Introducing Inventory

Name: Introducing Inventory
Author: Sergio Lopez

Learn the basic concepts and definitions of inventory.

Preview the first lesson free — get full access to all 5 lessons.

Course: On-Demand

(upbeat music) As a valuable item of exchange, inventory is relevant to a wide range of industries and companies. The following lessons will explore how inventory is identified throughout the manufacturing process, how it is assigned a cost value, and why it is stored. From an accounting perspective, inventory is the list of items that an organization owns, tracks and assigns value to based on purchases, production costs, and product sales. The concept of taking inventory refers to the physical act of counting and tracking those items. Inventory can be anything the company owns or has in its possession. It can be as small as nuts and bolts to oversized items such as airplanes. If the item has some value, it's essential to consider it as inventory, it must be accounted for. An organization's inventory is one of the most valuable assets it can have. A majority of time and effort is spent purchasing, storing, tracking, consuming, and selling inventory. If an organization does not have enough inventory to use or sell, it can be detrimental to the organization's health. Having too much inventory can also pose a problem by tying up cash that's needed elsewhere. When inventory is not managed properly, organizations can end up having too much of the wrong thing. Consumer demand can change, leaving organizations with items they cannot sell because they are expired, unpopular or irrelevant. This is why it is important for organizations to learn how to conserve resources and accurately track inventory. Inventory is considered an asset because businesses intend to consume or sell it within a specific period. An organization can track this asset in their financial balance sheet. Depending on the organization, inventory can be tracked using a pencil and paper, or a more sophisticated method, such as software. When tracking inventory, it's helpful to have a specific and unique identifier for each type of item. If the organization is small with only a few items to track, then doing so might not be needed. But as the organization gets larger and its inventory grows, it's much easier to use an identification method than trying to keep track of items in other complicated ways. This specific and unique identifier is called a stock keeping unit, or SKU. The SKU can be all numbers, all letters, or a combination of both, and it can be randomly generated. A SKU for a white sneaker with red trim that is size 12 could be represented as W1T2S12. In this case, the letters and numbers correlate to specific features of the product. W1 equals white leather, T2 equals red trim and S12 equals size 12. Now, instead of having to track how many sneakers with white leather, red trim and size 12 you have, you can simply track it using the SKU, which is much faster.

Beginner Provider : Sergio Lopez 5 Lessons · 15m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

For any business, controlling and managing inventory assets is important for the company’s health. All inventory has a cost and provides a value to the organization. In these lessons, we’ll explore the legitimate reasons for holding inventory. You’ll learn the definition of inventory and why it’s important to an organization. You’ll also discover how inventory can take many forms. We’ll discuss first in, first out (FIFO); last in, first out, (LIFO); and weighted average, and how they are tied to inventory.

What You'll Learn

Define inventory and explain why it is important to an organization
Identify the different forms and types that inventory can take
Explain the concept of a stock keeping unit (SKU)
Describe how inventory types change as they move through the material flow
Apply inventory valuation techniques including FIFO, LIFO, and weighted average
Recognize the reasons for holding inventory and the different types of inventory demand

Key Takeaways

Controlling and managing inventory assets is important for a company's health, and all inventory has a cost while providing value to the organization.
Inventory can take many forms, and its types change as it moves through the material flow.
FIFO (first in, first out), LIFO (last in, first out), and weighted average are valuation methods tied to inventory.
There are legitimate reasons for holding inventory, as well as different types of inventory demand.

Frequently Asked Questions

What will I learn in this course?

You'll learn basic inventory definitions, the concept of a stock keeping unit, how inventory types change as they go through the material flow, the importance of inventory valuation techniques, the reasons for holding inventory, and the different types of inventory demand.

What valuation methods does this course cover?

The course discusses first in, first out (FIFO); last in, first out (LIFO); and weighted average, and how they are tied to inventory.

What topics are covered in the lessons?

The lessons cover Defining Inventory, Inventory Types and Material Flow, Calculating Costs and Value, Why is Inventory Held?, and a Test Your Knowledge assessment.

Who is this course relevant to?

It is relevant to any business, since controlling and managing inventory assets is important for the company's health and all inventory has a cost and provides value to the organization.