Here are just a few reasons why companies have excess inventory:
All these seem to be sound reasons to purchase extra inventory – but are you really saving money? The true cost of inventory entails many elements and goes far beyond the cost of goods sold or raw materials
As stated earlier, inventory management is an attempt to maintain an adequate supply of goods while minimizing inventory costs. We saw a variety of reasons companies hold inventory and these reasons dictate what is deemed to be an adequate supply of inventory. Now, how do we balance this supply with its costs? First let's look at what kind of costs we are talking about.
There are three types of costs that together constitute total inventory costs:
As evidenced above, the costs surrounding inventory are significant. When it comes to inventory control, there are many methodologies. No matter what methodology you use, there are numerous ways to take better control of inventory and decrease its associated costs.
Visibility’s MRP suite (computer-based resource management system) provides the ability to match supply with demand at each stage of the product life cycle. Our MRP module looks at order quantities period by period and, as such, allow discrete ordering (ordering only what is currently needed). In this way inventory levels can be kept at a very low level; a necessity for a complex item with dependent demand.
To learn how Visibility helps companies with inventory management click here.