Published By: SME
Inventory management is a varied collection of many disciplines. In its simplest forms, the inventory management responsibilities may include the establishment of policies and procedures as well as the maintenance of manually posted card records. Inventory is one of the most important financial assets present in manufacturing companies. Stocks of raw materials, work-in-process inventory, and finished goods constitute the focus of control for the time they are held before being converted into sales dollars. Inventory is replenished according to some set of rules or policies, either formal or informal. The objective of inventory rules or policies must be to balance the cost of carrying inventory with the service level required. The principal measure related to this activity is called inventory turns. The economic order quantity (EOQ) has been the most common statistical calculation used in inventory control for several decades. EOQ attempts to balance inventory carrying costs with ordering costs. A popular technique that lends itself to good management of the inventory asset dollar is classical ABC analysis, which results in the coding of items by categories called A, B, and C. This technique requires sorting items by the amount of dollar demand (at cost) recorded over some past period. Supply chain management extends the linkage from the company upward to the customers’ customers and downward to the suppliers’ suppliers. It coordinates and tunes the chain of business entities to accept and fulfill customers’ orders.
By Philip D Rufe, CMfgE
By Ahmad K Elshennawy, Gamal S Weheba, PhD