This document provides an overview of inventory and warehouse management. It defines inventory as materials used for production or customer demands, including raw materials, work in progress, and finished goods. The document discusses the need for inventory to protect against uncertainties and allow economic production. It also describes different types of inventory stocks and the costs associated with inventory. Furthermore, it explores barcode systems, RFID systems, inventory control systems using perpetual and periodic methods, and the benefits and challenges of inventory management systems.

1. M O D U L E 2 :
I N V E N T O R Y
A N D
W A R E H O U S E
M A N A G E M E N T
L E C T U R E R : M S . S H A N E K A P E AT

2. TO BE COVERED
Definition of
inventory and
inventory
management
Explore the need
for inventory
Types of
inventory/stock
Costs of
inventory
Barcode systems RFID Systems
Inventory control
systems
Inventory
management
systems

3. INVENTORY DEFINED
• Inventory is a stock of
materials used to facilitate
production or satisfy
customer demands
• Typical inventories include
raw materials, work in
process, and finished goods

4. INVENTORY
DEFINED
• The rate of flow into the
tank is related to the
supply rate, and the
rate of flow out of the
tank corresponds to the
demand rate
• The water level which is
the inventory is the
buffer between supply
and demand

5. INVENTORY
DEFINED
• Inventory is often described
as a “necessary evil” and a
form of waste
• This perspective has led
many firms to strive
relentlessly to reduce their
inventory levels of items
that they manage, often
without careful consideration
of items themselves (e.g.,
uncertainty, stockouts, etc.)

6. INVENTORY MANAGEMENT DEFINED
• Inventory management is
among the most important
operations management
responsibilities because
inventory requires a great deal
of capital and affects the
delivery of goods to customers

7. SO WHY DO YOU NEED INVENTORY?
TO PROTECT AGAINST
UNCERTAINTIES
TO ALLOW ECONOMIC
PRODUCTION AND
PURCHASE
TO COVER ANTICIPATED
CHANGES IN DEMAND
OR SUPPLY
TO PROVIDE FOR
TRANSIT

8. TYPES OF STOCK
RAW MATERIALS WORK-IN-PROCESS FINISHED GOODS

9. OTHER STOCKS
Consumables
Service, repair,
replacement, and spare
items (S&R items)
Buffer/safety inventory Transit inventory

10. COSTS OF INVENTORY
Item cost- This is the cost of buying or producing the individual inventory items
Ordering (or setup) cost- The ordering cost is incurred when ordering a lot (batch) of items and
generally does not depend on the lot size ordered; it is assigned to the entire batch
Carrying (or holding) cost- The carrying or holding cost is associated with keeping items in
inventory for a period
Stockout cost- Stockout cost reflects the economic consequences of running out of stock

11. S T O RING
A N D
H A N D LING
I N VE NT OR Y
I N
S U PP LY C H A INS

12. BARCODE SYSTEM
• Many inventory management
platforms include barcoding
systems as a common feature
that helps organize and speed
up daily tasks while boosting
accuracy and efficiency
• When an employee scans a
product in or out, inventory levels
are automatically updated

13. BARCODE SYSTEM BENEFITS
Accurate records of all
inventory transactions
Eliminating time-consuming
data errors that occur
frequently with manual or
paper systems
Eliminating manual data
entry mistakes
Ease and speed of scanning Updates on-hand inventory
automatically

14. BARCODE SYSTEM DOWNSIDES
Barcode scanners need
a direct line of sight to
the barcode to be able
to read
Barcodes have no
read/write capabilities;
they do not contain
any added information
such as expiry date etc
They are very labour
intensive; as they must
be scanned
individually
Barcodes have less
security than RFID; as
they can be more
easily reproduced or
forged
Barcodes are more
easily damaged
If a barcode is ripped
or damaged there is
no way to scan the
product

15. RADIO FREQUENCY IDENTIFICATION
(RFID) INVENTORY SYSTEMS
• Radio frequency identification (RFID) inventory systems use active and passive
technology to manage inventory movements
• Active RFID technology uses fixed tag readers throughout the warehouse
• Passive RFID technology requires the use of handheld readers to monitor inventory
movement
• When a tag is read, the data is recorded by the inventory management software
• So RFID systems are another important facet that many inventory management
systems include and support

16. RFID ADVANTAGES
• Can read RFID tags from a greater
distance than barcodes
• RFID tags don’t need to be positioned in
a line of sight with the scanner
• RFID tags can be read at a faster rate
than barcodes
• RFID tags can work within much greater
distances
• RFID tags are read/write devices
• RFID contain high levels of security

17. RFID
SYSTEMS
DISADVANTAGES
Much more expensive than barcode-based
systems
RFID tagging suffers from interference issues
Transitioning into RFID can be costly as
suppliers, customers and transport companies
need to have the equipment available as well
RFID tags carry more data than barcodes
which can bog down unprepared servers

18. INVENTORY
CONTROL
SYSTEMS

19. PERPETUAL INVENTORY SYSTEM
• Continually updates inventory records and accounts for additions and subtractions
when inventory items are received, sold from stock, moved from one location to
another, picked from inventory, and scrapped
• They deliver up-to-date inventory information and better handle minimal physical
inventory counts
• Preferred for inventory tracking because they deliver accurate results on a continual
basis when managed properly
• Works best when used in conjunction with warehouse inventory database of
inventory quantities and bin locations updated in real time by warehouse workers
using barcode scanners
• Inventory management apps are perpetual inventory systems

20. PERPETUAL
INVENTORY
SYSTEM
DISADVANTAGES
These systems cannot be
maintained manually and require
specialized equipment and
software
Periodic maintenance and
upgrades are necessary
Recorded inventory may not
reflect actual inventory as time
goes by

21. PERIODIC INVENTORY SYSTEM
Do not track inventory daily
Track inventory using physical inventory counts
Organizations may choose whether to calculate the cost of
ending inventory using LIFO or FIFO inventory accounting
methods or another method

22. PERIODIC INVENTORY SYSTEM
DISADVANTAGES
When physical inventory counts are being completed, normal business activities
nearly become suspended
Typically, don’t use inventory trackers
Becomes more difficult to identify where discrepancies in inventory counts occur
Labour intensive

23. INVENTORY
MANAGEMENT SYSTEMS
An inventory management system is the
combination of technology (hardware and
software) and processes and procedures that
oversee the monitoring and maintenance of
stocked products, whether those products are
company assets, raw materials and supplies, or
finished products ready to be sent to vendors
or end consumers

24. INVENTORY
MANAGEMENT SYSTEMS
• A system for identifying every inventory item and
its associated information,
• Hardware tools for reading barcode labels
• Inventory management software,
• Processes and policies for labelling,
documentation, and reporting. This should include
an inventory management technique such as Just
in Time, ABC Analysis, First-In First-Out (FIFO),
Stock Review, or another proven methodology.
• People who trained to follow these policies and
processes.

25. BENEFITS OF INVENTORY MANAGEMENT
SYSTEMS
Improved cash
flow
Better reporting
and forecasting
capabilities
Reduction in
storage costs
(overhead)
Reduced labor
costs
Reduction in
dead stock
Better
organization
Enhanced
transparency
Improved
supplier, vendor,
and partner
relationships

26. CHALLENGES OF INVENTORY
MANAGEMENT SYSTEMS
• Most of the challenges associated with
inventory management systems arise from
failing to follow best practices or relying on
outdated methods
• In these cases, a complete inventory
management overhaul may be in order to
streamline inventory management and add
clarity and consistency to the process
company-wide