GROUP #3 Reporters

Mary Henzel Austria

Sheila Hernandez
Arlon Orias
Marie-Grace Morta Quizon

BSBA-OM Section 3M

Prof. Tommie Dicang

INVENTORY MANAGEMENT
TELLS:
 Concept
Inventory is an important resource of every business to run its day-to-day operations uninterruptedly. It
impacts various steps of the supply chain such as manufacturing,warehousing, sales etc. The amount of
inventory available with a business should be sufficient enough so that various activities of the business
are not adversely affected.

Likewise, there should not be excessive amount of investment in inventories. This is because over
investment can lead to inventories remaining idle. Thus, it would result in blocking of working capital .
Therefore, inventory plays a very important role in managing the various operations of the business.
Inventory Management
Steps

01 Preparation

02 Arrangement

03 Replenenishment
What is Preparation
Warehouse?
Order preparation, or “picking”, is the
warehouse activity in which items or
products are collected from their
storage áreas, to create a
customer's order.
 How to Prepare for an
Inventory?
Enables to identify variances in those
numbers and quickly identify issues with
both stock management and control.Stock
movements and stock items will enable you
1.Preparation to make informed decisions about the
damaged stock, theft, slow-moving
items, and current warehouse processes.

Preparing inventory the rules to follow to

ensure it is running smoothly.
BENEFITS OF INVENTORY
ARRANGEMENT

◻ More storage space in your

warehouse

◻ A safer working environment

for your staff

◻ Quicker processing of your

orders
Rules of Inventory
Management
◻ Establish which stock is owned by
the business and the location of
the stock

◻ The stockroom needs to be clean

and tidy and stock items should be
clearly laid out

◻ Tools required for the inventory

 Rules of Inventory Management
◻ Do not allow radios, mobile phones,
iPods and idle chatting

◻ Every item of your stock needs to be

counted. Never ever estimate

◻ Check the physical stock count

number against current accounting
records. Always recheck discrepancies

◻ Update your records

 How To Organize Inventory in a
Warehouse?
In arrangement or to organize inventory is
to reduce labor costs and drive productivity
and it will also ensure other warehouse
management processes run smoothly.
2.
Arrangement
Arrangement warehouse inventory
in 5 simple steps:

Step #1: Designate an inventory

receiving area
Step #2: Place bestselling products
nearest to the warehouse front
Step #3: Label all products and
name their storage areas
Step #4: Use the slotting technique
Step #5: Restock empty shelves
regularly
 What is Warehouse
Replenishment?
The process of moving products from inventory
storage to picking shelves, or receiving
ecommerce inventory from a supplier to stock it in
a warehouse or fulfillment center.

3. REPLENISHMENT
Warehouse
Replenishment
Twowarehouse
First, Occurences:
replenishment means
refilling your warehouses from external
sources with products that your company
regularly orders. In this case, warehouse
replenishment is between you and your
vendor, not your customer.

Second, warehouse replenishment can mean

moving materials within your warehouse to
either different processing or storage
locations so that you have them available to
fill customer orders.
Advantages of Efficient Warehouse
Replenishment:

● Decreases overstock
● Timely deliveries
● Reduction of labor costs
● Decrease of dead stock and
slow-moving products
● Reduces logistical challenges
● Ability to meet demand without
shortages
● Maintain buffer stock levels
 Replenishment Models:
✔ Demand Inventory Replenishment
commonly known as the “routine” method, triggers
restocking activity when a specific product reaches a
predetermined minimum threshold. This model is most
efficient for SKUs with predictable demand.
✔ Demand Inventory Replenishment -with
demand replenishment, the quantity is
limited to the amount necessary to fulfill pending orders
without creating excess stock.
✔ Top-off Inventory Replenishment -
is similar to the min/max replenishment model but
generally runs on schedule or per batch. This model is
most efficient during high-volume sales or work
shortages.
✔ Periodic Inventory Replenishment -
orders when inventory levels fall below the
pre-set minimum threshold. The periodic
inventory replenishment is generally used when
significant storage is available for products and
is used with longer lead times.
✔ Identifying the Right Mix of
Replenishment - Choosing the most
effective replenishment model is key for efficient
warehouse operations. In many cases, using
multiple replenishment models will help an
eCommerce business achieve and maintain an
optimal balance between consumer demand
and safe inventory levels, especially during
periods of high demand.
What is replenishment
stock?
Replenishment stock simply
refers to the inventory that is
CHART FLOW
ordered after a selling period
has already begun.

What is replenishment
time?
Replenishment time is the time
between initially placing a
replenishment order, and the
replenishment stock hitting the
shelf.

