Keeping inventory control helps reduce costs and avoid losses.
An inventory is the accurate and orderly record of items belonging to an individual or a company . It is a detailed annotation of the components of an estate at a precise moment.
It is common for the concept of inventory to be associated with the idea of stock or existence . This is the name given to the set formed by all the units of goods or products that are stored in a warehouse or are available for sale.
However, inventory and stock do not refer to exactly the same thing. Stock refers to what is ready to be sold or delivered, without considering machinery, furniture and real estate, for example. Inventory, on the other hand, includes all these elements and even the raw materials used in production.
What is an inventory
An inventory is a list that is prepared with all the tangible assets of a person or a company in a specific period . These goods can be used, consumed, transformed, rented or sold, depending on the case and need.
It can be said, therefore, that the inventory reflects the assets of an entity. That is why it contains stock, which are the products stored in a warehouse or already available at points of sale. In this way, stock is always included in inventory, but inventory transcends stock.
It is appropriate that the inventory be detailed, with the specific characteristics of each heritage component. Likewise, the elements are expressed in monetary units , with which the inventory allows an assessment of the heritage.
Although the inventory can be written by hand on paper, it is currently usually carried out with computer resources. Even if a company has different branches or stores, it can have a centralized database that records inventory variations in real time.
Seasonal inventory is made up of products that sell the most or the fastest at a given time of year.
Classification according to type
Inventories can be classified in different ways depending on what type of registration they make and how they are carried out. When the inventory is carried out every certain time, it is called a periodic inventory .
An initial inventory , meanwhile, is usually prepared at the beginning of an accounting period, recording the assets existing at the time. A final inventory , for its part, is developed at the close of the fiscal year. The perpetual inventory , in turn, observes daily activities and keeps records in real time.
Inventory in transit refers to what is in motion or is about to arrive at the company, while inventory available for sale shows products already ready for sale.
The inventory of raw materials brings together the materials that have not yet been processed and will be used to manufacture products; The inventory of semi-finished products or those in the manufacturing process shows those found in the manufacturing instance; and the inventory of finished products , those that are prepared for sale or delivery . If we talk about a quarantine inventory , it refers to the goods that cannot yet be used in the production process.
The physical inventory , on the other hand, requires a material count to contrast the calculation with the stocks that are recorded in the books. The virtual inventory , on the other hand, fulfills an administrative function and does not contemplate making accounts with the objects themselves.
Warehouse inventory (which refers to the stored goods); the minimum inventory (the basics to meet demand); the maximum inventory (if exceeded, the cost of storage and logistics increases); anticipation inventory, safety inventory or reserve inventory (extra quantity of items to respond to a delay from suppliers or an increase in demand); and dead inventory or obsolete inventory (stocks that are not used or sold, therefore lacking turnover ) are other types of inventories. As can be seen, the notion refers to both the record itself and what is stored for a purpose.
Wasting inventory hurts a business.
Advantages and disadvantages of maintaining an inventory
Maintaining an inventory, in the sense of keeping a stock in storage , offers advantages and disadvantages. Among the benefits, it helps reduce costs linked to orders (purchases from suppliers).
It also helps avoid lost opportunities: the dispatch of merchandise or sales that cannot be completed due to inventory shortages. If there is demand planning , with appropriate inventory strategies you can guarantee the flow of goods and always be able to satisfy demand.
The negative aspects, especially when maintaining a very large inventory, are linked to the delay in responding to customers, coordination difficulties and storage costs.
At this point it is interesting to mention the concept of just-in-time inventory . This philosophy aims to organize production to minimize costs, controlling above all the raw material inventory. The ideal, according to this position, is to reduce inventories to a minimum; However, this decision may turn out to be wrong in an inflationary context, for example.