Inventory 2

Meaning of Inventory

Inventory is an important factor in operational warehousing . It represents the number of units of a product that are physically in stock at a certain point in time, are on the way to the warehouse or can be recorded according to various criteria for accounting purposes. The shortage is increased by shortages, which are required quantities that could not be met. The shortage represents the excess between the required quantity over the actually available stock.

What constitutes a shortfall

There may be a shortage in the company’s warehousing. Such a stock shortage is made up of the actually available stock and outstanding orders; units of measure for subsequent deliveries, which serve to cover the shortage, are deducted from this. Units of measure that are reserved for other purposes or serve as safety stock are also deducted from the actual stock. The safety stock is not always part of the available stock, it depends on the respective planning context. The safety stock is used to compensate for uncertainties regarding the forecast quantity required. Since customer demand usually fluctuates stochastically, the safety stock is used to cover above-average demand.

The inventory as stock in the company

The operational inventory is also referred to as inventory. The goods and materials that are intended for the production process or for sale are deemed to be inventory. Depending on the type of business, a distinction is made between stocks:

  • in manufacturing plants: raw materials, auxiliary materials and supplies, work in progress and finished goods
  • in service companies: operating materials
  • in commercial establishments: finished products and goods.

The optimal inventory

According to GRADPHYSICS.COM, the optimal inventory is determined in warehouse and supply planning. To calculate the inventory turnover and the capital that is tied up in the warehouse, the average inventory is required. The inventory represents the amount of inventory that is in the warehouse. The minimum stock forms the lower limit of the stock, the upper limit forms the maximum stock. The maximum stock is the optimal stock, it is made up of the sum of the minimum stock and the optimal order quantity . The reorder level is between the minimum and maximum levels. The inventory is an important basis for calculating inventory key figures such as inventory turnover and storage duration.

Types of stocks

A distinction is made between different types of stocks. Stock can be physically available materials in the warehouse. The inventory also includes an external inventory that is not yet in the warehouse. This includes rolling and floating goods, provided that the risk has not yet been transferred. Goods taken on consignment are also part of the inventory. However, a warehouse that has been taken on commission is not part of the inventory.

The determination of the stock

The stock level can be determined by the effective inventory , during which a physical inventory is carried out. The determination is also possible by discounting, in which case inflows and outflows are continuously noted. In the inventory, movable assets, financial assets, inventories, securities, cash and other stocks are physically recorded on the spot. The records from the inventory must be kept for external audits. The inventory recording of the operational fixed assetsis subject to legal regulations. In the case of discounting, the material consumption is recorded by means of material withdrawal slips, with a material withdrawal slip being issued every time the warehouse is removed. The disadvantage of the cash discount is the high amount of work, but the cash discount has the advantage that the target stock can be determined at any time.

Correspondence between book and inventory

In the case of inventory, it becomes between book and warehouse inventory. Book and inventory should match. Errors can cause book and inventory levels to mismatch. There is a match between the book and the inventory if there are no errors due to measurement or registration and no typographical errors. In addition, if there is no loss of material due to shrinkage and theft. However, material losses through shrinkage have repeatedly been recorded in various companies, because theft can never be completely ruled out. Regular checks are therefore necessary to ensure that book and inventory levels match as closely as possible. Online storage software is a helpful program for a comprehensive overview .

Inventory 2