![]() Types of Inventory by FunctionĬonsumables required for processing. 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. 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.īesides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products. ![]() 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 at plant, FG Stores, distribution centers etc. It also holds inventory of semi-finished goods at various stages in the plant with various departments. A manufacturing organization holds inventory of raw materials and consumables required for production. Inventory of materials occurs at various stages and departments of an organization. ![]() All inventoried resources have economic value and can be considered as assets of the organization.Inventory is held to facilitate future consumption, sale or further processing/value addition.Inventory can be in complete state or incomplete state.All organizations engaged in production or sale of products hold inventory in one form or other.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.įrom the above definition the following points stand out with reference to inventory: 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.Īny 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. 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 management requires constant and careful evaluation of external and internal factors and control through planning and review. 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 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. Therefore these functions are extremely important to marketing managers as well as finance controllers. Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function. Continuously manage your inventory to get a return on your investment.Įxplore selling on Amazon around the worldĪmazon operates stores worldwide, allowing you to grow your business internationally regardless of where you’re located.In any business or organization, all functions are interlinked and connected to each other and are often overlapping. You want to make sure you have enough inventory to cover demand, but not so much you become overstocked. Good inventory management is about balance. Respond to problems as they arise to help minimize costs, maintain a good sell-through rate, and improve inventory performance overall. Keep on your toes and stay on the lookout for delays in listing, selling, or delivering products. Adopt inventory best practices and apply them consistently. In particular, focus on areas where you can cut back on costs, such as storage and order fulfillment. Cornerstones of healthy inventory management include shipping products as quickly as possible, maintaining enough stock to meet demand (even during peak seasons), and insulating your supply chain against hiccups due to weather and other unpredictable factors. The more efficiently you manage your inventory, the more profitable your business can become. Simple steps have the power to transform lackluster sales into a booming business.
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