Academic Master

Human Resource And Management

Inventory Essay

Inventory is a list of items such as properties in store, assets, or the matters of a building. In a company’s balance sheet, inventories is the largest item within the current asset class. Due to this reason, the value of inventories have to be precisely calculated, and valued at the finish of every bookkeeping period in order to define the company’s revenue level. This paper shall therefore discuss the various alternatives to holding inventories.

Holding inventories refers to the process of storing the inventory that remains unsold. Hence, the main purpose of holding inventory is that it helps the company to avoid fluctuations in the process of demand and supply from affecting production or sales. The other purpose is that it can also be used as a transitory counterbalance in order to delay the effects of upsurge in prices. This consequently improves the margins, and sales (Wang et al., 2014, P.1229). The holding of inventories at times has both benefits and disadvantages, but it is important to note that the disadvantages of inventory holding outweigh the advantages, and this is because of substantial costs. One of the major concerns of most companies that hold large amounts of stock is the issue of storage capacity and fees. Businesses make large losses through paying labor to take care of transportation of the stock, organization of stock, and the management of storage space. Businesses that hire storage space lose extra profit by paying rent to store the unused stock. Also in the case of perishable goods, holding of these goods may result to items over staying even past their “Best before” dates (Tayal et al., P.69). Hence, in case these goods are held for a long period of time until they expire, they obviously have to be disposed, thus meaning that they are an entire loss.

Lastly, for businesses that attempt to keep up to date with the buying trends may find that the excess holding of inventory is disadvantageous. Since customers tastes and preferences change quickly, the products become outdated if they stay for long in stock. Thus a storage compartment filled with trendy goods can easily become a storage unit full of devaluated stock.

Inventory management may also be seen as a balancing act, is because it ensures that the stock of any business is not in excess neither is it in deficit. There exist some various alternatives to holding of inventories, and some of them are discussed below.

Drop Shipping

Rather than employing the use of traditional methods like “Just in time management” that depend on precise forecasting, the company might turn to a more convenient form of controlling inventories. Through the use of drop shipping, there is no longer no need to ship or store items and this therefore reduces the costs and save on time (Axsäter, 2015, n.p). Thus once an order is made, the whole seller or vendor are informed and they can handle the task. One of the benefits of this method is that it reduces the costs involved in paying rent on warehouses, and on the cost of paying staff to organize and maintain the stored stock.

Setting Par Level

Stock management is made easier through setting par levels for every product. Par level refer to the least amount of stock that has to be on hand every time. Hence whenever the inventory falls below the set minimum, this implies that it is time to order more. The setting minimum levels of required stock helps to reduce cases of inventory holding. This is because the business only orders that which is sufficient at that particular moment, this minimizes wastage in the case of perishable goods and also reduces the costs involved in holding inventory.

In conclusion, all businesses must ensure that they have appropriate ways of handling inventories. Since the main aim of any business is to make profits, it must ensure that it cuts all costs completely. One of the most common form of cost that needs to be eliminated by all organizations is inventory holding costs. If these costs are reduced, the business shall be able to make more profit due to efficient sales.

Bibliography

Tayal, S., Singh, S. and Sharma, R., 2015. An inventory model for deteriorating items with seasonal products and an option of an alternative market. Uncertain Supply Chain Management3(1), pp.69-86.

Axsäter, S., 2015. Inventory control (Vol. 225). Springer.

Wang, H., Liang, X., Sethi, S. and Yan, H., 2014. Inventory commitment and prioritized backlogging clearance with alternative delivery lead times. Production and Operations Management23(7), pp.1227-1242.

SEARCH

Top-right-side-AD-min
WHY US?

Calculate Your Order




Standard price

$310

SAVE ON YOUR FIRST ORDER!

$263.5

YOU MAY ALSO LIKE

Pop-up Message