Why Do Exports Matter?
Countries all over the world try to promote exports. Almost every country offers financial incentives to exporters. Countries like China have Special Economic Zones wherein exporters are not charged any tax. Similarly, other countries have special banks and insurance agencies promoted by the government to facilitate export growth. This brings us to the importance of […]
Focusing on Forecasting
Companies all around the world are focused on quarterly as well as annual results. As soon as these results are announced, the financial markets give some sort of reaction. If the results are good, the stock prices rise. If not, stock prices tend to fall. However, in either case, the stock price is linked to […]
Investing in Sin Industries: Are They Worth the Hassle ?
Some professions in the world are not considered to be as acceptable as others. This notion of acceptability is widely influenced by the cultural norms in the society where one is conducting business. However, in the modern world, being associated with sin does not seem to be much of a deterrent to investors. Cities like […]
Identify the Vital Inputs in Six Sigma Project
The list derived from the detailed process map needs to be shortlisted. This can be done in multiple ways. The different tools that are commonly used in six sigma projects to meet the purpose have been written down. They are as follows: Cause Effect Matrix: The cause and effect matrix takes the list of inputs […]
Europe’s Controversial Common Agricultural Policy
European nations have been following a controversial policy called the common agricultural policy. Under this policy, European governments have been giving subsidies to their own farmers. These subsidies artificially lower the price of some crops leading to market distortions. This is the reason why Europe’s common agricultural policy has come under severe criticism many times. […]
In any business or organization, all functions are interlinked and connected to each other and are often overlapping. Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function. Therefore these functions are extremely important to marketing managers as well as finance controllers.
Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures.
Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review. Most of the organizations have a separate department or job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments.
Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.
Any organization which is into production, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale.
While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc.
From the above definition the following points stand out with reference to inventory:
Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds inventory of raw materials and consumables required for production. It also holds inventory of semi-finished goods at various stages in the plant with various departments.
Finished goods inventory is held at plant, FG Stores, distribution centers etc. Further both raw materials and finished goods those that are in transit at various locations also form a part of inventory depending upon who owns the inventory at the particular juncture.
Finished goods inventory is held by the organization at various stocking points or with dealers and stockiest until it reaches the market and end customers.
Besides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products. Defective products, defective parts and scrap also forms a part of inventory as long as these items are inventoried in the books of the company and have economic value.
| INPUT | PROCESS | OUTPUT |
| Raw Materials | Work In Process | Finished Goods |
| Consumables required for processing. Eg : Fuel, Stationary, Bolts & Nuts etc. required in manufacturing | Semi Finished Production in various stages, lying with various departments like Production, WIP Stores, QC, Final Assembly, Paint Shop, Packing, Outbound Store etc. | Finished Goods at Distribution Centers through out Supply Chain |
| Maintenance Items/Consumables | Production Waste and Scrap | Finished Goods in transit |
| Packing Materials | Rejections and Defectives | Finished Goods with Stockiest and Dealers |
| Local purchased Items required for production | Spare Parts Stocks & Bought Out items | |
| Defectives, Rejects and Sales Returns | ||
| Repaired Stock and Parts | ||
| Sales Promotion & Sample Stocks |
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