Tuesday, 20 March 2012

Inventory Management Systems

Inventory Management of raw materials, parts, or finished products by an organization requires a set of rules and conventions, under which a bar code system is being used. Developing an IT Module aimed to manage the Inventory starts, basically, from assigning to each item an unique code. Ensuring a uniform and consistent coding is in fact a mandatory prerequisite for automatic processing of information.

The goal is to improve Inventory Management activities, to reduce costs incurred by all domain-specific operations (storage costs, purchase and transport costs, additional costs related to lack of Stock, etc...)

Another important premise in building an IT Module consists in necessity of using multiple methods of Stock assessment and calculation of prices, such as LIFO, FIFO, SP (Standard Price), LP (Last Price), AC (Average Cost). All these methods are useful for understanding the Stocks level, or in case it falls below safety Stock, or when it exceeds the maximum level.

Developing the IT Module must start from the importance accorded to ensure flexibility of production, meaning more accurate knowledge of what and how much is being produced to ensure market performance of the organization. Thus, an efficient Management of Stocks of raw materials – supported by appropriate IT tools – is the "key" to avoid a large chunk of disturbances recorded in the production flow.

The IT Module's utility for Inventory Management can increase significantly if you choose to use the JIT method ( Just in Time) also known as "zero Inventory". The basic principle of the method is to reduce inventories of raw materials that need to be brought from suppliers in the exact moment the production process needs to start so the final products will be delivered on the date stipulated in the contract with the beneficiary. Obviously, implementation of such methods can lead to methodological changes in the programming and manufacturing production itself . In addition, it can lead to an integration of a powerful IT infrastructure with components for Production Management, Commercial Management, Financial Management and Accounting.

The direct users of this IT component are those responsible for Management activities of the various categories of existing Stocks in the organization. The general functions of the IT Module are:
  • Managing the entire flow of Stock, meaning reception, bookings, consumption, transfers, adjustments so you can monitor the evolution in time of material consumtpion, based on the transactions made;
  • Tracking costs on different administration levels and in different location;
  • Tracking Inventory by multiple criteria (different prices for the same item, serial number, cell manufacturing, supplier, etc..);
  • Issuing reports in real time (balance of Stocks etc...);
  • Provides the support for purchasing decisions, programming, production launch and sales planning.

Automate Inventory Management brings certain benefits for all operations, but we also have to highlight the effects on other related activities, whose efficiency increases when Stock tracking is optimized. These are some of the most obvious advantages for using the IT Module:
  • Access to information in the database is controlled by the mechanism of passwords and access rights, structured by users;
  • Estabilishing the necessary products and achieve an optimal supply, based on a model provided by the system;
  • Daily update of Stock levels and accurate movement tracking in correlation with accounting records, ensuring a better base for decisions;
  • Tracking the dynamics of inventory costs associated with the posibility of adopting measures to reduce them.