Inventory Systems Summary
Inventory control systems are used so that companies can track materials or products. Before technology was so readily available, employees of companies had a harder time tracking inventory. Today one can go into a large retailer and ask an employee to check if an item is in stock and all the employee would have to do is check a little hand held device. The four types of inventory systems that Team A decided to research and discuss were: Advanced Tracking System (ATS), Perpetual Inventory System, Periodic Inventory System, and Just-In-Time Inventory System.
Advanced Tracking System (ATS)
Advanced Tracking System, or ATS, is a system that operates standalone or front-end that interfaces with almost any
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It is also well suited for the type of industries where there isn't much processing to do, so the inventory exists at only one level (for sale) rather than at three levels (raw materials, work in progress and for sale)” (Kulkarni, 2010).
Periodic Inventory System A periodic inventory control is a system with no continuous record of changes. Inventory is only tracked periodically instead of per the transaction. At the end of a specific period, usually an accounting period; quarterly or monthly, the ending inventory is found by a physical count. The cost of each item is computed and deducted from the sum of purchases and the beginning of the inventory to calculate cost of goods sold (Business Dictionary, 2010). The periodic inventory system keeps the inventory balance at the same value that it was at the beginning of the period. The inventory level is not updated after purchases, for accounting purposes; this system uses an account called purchases at the end of the period, rather than debiting inventory.
Just-In-Time (JIT) Inventory System
Just-In-Time inventory system known as JIT is one of inventory systems used in companies to deliver a finished product to customers quickly to reduce the overall ordering and inventory holding cost (Atkinson, 2005). The system proves to be most effective for companies that lose money for holding a product in its inventory for an extended period of time and
To be successful in today’s business environment, an organization must be able to perform certain fundamentals accurately and efficiently. One of these elements is having an effective and efficient Inventory System Management (ISM). ISM enables one to have the knowledge of where his or her inventory is at every step of the way. This allows one to better interact with consumer and make sales. Choosing the right ISM can lead and pave the ground work for future business success and profitability.
→ customized systems – engage in collaborative design efforts with clients and engineers; once designed, system built by manufacturing alliances then installed and supported by FII
Office Depot uses multiple inventory strategies to order products. 90% to 95% of goods are ordered through automatic replenishment, manual replenishment, pull replenishment, and global sourcing are also used depending on channel, volume, velocity and cost. (Office Depot, 2015). The accuracy of the inventory from both a DC and store perspective is critical to the organizations success. Heizer and Render (2014) state that record accuracy is a prerequisite to inventory management, production scheduling, and sales. Accuracy is maintained by either periodic or perpetual systems (p.479). In Office Depot, the stores are required to cycle-count technology items such as laptops, desktops computers, and tablets five days a week. Discrepancies are entered in the system and bounced off the local DC’s on-hand inventory discrepancies. Office Depot is a “blind receive” organization meaning the stores receive pallets of products and simply unwrap and put them away. The only way a store knows if a product is missing is through the cycle-count program. This system was put into place to speed up the receiving process and eliminate unnecessary steps once the product was received at the store level. Office Depot conducts a full physical inventory once a year through a third party and trues up the inventory shrink at this time.
I have taken it upon myself to test two inventory management systems and have found a system that will yield the least cost to Parts Emporium Inc. The two systems I have tested are the Continuous Inventory System and the Periodic Inventory System. Using data that I have gathered from the products DB032 and the EG151, I have compiled calculations and have concluded a continuous inventory system would be best for our corporation. Attached you will find said calculations; I would like to take this moment and present the continuous inventory system and recognize all of the relevant costs. The following is an explanation of each calculation under the continuous inventory system:
While operating a manufacturing company one can expect to encounter different types of methods of inventory costing. The four methods I will be discussing are, first in first out, last in first out, average cost methods, and specific identification method. I will also be discussing the pro and cons of utilizing each method.
(FIFO) policy, minimum stock reorder for each item and periodic stock evaluation. One of the
Anybody who knows something about business had heard the term Just-in-time (JIT) inventory. It involves producing only what is need, when it is needed. The principle of Just in time is to eliminate sources of manufacturing waste by getting the right quantity of raw materials and producing the right quantity of products in the right place at the right time.(1) In this way, manufactures receive parts and materials “just in time” to meet the day’s manufacturing quota with hardly any extra.(3)
A common way of decreasing the amount of inventory a business holds on a daily basis is implementing a just-in-time inventory process. A Just-In-Time inventory system means that the business gets the materials for a product, as they are demanded. “The electronic data
There are many other definitions such as “a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check” or “all functions related to the tracking and management of material”, and in business management, the management of ”a list of goods and materials held available in stock”. Inventory Management is necessary in order to provide continuous
The periodic inventory system is generally used for inexpensive goods, while perpetual inventory system is a computerized record of inventory used for expensive goods and by large store.
Nowadays, in an era that has advanced technology and a place in the world. Everything can be linked only at your fingertips in the times of rapidly developing with the sophisticated technology of today. Therefore, an inventory system is also not lagging behind in introducing a method of keeping an inventory data systematically and safely. The system plays a very important role in improving the competitiveness of a business. Usually, organizations today face too many challenges to achieve the cost, speed and reliability. Efficient inventory system really help in order to make sure the store’s performance and data record is always in good condition and secured from abusers. The system basically to ease the admin to manage the
The data in the reports produced by the inventory system can be used to support
Regular inventory control improves accuracy in products that are stored in the company. Employees will know what products are available and what product will need to be restocked. Inventory control can prevent a shortage and overstock of products. There is also a reduction in time spent on counting inventory because regular audit reports will have product information in real-time.
According to [5], Just-in-Time (JIT) inventory management enables an organization to gain competitive advantage by not having a large or excessive amount of inventory in warehouse. The organization only needs to order the parts when they are actually needed and new materials are produced only when old materials have finished. One advantage of adopting this strategy is that there will be no excess of inventory that needs to be stored and hence the inventory levels will be reduced as well as the cost of carrying and storing goods. One major disadvantage of this is that the organization will expose it in the risk of ordering problems for example a supplier is not able to provide parts on time. The result of this is that the organization cannot fulfill the order and contributes to customer dissatisfaction.