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Inventory Management: Name of The Members Respective Roll Number
Inventory Management: Name of The Members Respective Roll Number
MANAGEMENT
NAME OF THE RESPECTIVE ROLL
MEMBERS NUMBER
VISHAKHA 693
SEQUENCE OF THE RESPECTIVE TOPICS RESPECTIVE PERSON
PRESENTATION EXPLAINING THE TOPIC
3
TRADING FIRM KHUSHI MITTAL-275
1. Finished goods –
• Completely manufactured products
ready to sell.
• Firms need to maintain a sufficient
finished goods inventory in order to
not lose sales.
• Purpose- Tu uncouple production and
sales function so that sales can be
made directly out of inventory.
TYPES OF INVENTORIES
2. Work-in-progress (WIP) –
• Partially produced goods.
• Value of WIP includes –
Raw material costs, direct
wages, expenses already
incurred and overheads, if
any.
• Purpose – To uncouple
various production
processes so that one
operation will not affect
the other operations.
TYPES OF INVENTORIES
3. Raw Materials –
• Materials primarily used in the manufacturing of goods.
• Purpose – to uncouple the production function from
purchasing function so that delay in procurement of raw
materials do not cause production delays.
While finished goods are final products of one firm, they may be a
raw material to another. One classic example is transaction
between following two firms –
The chip is the finished product to the manufacturer, but it
becomes a component when sold to the computer manufacturer.
Meaning
Product
Unit level Batch level Facility level
level
activities activities activities
activities
REASONS TO MAINTAIN INVENTORIES
IN MANUFACTURING FIRM
Keeping your inventory well-stocked is a crucial aspect of keeping business
operations running smoothly
1. Keeping inventory on hand allows a company to meet any expected increases in
demand. It also ensures that the appropriate number of products are available,
should there be an unexpected increase in demand.
2. Keeping a strong inventory supply allows a company to benefit from periodic
price reductions when making bulk purchases of needed raw materials.
3. Uninterrupted Production Schedule
4. Independent Sales Activity
Difference between
trading firm and manufacturing firm
Trading firm Manufacturing firm
• Goods are purchased and are sold • Raw materials are purchased
without further processing. and converted into a new final
product for sales.
• The major business process of • The major business process of
trading concerns are manufacturing concerns are
procurements and sales. procurements, production and
sales.
• The time required from
• The time required from procurement to sales will be
procurement to sales will be relatively more for firm since the
relatively less for trading firm. manufacture requires conversion
time for processing the goods
Trading firm Manufacturing firm
• The cost of goods sold for the trader • The cost of goods sold for the
is: manufacturer is:
Opening trading goods + purchases of Opening manufacturing goods +
trading goods – closing trading goods. purchases of manufacturing goods –
• Examples of trading include mobile closing manufacturing goods.
phone trading, books trading and • Examples of manufacturing
many more. include automotive companies,
bakeries, shoemakers and tailors
SUMMARY
Raw materials, work in progress, and finished commodities are
all included in inventory. Inventory management refers to the
control of these components' levels.