| The term inventory management really describes the | | | | average time frame it takes a particular product to |
| effective method of controlling objects and activities | | | | shift, you should have a fairly good idea of whether a |
| and ensuring that they get to the right place at the right | | | | product should be kept or destroyed. |
| time all within a cost parameter. | | | | Ultimately bad inventory management represents |
| Effective Inventory management covers amongst | | | | money that is being lost to a business. Bad inventory |
| other things, stock control. It is important to order | | | | that is stored for too long not only ties up money in |
| enough stock of a product that sells well - but it is also | | | | insurance but also ties up money because of the cost |
| very easy to over order good selling items. You are | | | | of the product itself. |
| then faced with the problem of additional overheads in | | | | There is a fine balance to be learned and put into |
| the form of insurance, stock control and storage. It is | | | | place between not ordering to much stock but also not |
| also just as easy to over order products that just don't | | | | reducing service. Ultimately customers don't like to be |
| sell, or just sell very slowly. Products such as these | | | | kept waiting whilst a good has to be reordered. |
| can sometimes be shifted with concerted sales and | | | | Inventory should also be spread over a large range of |
| marketing effort but often these products end up | | | | stock, but the most popular items should have plenty |
| being sold at a loss or sometimes even disposed of as | | | | of stock against them. |
| this option works out cheaper than storing it. | | | | Ultimately buying enough stock in advance can also |
| One of the methods of working out better inventory | | | | reduce costs as volume sales can often be negotiated |
| management is to work out the actual storage cost of | | | | downwards in price. |
| a product over its lifetime. Compare this cost to the | | | | Turnover rates ultimately vary though depending on |
| total cost of storing this product for a year - this should | | | | the type of business and how the inventory to sales |
| focus the mind on how many items should be bought | | | | ratio is worked out. |
| in the first place and how long it can reasonably be | | | | Sourcing a supplier who can not only produce a quality |
| expected to store it. To determine whether goods | | | | product but can turn around a large order for you at |
| should be destroyed means examining the monthly | | | | very short notice is the goal of every inventory |
| sales to inventory ratio. From this - based on the | | | | manager. |