Marketing Essentials Section 24.2 Inventory Control Chapter 24 Stock Handling and Inventory Control
SECTION 24.2 What You'll Learn Inventory Control
The concept of inventory management
Different types of inventory systems
Unit and dollar control of inventory
How to calculate stock turnover
The concept of stock management of basic, model stock, and never-out lists
The impact of technology on inventory systems
SECTION 24.2 Inventory Control Why It's Important
The inventory a business owns represents money tied up in products until the inventory is sold. Since inventory is a large part of the total investment of a business, well-managed and controlled inventories increase the profits of a business.
Inventory refers to an amount of goods stored, including raw materials, purchased components, manufactured sub assemblies, works in process, packaging materials, and finished goods.
Inventory management is the process of buying and storing products for sale while controlling costs for ordering, shipping, handling, and storage.
Inventory Management Slide 1 of 2
SECTION 24.2 Inventory Control Inventory Management A just-in-time inventory system is an arrangement in which suppliers deliver parts and raw materials just before they are needed for production. Plants keep only small stocks on hand to avoid tying up money and inventory space. Slide 2 of 2
SECTION 24.2 Inventory Control Inventory Systems
All merchandise bought and sold must be tracked to gain the information needed for effective inventory management. Two methods of tracking inventory are:
the perpetual inventory system
the physical inventory system
SECTION 24.2 Inventory Control Perpetual Inventory System
A perpetual inventory system tracks the number of items in inventory on a constant basis, as sales occur. There are two strategies:
Manual Systems Employees gather paper records of sales and enter the information into the inventory system.
Computer Based Systems A point-of-sale terminal automatically feeds sales transaction data directly into a computer.
Dollar control represents the planning and monitoring of the total inventory investment that a business makes. This information helps a business determine its net profit.
Unit control refers to the quantities of merchandise that a business handles. This information helps a business make better merchandising decisions.
Dollar vs. Unit Control Slide 1 of 2
SECTION 24.2 Inventory Control In a unit control inventory system, each item or group of related items is referred to as a stockkeeping unit (sku) . Tracking the skus shows which items (including which sizes and colors) are successful and which are not selling. This system also helps show when a product needs to be ordered. Dollar vs. Unit Control Slide 2 of 2
SECTION 24.2 Inventory Control Stock turnover is the number of times the average inventory has been sold and replaced in a given period of time. High turnover rates mean higher profit for the business because its money is not tied up in inventory. Stock Turnover Slide 1 of 2
There are three plans used to monitor different kinds of stock. They are:
basic stock list—for staple items
model stock list—for fashion items
never-out list—for very popular items
Stock Lists Slide 1 of 4
SECTION 24.2 Inventory Control Buyers use basic stock lists to plan purchases and keep track of items that should always be in stock. Where on this list is the stockkeeping unit (sku)? If you ran a retail store, what kind of items would be on your basic stock list? Basic Stock List Slide 2 of 4 October Sales November Sales December Sales Stock Description Size Packing Units Cost Retail Min. Stock This Year Last Year This Year This Year Last Year Last Year 1381 1382 1383 1384 1385 1386 Skippy Peanut Butter Skippy Peanut Butter Skippy Peanut Butter Jif Peanut Butter Jif Peanut Butter Jif Peanut Butter 32 oz. 32 oz. 18 oz. 18 oz. 12 oz. 12 oz. 24 24 24 24 24 24 4 8 8 4 8 8
SECTION 24.2 Inventory Control Buyers use model stock lists for fashion merchandise. How and why does this type of list differ from a basic stock list in form and content? Why would it be more difficult to maintain accurate model stock lists than basic stock lists? Model Stock List Slide 3 of 4 PRODUCT CLASS ____________________________________________________ SEASON ____________________________ Specific Styles General Styles Price Range Color Size 6 Size 8 Size 10 Size 12 Size 14 Total Units Blouse Blouse Sleeveless Tailored Short-sleeve Oversize $25 $35 White Black Blue Pink Orange 12 12 12 24 24 1 1 1 2 2 3 3 3 6 6 3 3 3 6 6 3 3 3 5 5 2 2 2 4 4 Misses Sportswear Spring
Do you think a just-in-time inventory control system could be used in a retail or wholesale operation? Why or why not?
24.2 Graphic Organizer Inventory Systems Perpetual Inventory System Tracks inventory on a constant basis, giving an up-to-date record throughout the year. Physical Inventory System Stock is visually inspected or counted to determine actual inventory. Business can use both systems, comparing physical records to perpetual records to identify problems. Manual System Computer Based System Visual Control Tickler Control Annual Inventory