Summary

Inventory management is about more than counting what you've got. It's about understanding business realities and making decisions that balance current demand with future needs - while keeping overhead and operating costs to a minimum. Now in its Second Edition, Essentials of Inventory Management gives inventory professionals the information they need to maximize productivity in key areas, from physical stock issues to problem identification and resolution to technologies like RFID and other automated inventory mechanisms. Perfect for novice and veteran managers alike, this ultra-practical book covers topics such as: * Forecasting and replenishment strategies* Differences between retail and manufacturing inventories* Materials requirements planning and just-in-time inventory systems* Simple formulas for calculating quantities and schedules * Management of inventory as a physical reality and a monetary value* Supply chain risk management Complete with detailed examples, handy tools, and a revised and expanded chapter analyzing "Why Inventory Systems Fail and How to Fix Them," this nontechnical yet throrough guide is perfect for both instructional and on-the-job use.

Preface to the Second Edition	p. xi
Inventory as Both a Tangible and an Intangible Object	p. 1
Inventory-Who Needs It?	p. 1
Inventory Costs	p. 2
The Purpose of Inventory	p. 2
Types of Stock	p. 4
Tracking the Paper Life	p. 8
Electronic Data Interchange	p. 9
Recap	p. 14
Review Questions	p. 15
Inventory as Money	p. 17
Accounting for Inventories	p. 17
How Inventory Is Valued	p. 18
Inventory on the Balance Sheet	p. 19
Inventory on the Income Statement	p. 22
Ratio Analyses and What They Mean	p. 23
Current Ratio	p. 25
Quick Ratio or Acid Test	p. 27
Inventory Turnover Ratio	p. 28
Profit Margins	p. 29
Calculating Gross Profit	p. 30
Merchandising Metrics	p. 33
Pricing Generally	p. 34
Selling Price	p. 34
Obsolete Stock	p. 37
Why You Have Been Told Not to Dispose of Obsolete Stock	p. 38
Problems with Convincing Decision Makers That "It's Gotta Go"	p. 38
Arguments in Favor of Disposing of Dead Stock	p. 40
Methods of Disposal	p. 44
Carrying Cost and Purchasing	p. 46
Recap	p. 47
Review Questions	p. 47
Physical Location and Control of Inventory	p. 49
Common Locator Systems	p. 50
Memory Systems	p. 51
Fixed Location Systems	p. 54
Zoning Systems	p. 61
Random Locator Systems	p. 63
Combination Systems	p. 66
Common Item Placement Theories	p. 67
Inventory Stratification	p. 67
Family Grouping	p. 76
Special Considerations	p. 79
Location Addresses and SKU Identifiers	p. 79
Significance	p. 79
Keys to Effectively Tying Together SKUs and Location Addresses	p. 81
Recap	p. 90
Review Questions	p. 90
Automatic Identification	p. 93
The Basics of Bar Coding	p. 94
Elements of a Bar Code Symbol	p. 94
Structure of a Generic Bar Code Symbol	p. 96
Quiet Zone	p. 97
Start and Stop Characters	p. 97
Data Characters	p. 97
"X" Dimension	p. 97
Symbologies: Bar Coding Structural Rules	p. 98
Discrete and Continuous Symbologies	p. 98
Symbology Summary	p. 99
Popular Symbologies Found in the Inventory World	p. 99
Scanning Basics	p. 104
Printing Basics	p. 105
Bar Code Applications	p. 106
The Basics of Radio-Frequency Identification	p. 113
RFID Tag Types and Classes	p. 114
Bar Code versus RFID	p. 117
RFID Item Identification	p. 118
The Advantages of RFID	p. 118
The Problems Associated with RFID	p. 119
Lack of RFID Standards	p. 120
Money, Money, Money	p. 120
System Disruption Vulnerability	p. 120
RFID Reader Collision	p. 121
RFID Tag Collision	p. 121
Security, Privacy, and Ethics Problems with RFID	p. 121
Recap	p. 122
Review Questions	p. 122
Planning and Replenishment Concepts	p. 125
Replenishment Costs	p. 125
Types of Inventory Management	p. 127
Independent Demand Inventory	p. 132
Economic Order Quantity Formula	p. 136
Dependent Demand Inventory	p. 139
Inventory Objectives	p. 150
Enterprise Resource Planning	p. 150
Recap	p. 154
Review Questions	p. 154
Why Inventory Systems Fail and How to Fix Them	p. 157
Inventory System Failure: A Case Example	p. 159
Discussion of Example Case	p. 164
Metrics	p. 176
Inventory Record Accuracy	p. 176
Fill Rates	p. 180
Tools with Which to Uncover System Dysfunctions	p. 182
Run Charts	p. 183
Flow Charts	p. 184
Logic Charts	p. 184
Variance Reports	p. 185
Cycle Counting	p. 185
Annual Inventories	p. 186
Cycle Counting	p. 186
Cycle Count Methodologies	p. 187
Control Group Cycle Counting Method	p. 189
Location Audit Cycle Counting Method	p. 190
Random Selection Cycle Counting Method	p. 193
Diminishing Population Cycle Counting Method	p. 194
Product Categories Cycle Counting Method	p. 194
A-B-C Analysis Cycle Counting Method	p. 197
When to Count	p. 206
Who Should Count	p. 208
Recap	p. 209
Review Questions	p. 209
Basics of Supply Chain Risk Management	p. 213
SCM in a Perfect World	p. 213
Primary Risks in SCM	p. 216
Globalization and Supply Chain Complexity	p. 216
Conflicting Interests	p. 218
System Fluctuations over Time	p. 219
Evolving Relationships	p. 219
Product Complexity	p. 220
Inadequacy of Insurance	p. 220
Suppliers	p. 220
The Bullwhip Effect	p. 222
Disruption in Communications	p. 224
Inadequate Software	p. 225
Suggested Solutions to SCM Problems	p. 227
Analysis of Risks	p. 228
Supplier Assessment	p. 230
Lessen the Bullwhip Effect Through Coordination Within the Supply Chain	p. 231
Contracts That Do and Don't Coordinate the Supply Chain	p. 236
Inventory Levels	p. 238
Recap	p. 238
Review Questions	p. 239
Bibliography	p. 241
Index	p. 247
Table of Contents provided by Ingram. All Rights Reserved.

