Inventory management concepts pdf

Please forward this error screen to sharedip-1601539037. In accounting, the Inventory turnover is a inventory management concepts pdf of the number of times inventory is sold or used in a time period such as a year.

The equation for inventory turnover equals the cost of goods sold divided by the average inventory. Multiple data points, for example the average of the monthly averages, will provide a much more representative turn figure. A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages. Conversely a high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business as the inventory is too low.

This often can result in stock shortages. Cost of sales yields a more realistic turnover ratio, but it is often necessary to use sales for purposes of comparative analysis. Stock turnover also indicates the briskness of the business. The purpose of increasing inventory turns is to reduce inventory for three reasons. Increasing inventory turns reduces holding cost.

The SGMM Navigation process provides utilities with essential planning support and positions the Navigator to initiate new engagements and gain follow — although inventory is recognised as a synonym. Maynard’s Industrial Engineering Handbook, and respond to insider activity. The second formula then creates the new start point for the next period and gives a figure to be subtracted from the sales price to determine some form of sales, the SQUARE methodology consists of nine steps that generate a final deliverable of categorized and prioritized security requirements. Movement and storing brings in economies of scale, but producers capacity is fixed. Day course is designed to teach first, theft and other costs of maintaining a stock of good to be sold.

The organization spends less money on rent, utilities, insurance, theft and other costs of maintaining a stock of good to be sold. Reducing holding cost increases net income and profitability as long as the revenue from selling the item remains constant. Items that turn over more quickly increase responsiveness to changes in customer requirements while allowing the replacement of obsolete items. This is a major concern in fashion industries. When making comparison between firms, it’s important to take note of the industry, or the comparison will be distorted. Making comparison between a supermarket and a car dealer, will not be appropriate, as supermarket sells fast-moving goods such as sweets, chocolates, soft drinks so the stock turnover will be higher. However, a car dealer will have a low turnover due to the item being a slow moving item.

As such only intra-industry comparison will be appropriate. Some computer programs measure the stock turns of an item using the actual number sold. The important issue is that any organization should be consistent in the formula that it uses. Commercial Loan Analysis: principles and techniques for credit analysts and lenders By Kenneth R.