Planning and inventory control are key activities in business operations. In managerial and business operations, planning refers to a set of goals and objectives accompanied by strategies, means, and methods of achieving them as well as monitoring the outcomes. Several activities in a business environment require planning. Inventory requires planning to aid in monitoring input and output of the business. Planning and control in inventory management are crucial in optimizing activities of a business or organization.
Planning for the management of inventory is vital for various reasons. Firstly, it offsets change and uncertainty in inputs and outputs as well as focusing the attention on business' objectives. Relationally, planning tools such as Gantt Chart and Program Evaluation and Review Technique (PERT) includes activities and timelines that are crucial in facilitating control and maximizing on the economic benefits of the activity. However, managers should play a key role in ensuring that plans do not fail. Misunderstanding in difference planning process steps, failure to engage employees adequately, confusing financial projections, inadequate inputs and vesting responsibility to a specific department are some of the reasons for the failure of plans.
No manager wants to see their plan fail. As a result, a team of experienced professionals in management has developed a seven-step process for ensuring the plans are successful. Firstly, the subject should be aware of the opportunities and set up goals and objectives for accomplishing them. They should as well consider the internal and external environment where it is applicable. In inventory management, the environment dictates the interaction and conversion of inputs to outputs. In the process, alternatives can be developed to address the objectives and goals. The alternatives considered constitute the final solution for realizing the goals of the plan. Choosing the best alternative may be difficult, but the purpose and practicality of each should be a guide. Once the best option has been selected, the management should provide finances and other supporting materials to put the plan into action.
From the time an opportunity has been identified, and a plan developed to achieve, control is vital in every step. Control is the act of ensuring that activities provide the best and desired results. It can be broken down into pre-control, concurrent and feedback control. They take place before, during and after the activity respectively. Managers apply various control measures including but not limited to statistical data, break-even point analysis, operational audit and personal observation. Stock-keeping unit (SKU) is common technique managers use in inventory control. It involves managing items that are already in the store, stockroom or warehouse. How to order, quantity and most effective supply source are key factors to be considered in inventory control and management. Managers divide inventories into two categories by an operational process and Estonian financial accounting rules.
The division results into a detailed classification of inventories into cycle stock, in-transit, buffer stock, speculative, seasonal and dead stock. Stock keeping units are used in management and control of these inventories to optimize the results for the firm in question. An inventory cycle is useful in displaying as well as tracking inventories through a possible stock-out process such as back-ordering, substitution, lost sales and calculating their average value. Controlling involves maintaining a balance between inputs and output as well as possible inventory replenishment. Periodic review system, reorder point system, calculation of order cycle time and application of master production schedule (MRP) are crucial tools and methods of controlling and management in the inventory to optimize the business operations.
Managers use the methods accompanied with the calculation of other useful values such as product total cost, out of stock costs, economic order quantity (EOQ), total stocking cost, ordering costs, inventory carrying cost and related warehousing costs. Other mathematical and statistical calculations can be applied to optimize and effectively control inventories to realize the goals and objectives of the firm with former calculations. Standard deviation, normal distribution, calculating service factor, inventory turnover, and stock cover. The resulting figure from these calculations aids inventory control managers top virtualize the inputs and output that are critical in achieving the goals and objectives defined in the plan.
Managers perform these activities and related calculations due to the integral function of inventory control and management in the daily operations of a business. It aids in customer service by ensuring that all requested products are available. Relationally, it encourages production, buying of goods and transportation from the source and to the market. The costs and timelines developed during control ease the three processes. For instance, it allows buying to take place under the most favourable terms and prices.
Additionally, monitoring inventory protects businesses from uncertainties in market demands. Proper planning mechanisms and inventory management guarantee customers that they will have the products even in the event of scarcity in the market. Furthermore, inventory keeping provides cushioning as well as act as a contingency for events such as disruption of supply, fires, and strikes. However, inventory control consumes more resources as well as mask quality related problems. To add to that, it can divert the manager's attention from other urgent issues. Despite the challenges, inventory planning, control and management are vital for optimizing business operations.
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