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Excerpts

<html><head></head><body>Introduction to the Second Edition When I wrote the first edition of Essentials of Inventory Management my objective was to present, in accessible language supported by copious illustrations and examples, timeless inventory management concepts and techniques. My purpose was to give the reader a fundamental understanding of inventory as it exists in the physical world (shelf count), and as an intangible item (record count) existing in a computer database and/or on paper. The basic principles covered in that edition are as relevant today, even with the explosion of Internet-based e-commerce solutions to many inventory and materials management issues, as when they were first written. I am pleased to note that the book was successful. It has been translated into Spanish, with distribution in a number of Spanishspeaking countries, and, an English-language soft cover edition is being distributed in India, Pakistan, Sri Lanka, Nepal, and Bangladesh. AMACOM Books and I have received excellent responses to the first edition from individuals just beginning their careers in fields related to inventory management, as well as from experienced materials managers who reported that the book reminded them of effective techniques they had known but had forgotten over the years. Over the past several years, as I have continued to lecture and consult, it became apparent that the book could be enhanced by adding chapters and sections on subjects such as cycle counting, enterprise resource planning, and supply chain management. And so, this second edition was born. The second edition retains the timeless, essential inventory management basics that are the hallmarks of the first edition, with new and expanded information that includes: Introduction to the second edition FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xi  An expansion of Chapter 2, “Inventory as Money,” to include a section dealing with profit margins and merchandising metrics and containing both examples and formulae related to merchandising.  A renamed Chapter 4, “Automated Inventory Identification Systems,” with new material on Radio Frequency Identification Systems (RFID) that discusses the strengths and challenges associated with this technology.  New coverage in Chapter 5, “Planning and Replenishment Concepts,” of the benefits of enterprise resource planning (ERP), including the five main reasons why an enterprise should consider incorporating this concept into its organization.  A revised and expanded Chapter 6, “Why Inventory Systems Fail and How to Fix Them,” which includes new material regarding how to distinguish A-B-C cycle counting analysis using a single factor from approaches combining multiple factors (e.g., dollar value and usage rate). The chapter now explains in detail how to undertake an A-B-C cycle counting analysis by combining multiple factors.  A new Chapter 7, “Basics of Supply Chain Risk Management,” reveals how the very techniques that have allowed American businesses to slash operating costs and inventories by embracing just-in-time and lean manufacturing techniques have made them vulnerable to a number of serious supply chain risks. It offers suggestions regarding steps organizations should take in trying to balance the risks and rewards of SCM, and xii Introduction to the second edition FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xii provides a starting point to any supply chain risk management effort. And, of course, as it has since the first edition, the book introduces the new stockroom/warehouse manager, the nonfinancial inventory control individual, and the small business owner to the fundamental nature of inventory from financial, physical, forecasting, and operational standpoints. In addition, it explains in easily understandable terms the concepts underlying automated identification of product through both bar coding and RFID. The ultimate goal of this book is to present immediately usable information in the areas of forecasting, physical control and layout, problem recognition, and resolution, as well as how to begin to better manage a supply chain. Ultimately, Essentials of Inventory Management will enable you to:  Understand that modern practice discourages holding large quantities of inventory and encourages only having amounts on hand required for current needs.  Grasp the signific ance of controlling actual, on-hand inventory as both a physical object (shelf count) and as an intangible object (record count and monetary worth).  Appreciate the fundamental differences between finished goods inventories in the retail/distribution sectors and raw materials and work-in-process inventories found in the manufacturing environment.  Apply basic formulae to calculating inventory quantities.  Utilize basic formulae to compute breakeven points, profit margins, markups and markdowns, as well as selling price and margin percentages. Introduction to the second edition xiii FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xiii  Select the cycle counting inventory method that is right for you.  Undertake an A-B-C cycle counting analysis by combining multiple factors.  Recognize and analyze dysfunctions within your own operation.  Employ basic problem-solving techniques to issue resolution.  Control the physical location of inventory in a more efficient manner.  Analyze whether or not RFID is right for your organization.  Be aware of supply chain management risks and possible solutions. </body></html>

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Essentials of Inventory Management

9780814416556

0814416551

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