The Effect Of Inventory Management On A Manufacturing Company

As focusing on each of the five management assertions for the inventory account, we discovered that there are some risky areas that indicate the need for further attention during the audit. First of all, for existence or occurrence, all items in the inventory account must physically exist and be available for sale. Thus, the auditors should physically count finished goods, copper rod, and plastic inventories, and determine actual increase of inventories at year end. Also, they should select items from the inventory ledger and locate them and reconcile the quantity. Second, for completeness, the auditors should make sure that all existing inventories have been recorded completely , go around the warehouse and ensure all the inventories are recorded in the inventory ledger. Third, for valuation or allocation, the auditors should make sure that Laramie Wire manufacturing sticks with one valuation method(For inventory items, valuation is based on the lower of cost or market value, with several alternative methods for calculating cost), find out if there is any scrap inventory that needs to be recorded and written off ,and ask about obsolescence items. Fourth, for rights and obligations, the auditor should ask them if there is any consigned inventory at their warehouse. If there is, those inventories should not be recorded in the company's inventory ledger. Finally, for presentation and disclosure, the auditors should review the company's financial

According to Investopedia (2014) dictionary, inventory represents one of the most important assets that most business possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners. There are several reasons for manufacturers to hold inventories: one is to meet the demand of production and sales operation; the other is to consider the market price. Generally, we would receive a lower price if we buy large stock of goods than a small amount of goods. However, overstocked inventories not only occupy plentiful funds, but also increase the costs including warehouse cost, insurance fee,

In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss.

Inventory management can be defined by how it “involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs,” (David Alan Collier, 2017). Inventory management used to be about taking notes on cards. Employees would write down the items on a piece of paper. This process obviously took a lot of time and it was easy for shop keepers to miss items. The idea of electric inventory records first came up during the 1930’s but didn’t really take off until 1948 when the first electronic scanner was built.

Inventory control and management is usually the last thing that is on the mind of independent practice owners. However, failure to properly take care of inventory will result in operational problems and poor customer satisfaction.

Inventory control is the biggest challenge because of inappropriate inventory management system. There is a requirement of proper food service for better inventory control and also for identifying the important requirements. There is a need to develop the inventory methods for the products and with a standard inventory management company should try to minimize the wastes in terms of future. (Gartenstein, 2012)

A study of inventory management at SARK CABLES LTD is undertaken inorder to know the inventory performance and position of the company and to know the strength and weakness and to assess the profitability of the company. Inventories constitute most significant part of assets of large majority of the companies in India. Inventory a double edged sword is usually an asset of an organization, if not used properly it will become liability. It is therefore absolutely important to manage inventories efficiently and effectively in order to overcome unnecessary investment.

Inventory management has two very different, but effective methods: Vendor managed inventory, and consignment inventory. A company may choose to utilize either of these two methods to manage inventory. If a company is able to manage inventory, they will be better able to work the company's capital to the fullest extent. The following paper will identify the differences between the two as well as identify what type of company is best suited for each method.

As most organizations grow, the techniques of how the organization acquires their supplies and allocates its goods; should grow. Using some of the vastly different ways that an organization could implement to keep an eye on how they are doing, for example the amount of profit being made or the amount of product being produced and sold.. An organization has to make sure that they keep track of the amount of inventory to ensure the amount of orders they will have to complete. But it’s not just about the profit an organization makes. For instance not only do organizations use supply management but cities and states do as well during crises such as natural disasters.

• By convention, manufacturing inventory generally refers to items that contribute to or become a part of a firm’s product or output.

An inventory management system, inventory control, and inventory accuracy are paramount to a mass production manufacturing facility, especially when multiple part types and multiple product types are being produced. Raw component inventory can account for millions of dollars of an organizations’ cash, which is not contributing to profitability until converted to a product and sold. Therefore, it is essential for an organization to have an inventory management system and an inventory control process to account for the value associated with each part and ultimately to return value to the operation.

The term inventory embraces goods awaiting sale (the merchandise of a trading concern and the finished goods of a manufacturer), goods in the course of production (work in process), and goods to be consumed directly or indirectly in production (raw materials and supplies). This definition of inventories excludes long-term assets subject to depreciation accounting, or goods which, when put into use, will be so classified. The fact that a depreciable asset is retired from regular use and held for sale does not indicate that the item should be classified as part of the inventory. Raw materials and supplies purchased for production may be used or consumed for the construction of long-term assets or other purposes not related to production, but the fact that inventory items representing a small portion of the total may not be absorbed ultimately in the production process does not require separate classification. By trade practice, operating materials and supplies of certain types of entities such as oil producers are usually treated as inventory.”

Material management is one of the main components in the management of all types of companies. Material management plays an important role in supporting the company's performance, which relates to customer satisfaction, cost of production and financial performance. Ruauw (2011) stated that the raw materials required should be sufficient available so as to ensure smooth production. However, should the quantity of inventory it should not be too large so that capital tied up in inventory and costs. Meanwhile the inventory is not too big and not too small anyway because can slow down the production process. Failure materials inventory control default will cause a failure in obtaining profit. It is important for every company held

Introduction : Introduction Inventory management is the system devised and adopted for controlling investment in inventory. The aim of inventory management is to attain a healthy balance between the cost of having inventory and the cost of not having inventory. Bad management of inventory may lead to overstocking or stock outs.

Inventory management of the company is highly effective. Modern techniques of inventory management like Economic Order Quantity (EOQ), ABC analysis, maximum and minimum level of inventory, CPM / PERT etc. are followed in a routine way.Monthly requirements for working capital are about 10 cores of Taka, these are collected both from internal and external sources. Cash credit facilities are given by National Commercial Banks (NCBs) at a lower rate of interest. The forecast of working capital is done through estimating monthly productions, needs for raw materials, and other direct expenses. The major elements of working capital are inventory, debtors, cash balances and short term investments. Inventories are grouped into raw materials, work in process, finished goods, stores and spares etc.(Md. Sayaduzzaman, dec-2006, “Working Capital Management: A Study on British American Tobacco Bangladesh Company Ltd” The