As a result, computer systems to control inventory was introduced. These systems include: point-of-sale terminals: this stores information of each item that is used or sold. Off-line point-of-sale terminals: this transmits sales information directly to the supplier's computer system. The supplier then uses this information to ship necessary items automatically to the retailers The last method for inventory control is carried out by an external agency. As sited by Floyd Hedrick, it involves removal of unwanted products from stock which can be returned to the manufacture. This however has to occur after an agreement and frequent scheduled visit by the manufacturer's representative to the large retailer in order to record stock count and writes the reorder (Hedrick, 2010). The main aim of the above systems was to provide a more efficient system that will be able to identify the cost of each inventory (Hedrick, 2010).
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Electronic Supplier product catalogs: allows the use of electronic devices like cd/DVDs to record inventory data. These systems ensure accurate inventory records through the use of electronic and for wireless technologies that provide error free data. These systems are very efficient in that they: keep only up-to-date records of items essay and remove all sold items from the system It is possible to review stock reports periodically to check the products status and identify low demand products. Periodically check record to ensure the level of accuracy of the system and to check against physical stock quantities. Methods of Inventory control There are several method of inventory control which include (Hedrick, 2010 visual control: this is used to determine if additional inventory is required through visual examination. This method is mostly used in small businesses and may not require any records. Tickler control: this is the physical counting of small portion of the inventory on a regular basis. Click Sheet Control: this involves the recording of items as they are used on a sheet of paper and used for reorder purposes Stub control: mostly used by retailers and allow managers have certain control of prices. Today, the growth of businesses has provided a necessity to develop a more complicated and highly analytical form of inventory management. The above inventory management systems became difficult and inefficient.
Other important applications of summary inventory management systems are in manufacturing, shipping, and receiving. As stated by Arsham, there are three main factors in inventory control decision making process (Arsham, 2006). The cost of holding the stock: this is the cost associated carrying inventory over time and involves having items in storage. This includes interest, taxes, insurance, spoilage, breakage and warehousing cost like light, rent. The cost of placing an order: this is the cost of ordering and receiving inventory which include shipping cost, preparing invoices, determine how much is needed and moving goods. The cost of shortage: this cost involves what is lost if the stock is insufficient to meet all demand. This normally happens when demand exceeds the supply of inventory on hand. Merchantos argued that "the easiest way to manage inventory is with a computer inventory management s ystem" (Merchant, 2010). The systems below help to reduce the time spent in managing inventory: point-of-sale terminals: this system updates stock level automatically and provide a more error free sales transaction Barcodes and barcode readers which proved a way to effectively input inventory and "stock takes" faster into.
Capitalisation and system optimisation goes hand-in-hand. For an effective system, the management is therefore required to possess the "know-how measures, policy development, and reporting required to take the business to level 5 (System Optimization) and not just the software alone(Slater, 2009). Inventory control according to business link in an article, an organisation has an efficient inventory control only when they have the "right amount of stock in the right place and at the right time" (Business link, 2006). Inefficient Inventory control can leads slower sales and disappointed customers. Inventory control basically deals with reducing the total cost supermarket of inventory. Inventory control is very relevant for businesses, especially businesses dealing with a large variety of products. As site by hossein Arsham, Inventory management or control can be used to streamline warehouse processes in order to track orders and shipment (Arsham, 2006).
Here, inventory is expensed when purchased. This approach tends to increase total expenditure as items are purchased in 'economic quantities' and discourage review and development due to lack of control. Capitalisation: This approach entails the use of software solution to control inventory and provide good availability. Unfortunately, most businesses use their software mostly for counting and accounting. Software Optimisation: at this level, inventory is capitalised and the levels of stock are optimised based on a risk/return algorithm. Software solution can automatically adjust stock levels based on the history of demand and supply but these level are not trusted by most business because they believe the supply and demand may not represent actual usage. System Optimisation: At this level, all factors influencing inventory investment are reviewed periodically. The main purpose of inventory management is to minimise overall cash investment without increasing risk. This according to Philip Slater is the world's best practice in inventory management (Slater, 2009).
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According to Edwars Silver (Silver, 2008 inventory book management involves knowing the following questions: The size of replenishment order that will be required. The time this order will be placed. And finally how frequent inventory records should be analysed. Best practice in inventory management, in an effort to maximise their return on investment (ROI) and avoid excess inventory, many businesses invest a fortune in inventory management systems. In a report by Philip Slater (Slater, 2009 he stated that most of these systems fails to render expected services and rather result in excess inventory.
This is because software can only optimise the values it has and not what it could be and as a result, it neglects some important external influences english like changes in the management process. He stated that "World's best practice inventory management demands that the inventory management system is optimised not just the inventory". Inventory management therefore goes beyond software system and as stated by Philip Slater (Slater, 2009) inventory management involves combination of 'know-how, process and reporting' that collectively provide a means of maximizing availability while minimizing cash investment. In the report, he stated five level of world's best practice inventory management that when fully implemented, can enable businesses to reduce their inventory investment or cost. These levels are: Ad Hoc: this level require less control as inventory is expensed when purchased on an 'as needed' basis and used immediately. Storage: this level involves the storage of items for use and not strictly controlled.
