ABC Analysis: An Analysis Of Inventory Management

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Inventory Management Inventories refer to those products or goods a firm is manufacturing for sale and components that make up the product. The forms of inventories in manufacturing enterprises are classified as Raw Materials which have been purchased and stored for future production, Work-In Progress which are in production but have not been completed, Finished Goods which are goods after completion of production. Maintaining the required size of inventory is necessary for smooth and effective functioning of the production activity. Holding inventory provides certain advantages like avoiding loss in sales and reducing ordering costs. However against these benefits there are some costs involved in storing the inventories like rent for storage…show more content…
‘A category’ which are very important, ‘B Category’ are average important and ‘C category’ are relatively less important. Popularly knows as 80/20 rule, this concept is applied to inventory management as a rule-of-thumb. It says 80% of rupee value, consumption wise of an inventory remains in about 20% of the items. This system is to group items according to annual issue value, in an attempt to identify the smaller number of items that will account for most of the issue value and that are the most important ones to control for effective inventory…show more content…
It is theratio (Links to an external site.) of cost of goods sold by a business during an accounting period to the average inventories (Links to an external site.) of the business during the period. It’s the (Cost of Goods Sold / Average Inventory). Retail Store – Inventory Management Inventory control is crucial in retail stores, especially those with a large number or variety of merchandise items for sale. The inventory level in the store shelf and the warehouse has to be maintained constantly and has to be replenished as and when the customer buy the products when it reaches the reorder level. The inventory management will help in identifying when to reorder the stock and also help worker locate the items on the order list in warehouse saving time. Queuing Theory Queuing theory is the mathematical analysis of waiting in line. The line might involve data waiting for processing, equipment parts waiting in an assembly line or people waiting in line at various types of

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