Stock, raw materials, semi-finished products, products or assets that a company has in order to produce are natural products.
Keeping stock is one of the cost items of manufacturing firms. Like every cost, stock should be kept under control without raising the cost. Both stock and logistic, storage, wear and so on. costs are attempted to be reduced.
Let’s think we have a grocery store. In our grocery store, we strive to consume the sugars before they are approaching, while trying to keep the sugars in a wide variety. Holiday, while increasing the stock of sugar, makes an estimate of a demand more or less according to him, we store the amount of our warehouse. If we still have sugar in our stock after the feast, and we have not consumed these sugars before their expiration date, we have made the stock management wrong.
Why is the stock kept?
1. To meet the demand increase in certain periods
As is the case in our grocery store, the stock is kept in order to keep up with the increase in demand in certain periods. Stocked products can be placed on the market when demand occurs.
2.Preparation without preparation
Although commercial activity is attempted to be controlled by a number of calculations and estimates, stock can be kept to be prepared for unforeseen changes in the supply, supply and product supply triangle. In this way, the demand for any product or raw material is met without any problems.
3. Lower the cost of supply
Ordering a product collectively will reduce the supply costs. Since both the logistics and the cost per piece are reduced, the product / raw materials with continuous demand can be kept in high volumes.
For example, in the face of the expectation that the prices of raw materials or final goods will increase in the near future, enterprises can go to holding stocks in order not to be affected by this price fluctuation.
If you are experiencing fluctuations in the prices of the main raw materials of your production from time to time, you can apply this type of holding strategies.
Inventory management directly affects the production and supply process. It is vital for a company’s sustainability and profitability. There are advantages and disadvantages of stock management like every process.
Advantages of Inventory Management
- It ensures regular and continuous production process. Thus, due to lack of raw materials or products, the production process does not stop or disrupt.
- When the requirements are determined and managed correctly, financial management gains efficiency.
- The procurement and sales processes are streamlined, so the cost is reduced.
- Cost accounting can be made more comfortable.
- Production processes are closer to reality and easier to manage.
- Material, product loss is minimized.
Disadvantages of Inventory Management
- Holding stock can increase the costs of hosting. Storage costs are included in your financial statements as a pen.
- Money / cash may not be used for other resources due to the reason for the inventory.
- It may be necessary to dispose of the stored product close to the cost and sometimes less than the cost.
- If the price of raw materials is not stable in the market, it is likely that the raw material will be stocked and damaged at a high price.
How is inventory tracking done?
Inventory tracking can be done in many ways; With paper pencil, with a software like excel, with your own software, inventory tracking with special software.