According to Inman, Inventory refers to the items that are stored in warehouses or distribution centres in excess of what the store needs (Inman, 2010). The following are the reason why business keeps more inventory than they currently need (Inventory management, 2010). Meet Demand: this ensures that customers get the product or item that they want when they want. Keep Operations running: When for example manufacturers run out of stock to manufacture certain product, the whole production process or operations will be halted and thus manufacture of the finished product. In order to prevent this, most manufacturers purchase excess inventory.
Lead time: When a shop or a factory places an order for a particular item, the period of time between the order placements and when the order is received is known as lead time. Business therefore should have hands on inventory during the lead time in order to keep its operations running. Hedge: This involves keeping inventory against inflation in price of products. This allows the buyer to buy at a lower price than when the price increases. Quantity discount: quantity discount refers to reduction in price of an item when purchasing in bulk. This always influences most businesses to buy more than it needs which might lead to excess inventory. Smoothing Requirements: businesses sometimes acquire access inventory for products that have unpredictable demands in order to meet demand.
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Materials requirement planning (mrp mrp is simply a management system in which sales type are converted into loads by sub-unit and time. In this system, orders are "scheduled more closely thereby reducing inventory and making delivery times shorter and more predictable" (Hedrick, 2003). Mpr review order quantities periodically and as such allow ordering only what is currently needed. This helps keep inventory levels very low. Just-in-Time (jit jit approach ensures that a business should only keep inventory in the right quantity at the right time with the right quality (david, 2004).Most organizations adapt to this system to integrate inventory management for a more competitive advantage (Kaynak, 2005). It eliminates inventories rather than optimize them. Why keep Inventory, inventory refers to a detailed list of all the items in store or warehouse.
To provide improved customer satisfaction, to increase sales and profits realised from effective inventory management which therefore improve overall business productivity. Benefits of inventory management, in a report by Stylus, he highlighted the following as some of the benefits of inventory management (Stylus, 2008 Inventory management systems can help reduce the time to respond to changing market demand of products and can help control forklift excess stock. Ims provide a means for business to effectively manage or control their inventory. Ims helps businesses to constantly analyse their business processes such as sales and purchasing in order to make efficient inventory decisions. Stylus systems also reported that inventory management systems ims can provide total insight on stock transactions. Stylus systems also stated that ims can provide hands on knowledge on inventory which might lead to increased sales and efficient customer services. Development in inventory management, presently, there are two major approaches to inventory management.
each firm as well as the whole supply chain (Mentzer, dewitt, keebler, min, nix, Smith and Zacharia, 2001). Inventory management involves "system and processes of maintaining the appropriate level of stock in a warehouse" (Barcodes, 2010). These activities includes identifying necessary inventory requirements, and creating replenishment processes, tracking and monitoring the usage of items/stock, reconciling inventory balances as well as reporting inventory status.(Barcodes, 2010). It is basically the process of efficiently controlling the amount of stock in order to avoid excess inventory. Reliable inventory management will therefore minimise the cost associated with inventory (Barcodes, 2010). Inventory management involves a wide scope of processes ranging from inventory forecasting, replenishment, demand forecasting as well as quality management (wikipedia, 2009). Objectives and benefits of inventory management. According to Stylus Systems, The 3 main objectives in inventory management are (Stylus, 2008 to reduce inventory investment or cost which is one of the most important goals of any business. Balancing the cost of keeping inventory with the benefits gained from it is vital to the successes of an organisation.
Based on knowledge gained from the literature review, a proposed solution was presented to resolve the issues with the company's current system of inventory management. Inventory entry management, an inventory is basically a detailed list of all the items in stock. Inventory consists of raw materials, work-in-process and finished goods. In today's highly competitive market, businesses need to maintain an appropriate level of stock to meet the customer demands at any time. Inventory management is part of the supply chain management. Over the past years, the concept of supply chain management scm has been given a considerable attention. This is an approach to view the supply chain as a whole rather than as a set of separate processes (Weele, 2002).
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Print, reference this, published: 23rd March, 2015 5th may, 2017. Introduction, this project is on the design and development of an inventory management system which is part of the supply-chain Management. This system will attempt to solve issues with current inventory management systems in order to give businesses a better competitive edge. The literature review will provide a detailed overview about Inventory management; why business need to manage their inventory, benefits and objectives of inventory management and best practice in inventory management. It will go on to further discuss what inventory management system is all about, a detailed explanation of the benefits, future of inventory management systems and talk about success of inventory management system. In the review, various factors for implementing efficient inventory management systems were listed in order to understand fully how to design and develop a software solution for a company that would provide the best services and effective solution to their current problems. The report also discussed some challenges faced by most inventory management system in providing businesses with an effective solution. As part of the literature review, a case study was carried out on Sahad the Stores, a distribution company in Nigeria and a detailed investigation into their existing system was accomplished highlighting the problems of the current system.