Introduction:

The inventory or stock is important thing because it is a key component

of the assets in any company. Some of companies and institutions can't
work without the inventory. So the industrial companies stockpile the raw
materials and production requirements and the service institutions need
some materials that using in service such as food for restaurants and
cloths for cloths chops and so on.

But controlling the inventory is very difficult and might don't have
enough attention so that will impact on the performance of the
companies.

Increasing or decreasing in the stock those makes a big problem. The

decreasing in the stock lead to shut down the production while increasing
in the stock means we can't investment the excess inventory and we using
more spaces without any benefits. Wherefore we face a big problem to
determine the value of the stock and the right time to give an order to
deliver the stock for suppliers.

There are many questions come when we are going to make a decision to
invest in the inventory like:

1- What are the reasons that make us invest in the inventory?

2- What are the main components or elements that the decision should
include?
3- If we make a decision to invest in the inventory what are the
criteria and the standers we used to know that our decision is right
or wrong?

Throw this report I will take about the inventory management definition
and other things relate to the inventory management.

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Ajab AlOtaibi ID:200710552
 Inventory Definition
The are many definitions for the inventory but what I chose that it is any
idle resource held for future use. Depend on this definition all resources
that will use in the future, the financial assets, human resources and
reserves of various all this will come under the inventory definition.

Why we have inventory:

There are many reasons to have an inventory and this reason vary from
company to another. Here some reasons:

 To face the potential order to our products: some companies

keep amount of final products to face the customers' orders.

 To face the sudden and season orders: it might be difficult to the

companies to produce a season product like product for summer
just in summer so they producing all the year so there will be a
stock for this product in winter.

 To avoid the effect between the stages of production: if I have a

stock for the half products form stage one to using in stage two if
any problem happen in stage one the stage two will not affected
because I have enough stock until the problem in stage two is
fixed.

 To facing expecting things: some companies not that they will be

an increase in the row materials price or stopping supply these row
materials so they increase they stock.

These were some reasons to have big and important stock. If we study the
markets we can reduce the stock.

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Types of Inventory:
Raw materials :

Often we see this type in the industrial institutions where it’s change to
products or materials to use in other side of industrial. The raw materials
are the core for any production system.

In process Inventory (half product):

It's the materials that was proceed but need more process until complete
the final product. This type or inventory is important for the companies
that use Production processes or assembly line.

Finished Goods:

We mean the final products and it's ready to use by the consumers and we
can deliver it by the same company or suppliers.

Spare Parts:

It's a spare part for the products and it's ready for repair or maintenance.

Salvage and scrap:

Many companies have specials stores to contain the waste and damage
products and other things. The purpose of this that the company may sell
it like a waste and gain some money.

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Types of inventory depend on usage and Nature of Demand:
Operating inventory:

Under this type you will find all important things to the production
system in normal situation.

Safety Stock:

We mean by the safety stock that the extra amount that the companies
have from the type of inventory that we mention before. This extra
amount not for production system it's for unmoral situation that might the
company face in future like high price.

Independent demand:

We mean by this type is the requests from retailers or other companies to

our products. These requests could be for one kind of our products or all
products the purpose of these requests to resell the products like
maintenances products or to use these products to produce other products
from other company.

Dependent Demand:

Its requests for some type of products that associate to other products
that’s mean that the dependent demand is the requests for some products
and these products it’s as a components use to produce different products

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Costs associated with inventory:

People think that the stock its help to produce products so we need big
stock as much as we can. This theory is wrong because there are costs
associated with inventory. So we need to study how we can deal with this
inventory in term of amount and time to supply. Here you can see some
of Costs that associate with the inventory:

Ordering Cost:

When we give an order to supply that cost us and this cost include the
labor, shipping, insurance and testing.

Carrying Cost:

Under this point there are three points:

1- Capital cost: the money that used to buy the stock its freeze we
can't use it or invest it.
2- Storage Cost: To stock some spare parts or row materials or final
products that’s cost us and this cost include the rent for the
warehouse, labors, security, utilities.
3- Deterioration Cost: some time stock become damage because it’s
store for long time or poor in storage.

Stock out Cost:

If customers' requests products but we can’t apply this requests because

we don’t have a stock so we loss profits that we can gain it if we have
stock and this may be make our customers go to our competitors and they
will never back to us. Some time we can apply some requests but the
customer should wait some time until we apply his request and this make
Dissatisfaction form the customers which lead to poor reputation to our
company.

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Controlling the inventory as the competitive advantage:
Controlling the inventory is very important to the companies and some
companies use it as a competitive advantage. The big example is the
TOYOTA Company they create the JIT (Just in time) the technique used
to reduce the all type of inventory and that’s lead to increase the
production process and reduce the cost of inventory and the TOYOTA
become the big example for the other companies. Another example is
DELL Company they use controlling the inventory as a competitive
advantage by build the computers by orders. This procedure leads to
reduce the cost for the computer to the company and for the customer
which lead to more sells. Some restaurants prefer to reduce their food list
to reduce the size of the inventory. These examples show us that the
controlling the inventory is very important and its affect the performance
of the companies and it's have direct relationship with competitive
advantage. Controlling the inventory not easy thing its need gathering
information's and analyzing these information's and make some
mathematics calculations with building a good relationship with the
suppliers and using the information technology. You should have go
expect to what the market need in future and you should have good
system in the inventory place.

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Inventory count:
Inventory count is the way to account or measure the amount from
different products in the warehouses and the purpose of this account is
for making easy to take a decision to invest in the inventory and it’s an
important way to controlling the inventory in term of place and time.
From the inventory account we know if the products in their place or not
and how long the products be in the warehouse.

Goals from inventory count:

1-To make sure that the numbers of the inventory in the warehouse is the
same in the records for the inventory and all this to make sure there is no
cheating in the records or other things.

2-To see in there is any mistakes in our application we using in records

and if here is any mistakes we should find the problem and solve it and
we should develop our applications to meet the new standers.

3-To know if we following the standers of the safety for the inventory,
warehouse and the labors.

4-Give the auditors the evidence that there is a system we follow to apply
the international standers for the inventory.

If we want achieve these goals we should:

1-Chose best team to do the inventory count.

2-The inventory count include all warehouses.

3-Hold all process during the inventory count.

4-Doing the inventory count suddenly

5-Preseant the final report in good way.

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