Inventories

By definition, Inventory (or ‘stock’) refers to the goods and materials that a business holds for the ultimate purpose of resale (or repair). In manufacturing and repair services companies, inventories consist of raw materials (‘ingredients’), work-in-progress and finished goods. Trading companies – distributors, dealers, resellers and retailers - usually carry only finished goods.

From the financial value standpoint, your inventory management function has two key objectives:

1.      Manufacture and deliver as many goods as your salespeople can sell; and

2.      Do it at an acceptable cost – i.e. without compromising product functionality or quality (in other words, without reducing its functional or emotional value) which will negatively affect product sales

To achieve these objectives, you first must develop and implement a highly efficient core corporate process – Sell, manufacture and deliver your products to your customer.

After that, (actually, concurrently with that) you must select the optimal inventory management methodology (including the one for accurate costs allocation); inventory management sub-process; inventory management tools and a highly competent inventory management team.

These components will constitute your inventory management system that must be comprehensive, well-structured and well-documented.