Instead, prioritize the timing of storing and selling the components or products. If a business is dealing with perishable items or items whose demand is time-sensitive, it is advisable to not sit on the inventory for a long time. However, in the case of a larger business model, maintaining the stock requires an enterprise resource planning (ERP) software or a Software As A Service (SaaS) application. In the case of small businesses, the stock maintained can be tracked manually or using basic spreadsheet formulas. The prime goals of inventory management are restocking inventory, knowing the prices of purchase and production and selling prices. Merchandise – These are separate finished goods a company purchases from another company for future resale but get included in their inventory.Finished goods – These are the outcomes which are ready for sale by the company to the customers. Work in progress – It includes the process of conversion or use of raw materials into a finished product.These are either produced in-house or purchased from another company Raw materials – These are materials required for the production process in a company.The chief account of a company's inventory includes four different categories: In the case of large-sized inventories, companies rely on more sophisticated inventory management systems for real-time tracking of inventories. Before it gets accounted for in the company's balance sheet, a company's inventory should be physically measured or counted. The company's inventory counts into its current asset, as it needs to get cleared out within a particular timeframe. In the latter case, the inventory should either be sold in time or should be dismantled or sold at clearance prices. At the same time, a company's inventory is also its liability because it carries the risks of theft, damage and spoilage of the products on its shoulders. In the retail industry, a company's inventory, which generally includes raw materials and finished products, is its biggest asset. Significance of inventory – asset or liability? The main objective of inventory management is to ease off the storage and supply of inventories, thus avoiding the possibility of a shortage of any product. This process includes managing raw materials, components and the final products, including their storage and processing. The start-to-finish process of ordering, storage, usage and sales of a company is called inventory management. Here, we will be discussing the significance of inventory management and how it can be monitored to overcome the shortcomings coming its way. Due to supply chain and component shortage issues, all the companies are facing difficulties in maintaining inventories, which has hit the demand-and-supply process in all the companies. At a time, when the world is crippling by multiple supply chain issues due to a shortage of crucial components, the significance of inventory management has once again hit the pedestal.
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