S-002 - Warehouse Inventory Management
As Warehouse Inventories form part of the Working Capital of a business, effectiveness of this investment has a direct bearing on a company’s performance and profitability. Over-investment in inventories represents a waste of resources whilst under-stocking can severely reduce operational effectiveness. Good management of inventories requires application of policies, methods and techniques collectively known as “Inventory Management”. This management system matches supply and demand and balances the costs and benefits of holding stock.
Benefits of good Inventory Management are associated with the price paid for goods and services. Also, good Inventory Management protects you from the costs of not having goods available when they are required. Such costs may include:
- Cost of having to defer work and make alternative plans,
- Costs of rush ordering, including surcharges from the manufacturer and transport costs,
- Loss of production,
The total cost of holding stock is typically 20% to 30% of the stock value each year. Stock-holding costs are generally:
- Physical storage – direct warehousing, stock audit, preservation and clerical administration –
Provision for deterioration, loss or obsolescence in store
Opportunity costs, which is defined as the return on capital that the money tied up in stock could generate if invested elsewhere
Therefore,the benefits of holding stock must be weighted against the costs. A practical Guide for Inventory Management has been developed by Triple EEE. The prime objective of this Guide is to create a better understanding of modern Inventory Management concepts and techniques to enable Management to challenge existing practices and to ensure that they get the best value from their investments in inventories. By applying these techniques considerable savings on inventory levels have been achieved.
Triple EEE is ready to assist in providing support in implementing the related strategies.
Inventory Management Review can be embedded in a Site Management Review whereby Key Performance Indicators and agreed actions are fully integrated in site-wide improvement programme.
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