Inventory Management keeps track of goods and materials held available in stock. It allows the management of sales, purchases and payments. Inventory management software, such as Fishbowl, helps create invoices, purchase orders, receiving lists, payment receipts, and can print bar-code labels. An inventory management software system configured to a warehouse, retail, or product line, will help create revenue for the company and control operating costs. Here are five common inventory phrases:
SKU – Stock-Keeping Unit (pronounced Skew) is a unique combination of all the components that are assembled into the purchasable item. Therefore, any change in the packaging or product is a new SKU. This level of detailed specification assists in managing inventory.
BOM - Bill of Materials (pronounced bomb) is the term used to describe the raw materials, parts, sub-components, and components needed to manufacture a finished product. A BOM can define:
Products as they are designed, which is an engineering
As they are ordered, which is a sales
As they are built, which is a manufacturing
As they are maintained, which is a service
JIT – Just-in-Time – JIT is the practice of keeping very low levels of inventory and using sophisticated ordering and manufacturing methods to get the product into inventory just in time to be shipped. The goal is to maximize inventory turnover, and minimize the money tied up in inventory.
FIFO – First in First out (pronounced Fife-oh) - FIFO is pushing the old items up front to make room for new items in the back that are of the same kind. Items that are perishable and have a sell by date such as milk and eggs, or if you have a product that has periodic software upgrades, would use the FIFO method. You would want to use FIFO to reduce old stock in order to make way for the new stock.
LIFO – Last in First out (Pronounced Life-oh) – LIFO is pushing the old items back to make room for new items in the front that are of the same kind. The last items stocked will be the first items sold. This would be a typical stocking method for items that have no “sell-by” date associated with them, or at least one that is in the distant future, such as canned goods or a product that has no upgrade scheduled for a while, etc.
COGS, LIFO and FIFO as pertained to accounting is discussed in Lesson 8.
LESSON 9 - BUSINESS BASICS PART II - OPERATIONS MANAGEMENT, CUSTOMER SERVICE, IS & HR
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