![]() ![]() ![]() Obviously, the better the customer service the greater the likelihood of customer satisfaction. Thus, customers do not have to wait until the next order cycle, or even worse, leave empty-handed to find another supplier. This is because maintaining a buffer inventory allows companies to reduce the probability that it will experience outages of desired goods. Generally, the higher the level of buffer inventory, the better the firm's customer service. Buffer inventory is any amount held on hand that is over and above that currently needed to meet demand. These inventory cushions are often referred to as buffer inventory. Inventory is sometimes used to protect against the uncertainties of supply and demand, as well as unpredictable events such as poor delivery reliability or poor quality of a supplier's products. BUFFER INVENTORYīuffer inventory, also called buffer stock or safety stock, is a cushion of supply in excess of forecast demand. Of course, this can greatly increase the transit time for these inventories, hence an increase in the size of the inventory in transit. This is in order to take advantage of economies of scale. Some large firms, such as automobile manufacturers, employ freight consolidators to pool their transit inventories coming from various locations into one shipping source. Merchandise shipped by truck or rail can sometimes take days or even weeks to go from a regional warehouse to a retail facility. Since the inventory is still in-transit it is also called pipeline inventory and it is a crucial part of inventory management. Transit inventories result from the need to transport items or material from one location to another, and from the fact that there is some transportation time involved in getting from one location to another. Some of these are also known by other names, such as speculative inventory, safety inventory, and seasonal inventory. ![]() Hence, the following lists the 6 main inventory classification that can aid in inventory management. Inventories can be further classified according to the purpose they serve. Therefore, inventory is required to be classified with some logic to be able to manage the same. Inventory in any organization can run in thousands of part numbers or classifications and millions of part numbers in quantity. We’ll cover the 6 main classification of inventory to help managers get a better understanding of inventory management. As such, it is usually important that directors and senior management understand the inner workings of the supply chain to improve their inventory management skills. Inventories usually make up a large part of the total current assets of a company. In business, inventory may be defined as the goods held for sale in the ordinary course of business or the goods that are used to manufacture goods to be sold. Inventory is a necessary evil in any organization engaged in production, sale or trading of products. ![]()
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