Mumbai University > Computer Engineering > Sem 5 > Structured and Object Oriented Analysis & Design

Marks: 10M

Year: May 2015

Inventory Control systems:

1. Inventory:

   • The quantity of product that a merchandising or manufacturing firm has available to sell at any given time is called its inventory.
   • An inventory system monitors the quantity of each product available for sale and helps ensure the proper stock levels are maintained.

2. Inventory Control System:

   • An inventory control system is a process for managing and locating objects or materials. In common usage, the term may also refer to just the software components.
   • Modern inventory control systems often rely upon barcodes and radio- frequency identification (RFID) tags to provide automatic identification of inventory objects.
   • Inventory objects could include any kind of physical asset: merchandise, consumables, fixed assets, circulating tools, library books, or capital equipment.
   • To record an inventory transaction, the system uses a barcode scanner or RFID reader to automatically identify the inventory object, and then collects additional information from the operators via fixed terminals (workstations), or mobile computers.

3. Applications:

   • Automate an order fulfillment process. System contains a list of orders to be received, and then prompts workers to pick the necessary items, and provides them with packaging and shipping.
   • Manages in and outwards material of hardware.
   • Real-time may uses wired, mobile terminals to record inventory transactions at the moment they occur.
   • A wired LAN transmits the transaction information to a mobile network.
   • Physical Inventory counting and Cycle Counting are features of many inventory control systems which can enhance the organization.
   • Help managers maintain reasonable inventory levels, inventory system generates a variety of useful information to management
   • Management can find out which products are moving out fast or slowest from the inventory, the rate of inventory turnover, profitability per square foot of shelf space, facts about any backorders, the average time to take to fill backorders and so on.

4. Why Inventory Control?

   • Control of inventory, is needed to ensure that the business has: – The right goods on hand – To avoid stock-outs – To prevent shrinkage (spoilage/theft) – To provide proper accounting
   • Many businesses have too much of their limited resource, capital, tied up in their major asset, inventory. They may have their capital tied up in the wrong kind of inventory
   • Inventory may be old, worn out, shopworn, obsolete, or the wrong sizes or colors, or there may be an imbalance among different product lines that reduces the customer appeal of the total operation.

5. Inventory Control

   • Inventory control involves the procurement, care and disposition of materials. There are three kinds of inventory that are of concern to managers: Raw materials, In-process or semi-finished goods, Finished goods.
   • If a manager effectively controls these three types of inventory, capital can be released that may be tied up in unnecessary inventory, production control can be improved and can protect against obsolescence, deterioration and/or theft.

6. Advantages of inventory control:

   • Helps balance the stock as to value, size, color, style, and price line in proportion to demand or sales trends.
   • Help plan the winners as well as move slow sellers.
   • Helps secure the best rate of stock turnover for each item.
   • Helps reduce expenses and markdowns.
   • Helps maintain a business reputation for always having new, fresh merchandise in wanted sizes and colors.

7. Inventory Control Records

   Inventory Control Records

   • Essential to making buy-and-sell decisions.
   • Some companies control their stock by taking physical inventories at regular intervals, monthly or quarterly.
   • Others use a dollar inventory record that gives a rough idea of what the inventory may be from day to day in terms of dollars.
   • If your stock is made up of thousands of items, as it is for a convenience type store, dollar control may be more practical than physical control. However, even with this method, an inventory count must be taken periodically to verify the levels of inventory by item.

   Perpetual inventory control records

   • Most practical for big-ticket items.
   • Quite suitable to hand count the starting inventory, maintain a card for each item or group of items, and reduce the item count each time a unit is sold or transferred out of inventory.
   • Periodic physical counts are taken to verify the accuracy of the inventory card.

   Out-of-stock sheets

   • Also known as Want Sheets, notify the buyer that it is time to reorder an item.
   • Experience with the rate of turnover of an item will help indicate the level of inventory at which the unit should be reordered to make sure that the new merchandise arrives before the stock is totally exhausted.

   Open-to-buy records

   • Prevent ordering more than is needed to meet demand or to stay within a budget.
   • Adjust your order rate to the sales rate.
   • Provide a running account of the dollar amount that may be bought without departing significantly from the pre- established inventory levels.
   • An open-to-buy record is related to the inventory budget. It is the difference between what has been budgeted and what has been spent.
   • Each time a sale is made, open-to-buy is increased (inventory is reduced).
   • Each time merchandise is purchased; open-to-buy is reduced (inventory is increased).
   • The net effect is to help maintain a balance among product lies within the business, and to keep the business from getting overloaded in one particular area.

   Purchase order files

   • Keep track of what has been ordered and the status or expected receipt date of materials.
   • It is convenient to maintain these files by using a copy of each purchase order that is written.
   • Notations can be added or merchandise needs updated directly on the copy of the purchase order with respect to changes in price or delivery dates.

   Supplier files

   • Valuable references on suppliers and can be very helpful in negotiating price, delivery and terms.
   • Extra copies of purchase orders can be used to create these files, organized alphabetically by supplier, and can provide a fast way to determine how much business is done with each vendor.
   • Purchase order copies also serve to document ordering habits and procedures.
   • Used to help reveal and/or resolve future potential problems.

   Returned goods files

   • Provide a continuous record of merchandise that has been returned to suppliers.
   • Indicate amounts, dates and reasons for the returns.
   • Information is useful in controlling debits, credits and quality Issues.

   Price books

   • Maintained in alphabetical order according to supplier, provide a record of purchase prices, selling prices, markdowns, and markups.
   • Important to keep record completely up to date in order to be able to access the latest price and profit information on materials purchased for resale.

8. Benefits of Inventory control system

   • Using information technology to automate manual activities, as when point-of-sale scanning, rather than manual stock counting, is used for measuring sales.
   • Eliminating redundancies, such as order entry by both supplier and retailer.
   • Reassigning tasks for maximum system wide efficiency, such as moving the task of ticketing merchandise to the supplier, which makes it “floor ready.”
   • Reducing or eliminating control steps in the process by capturing data more accurately and developing greater trust between partners.