Inventory Management and Optimization
Inventory Management
Inventory Management is an activity that coexists in the three types of costs associated with inventory flows and processes. This structure arises while preserving the classical structure of costs by nature, as classified in the following two major groups:
Operational Costs
Costs associated with the investment classification of purely logistical costs, which has been mentioned so far, is the most frequently used in “the profession”. We have already mentioned in the paragraph above concepts like “cost of launch orders” or “acquisition cost”, which originally appeared between the concepts presented. Well, the usual classification of costs that managers use for inventories is as follows:
- Costs of storage, maintenance, or possession of stocks
- Order launch costs
- Acquisition costs
- Breakdown costs
Inventory Storage, Maintenance, or Possession Costs
These costs include all costs directly related to the ownership of stocks, such as:
- Financial costs of inventories
- Secure storage costs
- Deterioration, loss, and degradation of merchandise
Warehouse Direct Costs
Fixed Costs:
- Personnel
- Security and Surveillance
- Uploads
- Fiscal Warehouse Maintenance
- Warehouse Manufacturing
- Warehouse Rentals
- Amortization
- Amortization of shelving and other storage equipment
- Financial costs of detention
Variable Costs:
- Oven Energy
- Water Maintenance
- Repair replacement materials (storage-related)
- Damage, loss, and degradation of goods
- Financial Costs of Stock
Direct Maintenance Costs
Fixed Costs:
- Staff
- Seguros
- Fixed costs of handling
- Amortization
- Amortization of computer equipment
- Financial costs of property, plant maintenance costs
Variable Costs:
- Energy
- Handling equipment
- Computer maintenance repairs
- Communications equipment maintenance
Launch Costs
Launch Costs of orders include all costs incurred when launching a purchase order. Costs that are grouped under this heading should be independent of the quantity you buy and exclusively related to the fact of launching the command. Components are called implicit costs:
- Cost of preparation of the machines when it launches a production order
- Cost of getting a “Place” in the warehouse receipt (mobilization or transport goods to other locations, for example)
- Transportation costs exclusively linked to the order (the invoice for a “courier” in the case of an emergency replacement, for example)
- Costs of supervision and monitoring of the need to launch an order, etc.
Cost of Acquisition
The Cost of acquisition is the total amount invested in the purchase of goods or the book value of the product when the material is ongoing and finished. In the first case of products (raw materials or components), the cost of acquisition will incorporate the concepts not recoverable by the supplier and will include in its bill (e.g., transport, sies by the supplier, but not VAT). Costs of materials incorporated which, according to company accounting practices, can be assessed according to the following criteria:
- FIFO (first in, first out)
- LIFO (last in, first out). LIFO somehow equates to a replacement value.
- Method MIFO (middle in, first out) is a weighted average of prices, the enterprise standard of estimated replacement prices, direct production costs (MOD, depreciation, etc.), and indirect costs.
Costs of Rupture or Breakage of Inventory
The Costs of rupture or breakage of inventory include all costs for the shortages. These costs are not absorbed by the production process but will go directly to the income statement. The criteria for evaluating these costs breakdown include:
- Decreased Sales revenue: The accounting integrity not for lack of references in an order made, a reduction of sales revenue, both by the shift in the type of the invoice date, for the absolute loss lost.
- Increase in expenditures of Service: This includes contractual penalties for delays of supply, stand in the process of production, freight, etc., false.
Just in Time (JIT)
Just in Time or Just in Time was originally developed by Toyota and then spread to many other companies in Japan and the world. It has been the biggest factor contributing to the impressive development of Japanese firms. This has prompted companies elsewhere to become interested in this technique.
Inventory Management Models
The models on which to base the planning of supply are divided into two main categories, according to whether the suit is dependent or independent.
- Models for unscheduled replenishment, where demand is independent of type, produced as a result of the decisions of many actors outside the supply chain (customers or consumers). The most common model is the Economic Lot Purchases.
- Models for Replenishment schedule, in which the demand is dependent rate, generated by a program of production or sales. Respond to requests for replenishment provided by MRP or DRP based on optimization or simulation techniques.
Level of Service and Safety Stock
Independent or unscheduled demand for a product type is usually probabilistic. The independent claims are rather deterministic in practice, a teaching resource to complete the ratings or simplify the formulation of models. This random circumstance in generating demand may cause breaks in the stocks, with their associated costs and wastage of undoubted quality of service.