1、 Floyd D. Hedrick, Library of Congress, Washington, D.C. Editor: Jeannette Budding, Communications Manager National Association of Purchasing Management Inventory management Abstract Inventory management, or inventory control, is an attempt to balance inventory needs and requirements with the need t
2、o minimize costs resulting from obtaining and holding inventory. There are several schools of thought that view inventory and its function differently. These will be addressed later, but first we present a foundation to facilitate the readers understanding of inventory and its function Inventory man
3、agement is inventory management in short .As an important inventory of liquid assets, its existence is bound to take up a lot of liquidity. In general, inventories of industrial enterprises accounted for about 30% of the total assets of commercial circulation enterprises is even higher, the manageme
4、nt of utilization is directly related to the occupation of the level of corporate funds and asset efficiency. Therefore, a business to maintain high profitability, should be attached great importance to inventory management. Inventory management at different levels, the companys average occupancy le
5、vel of funding is a big difference. Through the implementation of proper inventory management methods to reduce the level of the average amount of funds used to improve the inventory turnover rate and total assets, will ultimately improve the economic efficiency of enterprises. Keyword： Inventory； M
6、anagement Chapter Inventory Definition Inventory is a quantity or store of goods that is held for some purpose or use (the term may also be used as a verb, meaning to take inventory or to count all goods held in inventory). Inventory may be kept in-house, meaning on the premises or nearby for immedi
7、ate use； or it may be held in a distant warehouse or distribution center for future use. With the exception of firms utilizing just-in-time methods, more often than not, the term inventory implies a stored quantity of goods that exceeds what is needed for the firm to function at the current time (e.
8、g., within the next few hours). Chapter II The meaning of Inventory Management 2.1 maintain the list Why would a firm hold more inventory than is currently necessary to ensure the firms operation? The following is a list of reasons for maintaining what would appear to be excess inventory. Table 1 Ja
9、nuary February March April May June Demand 50 50 0 100 200 200 Produce 100 100 100 100 100 100 Month-end inventory 50 100 200 200 100 0 Table 1 1-6 month a business demand, production, end balance situation 2.2 Meet demand In order for a retailer to stay in business, it must have the products that t
10、he customer wants on hand when the customer wants them. If not, the retailer will have to back-order the product. If the customer can get the good from some other source, he or she may choose to do so rather than electing to allow the original retailer to meet demand later (through back-order). Henc
11、e, in many instances, if a good is not in inventory, a sale is lost forever. 2.3 Keep operations running A manufacturer must have certain purchased items (raw materials, components, or subassemblies) in order to manufacture its product. Running out of only one item can prevent a manufacturer from co
12、mpleting the production of its finished goods. Inventory between successive dependent operations also serves to decouple the dependency of the operations. A machine or workcenter is often dependent upon the previous operation to provide it with parts to work on. If work ceases at a workcenter, then
13、all subsequent centers will shut down for lack of work. If a supply of work-in-process inventory is kept between each workcenter, then each machine can maintain its operations for a limited time, hopefully until operations resume the original center. 2.4 Lead time Lead time is the time that elapses
14、between the placing of an order (either a purchase order or a production order issued to the shop or the factory floor) and actually receiving the goods ordered. If a supplier (an external firm or an internal department or plant) cannot supply the required goods on demand, then the client firm must
15、keep an inventory of the needed goods. The longer the lead time, the larger the quantity of goods the firm must carry in inventory. A just-in-time (JIT) manufacturing firm, such as Nissan in Smyrna, Tennessee, can maintain extremely low levels of inventory. Nissan takes delivery on truck seats as ma
16、ny as 18 times per day. However, steel mills may have a lead time of up to three months. That means that a firm that uses steel produced at the mill must place orders at least three months in advance of their need. In order to keep their operations running in the meantime, an on-hand inventory of th
17、ree months steel requirements would be necessary. 2.5 Hedge Inventory can also be used as a hedge against price increases and inflation. Salesmen routinely call purchasing agents shortly before a price increase goes into effect. This gives the buyer a chance to purchase material, in excess of curren
18、t need, at a price that is lower than it would be if the buyer waited until after the price increase occurs. 2.6 Smoothing requirements Sometimes inventory is used to smooth demand requirements in a market where demand is somewhat erratic. Consider the demand forecast and production schedule outline
19、d in Table1 Notice how the use of inventory has allowed the firm to maintain a steady rate of output (thus avoiding the cost of hiring and training new personnel), while building up inventory in anticipation of an increase in demand. In fact, this is often called anticipation inventory. In essence, the use of inventory has allowed the firm to move demand requirements to earlier periods, thus smoothing the demand.