The longer the replenishment

time, the higher the cost. In order
to shorten replenishment time.
Common factors include:

■ Manufacturing time
■ Packaging and shipping
time
■ Lead time
■ Processing time at the
warehouse
■ Customer order
fulfillment
■ Allocations
Promotions
 5 best practices:
1. Determine accurate lead Replenishment
times
Lead-time refers to how quickly
the order can be fulfilled by the
supplier., helps businesses
understand the right frequency
of replenishing to prevent
shortages.This is extremely
important, especially for those
retailers using last minute
replenishment strategies like
Top-Off or Reorder Point
Strategy.
2. Replenish inventory from within the business
Inter-store transferring of replenishment inventory can be a game changer when balancing inventory levels,
high demand in store-A and no demand in store-B; by replenishing store-A with product from store-B you free
up shelving, meet sales demand, and do so while saving time and money.

Effective inter-store balancing is achieved by having a unified inventory platform, enabling visibility into
inventory across all sales channels and location.
3. ABC analysis (a.k.a Contribution codes)
Identify and rank SKUs in your inventory mix to reflect their sales contribution. Once an ABC
analysis has been performed, the retailer can optimize their assortment mix breadth and depth.

This analysis can be relatively straightforward for a smaller retailer, but becomes exponentially
difficult as the business grows. Omni-channel retailers rely on analytics-powered inventory
management solutions to compute the 100s of thousands of SKUs and millions of data points
required for an ABC analysis.
4. Monitor & measure vendors’ performance
Similar to analyzing product performance, retailers should be keeping track of vendor performance
for optimal vendor management.

There should be clear and tangible KPIs put in place that can be quantified and monitored, such as
total missing or broken inventory/order shipped, lead-times and late delivery, instances of
unavailable stock, and so on.

A time-frame should be set for assessing vendor performance, and real deliverables are then
compared to the set KPIs.
5. Inventory Management Software
A smaller retailer can get away with managing their inventory manually on spreadsheets. They might use the
Periodic Strategy to manage replenishment. However, with each additional channel, location, and even SKU,
the complexity of inventory management grows exponentially.

Some omnichannel retailers attempt to manage the size of their business using a ‘divide and conquer’
approach. Siloed channel operations limit visibility. Leaving retailers less agile and less able to make timely
adjustments.

Others have chosen a unified approach to inventory management. Unifying software enables retailers to
quickly identify and adjust for replenishment needs and opportunities. What’s more, they can take advantage
of inter-store replenishment and inventory balancing.
INVENTORY MANAGEMENT AND
CONTROL
 Click here to add to the title

Inventory control means

managing your inventory
levels to ensure that you are
What is Inventory Control? keeping the optimal amount
of each product.
Systems can be put in place to help with
forecasting and allow you to set reorder
points, too.
Inventory control can include:
● Barcode scanner integration
● Complete inventory counts
● Keeping track of physical inventory
with sales and purchase orders
● Product details, locations, and
histories
● Reports and adjustments
Inventory control
systems
Spreadsheet to control inventory
The use of a spreadsheet as a manual inventory
control technique works best for smaller
businesses that don’t keep much stock or have
a lot of different kinds of inventory.
Periodic inventory system
A periodic inventory system usually relies on
physical inventory counts. Inventory information is
updated periodically when a physical count is
conducted.

Periodic inventory generally uses the

formula:

Cost of Goods Sold (COGS) =

(Beginning Inventory + Purchases) –
Closing Inventory.
Perpetual inventory system
Perpetual inventory systems update your
stock in real-time when a transaction happens
or new stock is received through technology
solutions. Around 72% of all retailers plan to
adopt real-time visibility in their supply chain
using automation, sensors, and analytics. It
allows you to easily implement inventory
management techniques like Economic
Order Quantity (EOQ). EOQ makes sure
inventory meets demands while minimizing
holding and storage costs.
Inventory Forecasting Formulas
Inventory forecasting is the process of predicting
how much stock will be required to meet
expected product demand.
# Re-order Point
in inventory management software, this reorder point is
known as the “Min” as in “Min/Max” inventory.
# Safety Stock Formula
Safety stock is an amount of extra inventory that
you keep on hand as a buffer against stockouts

Safety stock = (Max number of units sold in

a day X max lead time for replenishment) –
(average daily usage X average lead time in
days)

Ex. you sell a maximum of 50 units per day,

and the maximum lead time to replace them is 7
days. Average daily usage is 35, and average
lead time is 4 days. Your calculation is:
(50 x 7) – (35 x 4) = 210
# Economic Order Quantity
Economic Order Quantity (EOQ) is a calculation
for working out the most economical quantity of
inventory to order for a specific product.

EOQ = √ 2 X (demand in units X order costs

per purchase) / carrying costs per unit

Ex. you sell an average of 600 coffee mugs per

year. The order cost is £5 per mug, and the
carrying cost is £2 per unit per year. The
calculation would be:
√ 2 x (600 x 5) / 2 = 54.7
Calculating Your Inventory Turnover
Ratio
Your inventory turnover ratio dictates how fast
you’re selling your inventory… which is usually
based on 12 months’ worth of data.

Ex. if your annual sales totaled $500,000 and

you held $75,000 worth of inventory last year,
then your inventory turnover ratio would be 6.6.
Qualitative Inventory
Forecasting vs
Quantitative Inventory
Forecasting
 THANKS
God Speed

GMQ/04072023