Essentials of Inventory Management

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  • Edition: 2nd
  • Format: Hardcover
  • Copyright: 2011-04-25
  • Publisher: Amacom Books
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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.

Table of Contents

Preface to the Second Editionp. xi
Inventory as Both a Tangible and an Intangible Objectp. 1
Inventory-Who Needs It?p. 1
Inventory Costsp. 2
The Purpose of Inventoryp. 2
Types of Stockp. 4
Tracking the Paper Lifep. 8
Electronic Data Interchangep. 9
Recapp. 14
Review Questionsp. 15
Inventory as Moneyp. 17
Accounting for Inventoriesp. 17
How Inventory Is Valuedp. 18
Inventory on the Balance Sheetp. 19
Inventory on the Income Statementp. 22
Ratio Analyses and What They Meanp. 23
Current Ratiop. 25
Quick Ratio or Acid Testp. 27
Inventory Turnover Ratiop. 28
Profit Marginsp. 29
Calculating Gross Profitp. 30
Merchandising Metricsp. 33
Pricing Generallyp. 34
Selling Pricep. 34
Obsolete Stockp. 37
Why You Have Been Told Not to Dispose of Obsolete Stockp. 38
Problems with Convincing Decision Makers That "It's Gotta Go"p. 38
Arguments in Favor of Disposing of Dead Stockp. 40
Methods of Disposalp. 44
Carrying Cost and Purchasingp. 46
Recapp. 47
Review Questionsp. 47
Physical Location and Control of Inventoryp. 49
Common Locator Systemsp. 50
Memory Systemsp. 51
Fixed Location Systemsp. 54
Zoning Systemsp. 61
Random Locator Systemsp. 63
Combination Systemsp. 66
Common Item Placement Theoriesp. 67
Inventory Stratificationp. 67
Family Groupingp. 76
Special Considerationsp. 79
Location Addresses and SKU Identifiersp. 79
Significancep. 79
Keys to Effectively Tying Together SKUs and Location Addressesp. 81
Recapp. 90
Review Questionsp. 90
Automatic Identificationp. 93
The Basics of Bar Codingp. 94
Elements of a Bar Code Symbolp. 94
Structure of a Generic Bar Code Symbolp. 96
Quiet Zonep. 97
Start and Stop Charactersp. 97
Data Charactersp. 97
"X" Dimensionp. 97
Symbologies: Bar Coding Structural Rulesp. 98
Discrete and Continuous Symbologiesp. 98
Symbology Summaryp. 99
Popular Symbologies Found in the Inventory Worldp. 99
Scanning Basicsp. 104
Printing Basicsp. 105
Bar Code Applicationsp. 106
The Basics of Radio-Frequency Identificationp. 113
RFID Tag Types and Classesp. 114
Bar Code versus RFIDp. 117
RFID Item Identificationp. 118
The Advantages of RFIDp. 118
The Problems Associated with RFIDp. 119
Lack of RFID Standardsp. 120
Money, Money, Moneyp. 120
System Disruption Vulnerabilityp. 120
RFID Reader Collisionp. 121
RFID Tag Collisionp. 121
Security, Privacy, and Ethics Problems with RFIDp. 121
Recapp. 122
Review Questionsp. 122
Planning and Replenishment Conceptsp. 125
Replenishment Costsp. 125
Types of Inventory Managementp. 127
Independent Demand Inventoryp. 132
Economic Order Quantity Formulap. 136
Dependent Demand Inventoryp. 139
Inventory Objectivesp. 150
Enterprise Resource Planningp. 150
Recapp. 154
Review Questionsp. 154
Why Inventory Systems Fail and How to Fix Themp. 157
Inventory System Failure: A Case Examplep. 159
Discussion of Example Casep. 164
Metricsp. 176
Inventory Record Accuracyp. 176
Fill Ratesp. 180
Tools with Which to Uncover System Dysfunctionsp. 182
Run Chartsp. 183
Flow Chartsp. 184
Logic Chartsp. 184
Variance Reportsp. 185
Cycle Countingp. 185
Annual Inventoriesp. 186
Cycle Countingp. 186
Cycle Count Methodologiesp. 187
Control Group Cycle Counting Methodp. 189
Location Audit Cycle Counting Methodp. 190
Random Selection Cycle Counting Methodp. 193
Diminishing Population Cycle Counting Methodp. 194
Product Categories Cycle Counting Methodp. 194
A-B-C Analysis Cycle Counting Methodp. 197
When to Countp. 206
Who Should Countp. 208
Recapp. 209
Review Questionsp. 209
Basics of Supply Chain Risk Managementp. 213
SCM in a Perfect Worldp. 213
Primary Risks in SCMp. 216
Globalization and Supply Chain Complexityp. 216
Conflicting Interestsp. 218
System Fluctuations over Timep. 219
Evolving Relationshipsp. 219
Product Complexityp. 220
Inadequacy of Insurancep. 220
Suppliersp. 220
The Bullwhip Effectp. 222
Disruption in Communicationsp. 224
Inadequate Softwarep. 225
Suggested Solutions to SCM Problemsp. 227
Analysis of Risksp. 228
Supplier Assessmentp. 230
Lessen the Bullwhip Effect Through Coordination Within the Supply Chainp. 231
Contracts That Do and Don't Coordinate the Supply Chainp. 236
Inventory Levelsp. 238
Recapp. 238
Review Questionsp. 239
Bibliographyp. 241
Indexp. 247
Table of Contents provided by Ingram. All Rights Reserved.


