Hi Iman,

The first question to be asked in Inventory Control is the type of inventory at hand (finished goods, raw materials, WIP, etc.).

In additional, how inventory is accounted for is key (perpetual vs. periodic inventory systems).

When it comes to actual management of inventory, obviously there are inputs, processes, usage, transformation, and outputs.

Each of these steps should be automatically integrated with other departments/functions.

For example, inputs should be integrated with purchases in accounting via the G/L.

Outputs should be integrated with Sales figures in the G/L.

Finally, physical stock verification methods should be implemented on period and ad-hoc basis.

In general, pareto theorem is used in planning stock counts (except for year end or period end counts), where the counts are done on high value items which represent around 80% of total inventory; also, inventory with high movement are also counted as they are more subject to theft/loss.

Furthermore, inventory should be always checked for obsolescence (physical and technological) and adjusted according in the books.

Several ratios are used to monitor the performance inventory, such as inventory turnover ratio, efficiency ratios, and others.

Kind regards,

George Majdalany

Thanks Dear Majdalany

You're Welcome!

Dear Iman,

The major problem is how do we predict demand and accordingly stock units so as to meet the demand in the most effective manner balancing stock out vs overstock.

Thanks

SGD

This might help:

https://www.researchgate.net/publication/280600437_Inventory_Valuation_Practices_A_Developing_Country_Perspective?ev=prf_pub

Article Inventory Valuation Practices: A Developing Country Perspective

Problem of uncertainty and lack of standard practices for forecasting inventory....

The most important problem is

How to determine and calculate inventory costs. Especially the shortage cost

Dear Iman,

The inventory is usually issued from a warehouse when it is required in the production activities. This refers to the behavior taking an object out of a warehouse. Inventory issue can be performed with issue slips used or unused. The inventory control problem is the problem faced by a firm that must decide how much to order in each time period to meet demand for its products. It usually costs more and therefore lowers your profit margins? Poor purchasing decisions that lead to excess or inadequate inventory have tax and overhead implications, which also impacts the margins on sellable products. The problem can be modeled using mathematical techniques of optimal control, dynamic programming and network optimization.

Ashish

Dear Iman,

The inventory is usually issued from a warehouse when it is required in the production activities. This refers to the behavior taking an object out of a warehouse. Inventory issue can be performed with issue slips used or unused. The inventory control problem is the problem faced by a firm that must decide how much to order in each time period to meet demand for its products. It usually costs more and therefore lowers your profit margins? Poor purchasing decisions that lead to excess or inadequate inventory have tax and overhead implications, which also impacts the margins on sellable products. The problem can be modeled using mathematical techniques of optimal control, dynamic programming and network optimization.

Ashish