Inventory Management Challenges
Too much inventory wastes money, too little loses sales. Balance is delicate and requires constant management.
Inventory Categories
Raw materials, work in progress (WIP), finished goods. Each requires different management approach.
ABC Analysis
Categorize items: A items (high value, low volume), B items (medium), C items (low value, high volume). Manage each category differently.
Demand Forecasting
Better forecasts reduce inventory needs. Use historical sales, seasonal trends, and pipeline forecasts.
Safety Stock Calculation
Keep extra inventory to cover unexpected demand or supply delays. Too much ties up cash, too little risks stockouts.
Reorder Points
Automatically reorder when inventory hits a certain level. Prevents stockouts and minimizes surplus.
FIFO Inventory Method
First In First Out ensures old inventory sells first. Prevents spoilage and obsolescence.
Inventory Turnover Ratio
How many times per year do you sell and replace inventory? Higher ratio means efficient inventory management.
Inventory Audits
Regular physical counts catch discrepancies. Compare counted inventory to system records. Investigate variances.