<html><head></head><body><p style="margin-top: 0">Introduction to the Second Edition </p><p style="margin-top: 0"></p><p style="margin-top: 0">When I wrote the first edition of Essentials of Inventory Management </p><p style="margin-top: 0">my objective was to present, in accessible language supported </p><p style="margin-top: 0">by copious illustrations and examples, timeless inventory </p><p style="margin-top: 0">management concepts and techniques. My purpose was to give the </p><p style="margin-top: 0">reader a fundamental understanding of inventory as it exists in the </p><p style="margin-top: 0">physical world (shelf count), and as an intangible item (record </p><p style="margin-top: 0">count) existing in a computer database and/or on paper. </p><p style="margin-top: 0">The basic principles covered in that edition are as relevant today, </p><p style="margin-top: 0">even with the explosion of Internet-based e-commerce solutions to </p><p style="margin-top: 0">many inventory and materials management issues, as when they </p><p style="margin-top: 0">were first written. </p><p style="margin-top: 0">I am pleased to note that the book was successful. It has been </p><p style="margin-top: 0">translated into Spanish, with distribution in a number of Spanishspeaking </p><p style="margin-top: 0">countries, and, an English-language soft cover edition is </p><p style="margin-top: 0">being distributed in India, Pakistan, Sri Lanka, Nepal, and </p><p style="margin-top: 0">Bangladesh. AMACOM Books and I have received excellent responses </p><p style="margin-top: 0">to the first edition from individuals just beginning their careers </p><p style="margin-top: 0">in fields related to inventory management, as well as from </p><p style="margin-top: 0">experienced materials managers who reported that the book reminded </p><p style="margin-top: 0">them of effective techniques they had known but had forgotten </p><p style="margin-top: 0">over the years. </p><p style="margin-top: 0">Over the past several years, as I have continued to lecture and </p><p style="margin-top: 0">consult, it became apparent that the book could be enhanced by </p><p style="margin-top: 0">adding chapters and sections on subjects such as cycle counting, </p><p style="margin-top: 0">enterprise resource planning, and supply chain management. And </p><p style="margin-top: 0">so, this second edition was born. </p><p style="margin-top: 0">The second edition retains the timeless, essential inventory </p><p style="margin-top: 0">management basics that are the hallmarks of the first edition, with </p><p style="margin-top: 0">new and expanded information that includes: </p><p style="margin-top: 0">Introduction to the second edition </p><p style="margin-top: 0">FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xi </p><p style="margin-top: 0">&#61565; An expansion of Chapter 2, &#8220;Inventory as Money,&#8221; to </p><p style="margin-top: 0">include a section dealing with profit margins and </p><p style="margin-top: 0">merchandising metrics and containing both examples </p><p style="margin-top: 0">and formulae related to merchandising. </p><p style="margin-top: 0">&#61565; A renamed Chapter 4, &#8220;Automated Inventory </p><p style="margin-top: 0">Identification Systems,&#8221; with new material on Radio </p><p style="margin-top: 0">Frequency Identification Systems (RFID) that discusses </p><p style="margin-top: 0">the strengths and challenges associated with this </p><p style="margin-top: 0">technology. </p><p style="margin-top: 0">&#61565; New coverage in Chapter 5, &#8220;Planning and </p><p style="margin-top: 0">Replenishment Concepts,&#8221; of the benefits of enterprise </p><p style="margin-top: 0">resource planning (ERP), including the five main reasons </p><p style="margin-top: 0">why an enterprise should consider incorporating this </p><p style="margin-top: 0">concept into its organization. </p><p style="margin-top: 0">&#61565; A revised and expanded Chapter 6, &#8220;Why Inventory </p><p style="margin-top: 0">Systems Fail and How to Fix Them,&#8221; which includes new </p><p style="margin-top: 0">material regarding how to distinguish A-B-C cycle </p><p style="margin-top: 0">counting analysis using a single factor from approaches </p><p style="margin-top: 0">combining multiple factors (e.g., dollar value and usage </p><p style="margin-top: 0">rate). The chapter now explains in detail how to </p><p style="margin-top: 0">undertake an A-B-C