs and increased efficiency. For any business, having large amounts of inventory could prove to be expensive. In most company’s the management team will forecast sales on a monthly basis in order to keep enough inventories to fill customer orders in a timely fashion but not have an overflow of stock. There are various types of inventory systems. For example, just in time (JIT) is a strategic inventory system implemented to improve the return on investment by reducing in-process inventory and the costs associated. JIT is driven by a series of signals that tell the production processes to make the next part. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization 's return on investment, quality, and efficiency. Furthermore, JIT is an attitude of continuous progress in which non-value-adding activities are identified and replaced. Additionally, there are other inventory systems such as FIFO and LIFO. FIFO means, first-in-first out. The primary purpose of FIFO inventory management practice in retail stores is to rotate stock so that it remains fresh, new, and in good condition for the consumer. This practice reduces returns and inventory write downs Conversely, LIFO means last in first out.In terms of how a company reports their financials, LIFO and FIFO have different advantages and disadvantages. For instance, with FIFO, as long as a company 's good generally appreciate in value (due to inflation,) income statements will show higher revenues, because the company is taking the least expensive quantities to cost of
Planning and Forecasting is a vital function of management especially as it is related to inventory management. Planning has four processes associated with it. They are establishing goals, formulating strategies, implementing the plan and evaluating its success. The planning process of inventory will assist the organization choose the correct inventory system resulting in reduced costs and increased efficiency. For any business, having large amounts of inventory could prove to be expensive. In most company’s the management team will forecast sales on a monthly basis in order to keep enough inventories to fill customer orders in a timely fashion but not have an overflow of stock. There are various types of inventory systems. For example, just in time (JIT) is a strategic inventory system implemented to improve the return on investment by reducing in-process inventory and the costs associated. JIT is driven by a series of signals that tell the production processes to make the next part. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization 's return on investment, quality, and efficiency. Furthermore, JIT is an attitude of continuous progress in which non-value-adding activities are identified and replaced. Additionally, there are other inventory systems such as FIFO and LIFO. FIFO means, first-in-first out. The primary purpose of FIFO inventory management practice in retail stores is to rotate stock so that it remains fresh, new, and in good condition for the consumer. This practice reduces returns and inventory write downs Conversely, LIFO means last in first out.In terms of how a company reports their financials, LIFO and FIFO have different advantages and disadvantages. For instance, with FIFO, as long as a company 's good generally appreciate in value (due to inflation,) income statements will show higher revenues, because the company is taking the least expensive quantities to cost of
References: Accounting for Management. (2009). Just In Time Manufacturing and Inventory Control Systems. Retrieved from http://www.accountingformanagement.com/just_in_time.htm Deierlein, B. (2000). JIT: Zero Tolerance for Late Deliveries. Fleet Equipment, 26(1), 36. Retrieved from MasterFILE Premier database Djuric, P. & Athalye, A., (2008). Radio Frequency Identification. Long Island Business News. Retrieved from (Need the link to the website) Inventory Management Review. (2005). McDonald 's, A Guide To The Benefits of JIT. Retrieved from http://www.inventorymanagementreview.org Pandey, K. Advantage And Disadvantages Of RFID Technology. Retrieved from http://www.buzzle.com Poudel, K. (2010). First In First Out (FIFO), Its Advantages And Disadvantage. Retrieved from http://www.accountlearning.blogspot.com Research with Impact. (2010). The impact of RFID supply chains. Retrieved from http://research.smeal.psu.edu/news/the-impact-of-rfid-on-supply-chains Roviere, J. (2002-2010). Understanding the difference between FIFO and LIFO. Helium, Inc. Retrieved from http://www.helium.com/items/665575-understanding-the-difference-between-fifo-and-lifo Shepherd, N., (1993). JIT less means more service to the customer. CMA Magazine, 66(10), 14. Retrieved October 23, 2010, from EBSCOhost database.