An inventory process analysis studies in detail the procedures or steps a company use to co-ordinate the movement of products through their business operations. There are many different types of inventory which varies across different sectors. For example, manufacturing and production companies deal mainly with raw materials and eventually finished goods whilst retailers may just deal with the finished product ready for end use. These two types of business are at different stages of the supply chain but can have an inventory process which is very similar.
Inventory process analysis involves looking at the broad overview of the inventory procedures that a company uses to track inventory on their accounting ledger. The most common type of systems are periodic and perpetual. Periodic involves starting with an opening inventory balance and updating information every quarter as opposed to updating after each transaction. This is a common feature in perpetual inventory systems which update the general ledger after each sale or adjustment to the company’s inventory account. It is important to analyse which system will work for your business as perpetual inventory systems require more work but provide a higher degree of accuracy for managing the inventory.
When it comes to analysing the inventory, companies should select each process according to the type of stock or the nature of the company. A simpler inventory process should be adopted by companies who produce and sell homogeneous items for wholesale or batches. Have quality inspection in mind for these types of products as many companies sample by selecting a random item in the inventory to inspect.
Another important aspect which should not be ignored when conducting inventory process analysis is the time aspect. The amount of time needed to maintain an inventory often needs to be analysed as some companies do not have the workforce to maintain accurate inventory information.
The best way to make sure your process is well optimised to your business is to call on the expertise of supply chain consultants. Gideon Hillman are one such company who offer in depth inventory process analysis to help your business get the best out of your inventory. Please visit www.hillman-consulting.co.uk to find out about how Gideon Hillman can aid your inventory management.