cycle counting analysis by </p><p style="margin-top: 0">combining multiple factors. </p><p style="margin-top: 0">&#61565; A new Chapter 7, &#8220;Basics of Supply Chain Risk </p><p style="margin-top: 0">Management,&#8221; reveals how the very techniques that have </p><p style="margin-top: 0">allowed American businesses to slash operating costs and </p><p style="margin-top: 0">inventories by embracing just-in-time and lean </p><p style="margin-top: 0">manufacturing techniques have made them vulnerable to </p><p style="margin-top: 0">a number of serious supply chain risks. It offers </p><p style="margin-top: 0">suggestions regarding steps organizations should take in </p><p style="margin-top: 0">trying to balance the risks and rewards of SCM, and </p><p style="margin-top: 0">xii Introduction to the second edition </p><p style="margin-top: 0">FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xii </p><p style="margin-top: 0">provides a starting point to any supply chain risk </p><p style="margin-top: 0">management effort. </p><p style="margin-top: 0">And, of course, as it has since the first edition, the book introduces </p><p style="margin-top: 0">the new stockroom/warehouse manager, the nonfinancial </p><p style="margin-top: 0">inventory control individual, and the small business owner to the </p><p style="margin-top: 0">fundamental nature of inventory from financial, physical, forecasting, </p><p style="margin-top: 0">and operational standpoints. In addition, it explains in easily </p><p style="margin-top: 0">understandable terms the concepts underlying automated identification </p><p style="margin-top: 0">of product through both bar coding and RFID. </p><p style="margin-top: 0">The ultimate goal of this book is to present immediately usable </p><p style="margin-top: 0">information in the areas of forecasting, physical control and layout, </p><p style="margin-top: 0">problem recognition, and resolution, as well as how to begin to better </p><p style="margin-top: 0">manage a supply chain. </p><p style="margin-top: 0">Ultimately, Essentials of Inventory Management will enable you </p><p style="margin-top: 0">to: </p><p style="margin-top: 0">&#61565; Understand that modern practice discourages holding </p><p style="margin-top: 0">large quantities of inventory and encourages only having </p><p style="margin-top: 0">amounts on hand required for current needs. </p><p style="margin-top: 0">&#61565; Grasp the signific ance of controlling actual, on-hand </p><p style="margin-top: 0">inventory as both a physical object (shelf count) and as </p><p style="margin-top: 0">an intangible object (record count and monetary worth). </p><p style="margin-top: 0">&#61565; Appreciate the fundamental differences between finished </p><p style="margin-top: 0">goods inventories in the retail/distribution sectors and </p><p style="margin-top: 0">raw materials and work-in-process inventories found in </p><p style="margin-top: 0">the manufacturing environment. </p><p style="margin-top: 0">&#61565; Apply basic formulae to calculating inventory quantities. </p><p style="margin-top: 0">&#61565; Utilize basic formulae to compute breakeven points, </p><p style="margin-top: 0">profit margins, markups and markdowns, as well as </p><p style="margin-top: 0">selling price and margin percentages. </p><p style="margin-top: 0">Introduction to the second edition xiii </p><p style="margin-top: 0">FM-Essential Inventory Mgmt 12/6/10 12:55 PM Page xiii </p><p style="margin-top: 0">&#61565; Select the cycle counting inventory method that is right </p><p style="margin-top: 0">for you. </p><p style="margin-top: 0">&#61565; Undertake an A-B-C cycle counting analysis by </p><p style="margin-top: 0">combining multiple factors. </p><p style="margin-top: 0">&#61565; Recognize and analyze dysfunctions within your own </p><p style="margin-top: 0">operation. </p><p style="margin-top: 0">&#61565; Employ basic problem-solving techniques to issue </p><p style="margin-top: 0">resolution. </p><p style="margin-top: 0">&#61565; Control the physical location of inventory in a more </p><p style="margin-top: 0">efficient manner. </p><p style="margin-top: 0">&#61565; Analyze whether or not RFID is right for your </p><p style="margin-top: 0">organization. </p><p style="margin-top: 0">&#61565; Be aware of supply chain management risks and possible </p><p style="margin-top: 0">solutions. </p></body></html>

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