What are some of the metrics you would recommend to monitor effective working capital management for inventory? How would you implement them?
Inventory is defined as store of goods. Inventory is often discussed in terms of goods for sale; organizations - manufacturers, service-providers - also have inventories. Inventories are not only intended for sale to customers it may also be held in any premises an organization for use. Stock ties up cash and if uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to control them.
It can be divided in three parts:
? Raw materials - materials and components scheduled for use in making a product.
? Work in process, (WIP) is made up of all the materials, parts (components), assemblies, and those is being processed or are waiting to be processed. This generally includes all material and components that have begun their transformation to finished goods.
? Finished goods - goods ready for sale to customers.
Efficient stock control is key to cutting costs - you need the right stock on hand for the right jobs, at the right time, all the while keeping your inventory levels as low as possible to control cost.3
If your inventory is not sufficient then you can lose sales and cost of back orders is also time consuming. In the midst of production if you run short of raw materials or part it can be crucial and will increase your operating costs. 3
If we keep excess inventory, there is a possibility that we would not need it for a ...
This discusses the metrics to monitor effective working capital management for inventory