Inventory Management Techniques

Name: Inventory Management Techniques
Author: Sergio Lopez

Learn how to use inventory management to improve your business.

Preview the first lesson free — get full access to all 9 lessons.

Course: On-Demand

(upbeat music) Proven inventory management techniques can help businesses minimize risk and maximize sales. The following lessons we'll explore different management strategies and how they can be used to grow an organization. Just-in-time or JIT is an inventory management philosophy and tracking methodology that states that inventory should only be purchased, warehoused and move to production when the operational process requires it. JIT can be traced back to some of Henry Ford's, early automotive assembly line processes. Ford knew that keeping too much inventory in the wrong places of the assembly line process would cost him money. He tried to keep inventory where the assembly process needed it most. The next evolution of JIT happened in post-World War II, Japan. Taiichi Ohno incorporated some of these concepts at the new Toyota assembly plant. From an inventory management perspective JIT and the proper management of inventory resources go hand in hand. Inventory in the wrong spot will tie up cash and hurt efficiency and costs. Having the correct inventory in the right location is the most efficient use of resources. One disadvantage of JIT is that it can interfere in the flow of materials through the supply chain. If there is a slowdown in any portion of the supply chain, the downstream stakeholders could suffer a disruption which could impact efficiency and customer satisfaction. If JIT inventory processes are not monitored carefully savings can be wiped away by loss sales or additional costs. As you can see from the Ford and Toyota examples, JIT is vital in a manufacturing environment. Modern manufacturing techniques are all about efficient processes with an uninterrupted flow of materials. JIT helps this by limiting inventory to right before it's needed. By keeping the inventory low, better inventory accuracy is achieved, which promotes better cost control of that inventory. But the risk still remains. If the supply chain suffers any interruptions in the flow of needed materials, the manufacturing process could become backed up as well.

Beginner Provider : Sergio Lopez 9 Lessons · 26m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

In these lessons, we’ll discuss some advantages and disadvantages of just in time (JIT), as well as how the ABC analysis and cycle counting methodologies provide a method to track the inventory based on a prioritization scheme. We’ll also address concepts such as economic order quantity (EOQ), minimum order quantity (MOQ), safety stock, customer service level, fill rate, Lean, and Six Sigma.

What You'll Learn

Learn the concept of just in time (JIT), including its advantages and disadvantages
Apply ABC analysis and cycle counting to track and prioritize inventory
Understand how FIFO, LIFO, and WAC inventory valuation methods work
Calculate and use economic order quantity (EOQ) and minimum order quantity (MOQ), including how lot size and discounts affect inventory
Determine safety stock and reorder points and recognize the importance of customer service level and fill rates
Explain how Lean inventory management, TIMWOOD, and Lean Six Sigma apply to inventory management

Key Takeaways

Just in time (JIT) has both advantages and disadvantages for inventory management.
ABC analysis and cycle counting provide a method to track inventory based on a prioritization scheme.
Economic order quantity (EOQ), minimum order quantity (MOQ), lot size, and discounts all influence inventory decisions.
Customer service level and fill rates are important measures in inventory management.
Lean inventory management, TIMWOOD, and Lean Six Sigma are important approaches to managing inventory effectively.

Frequently Asked Questions

What topics does this course cover?

The course covers just in time (JIT), ABC analysis and cycle counting, FIFO, LIFO, and WAC, economic order quantity (EOQ), minimum order quantity (MOQ), safety stock, reorder point, customer service level, fill rate, Lean, and Six Sigma/Lean Six Sigma.

What inventory methodologies will I learn to prioritize and track stock?

You will learn how ABC analysis and cycle counting provide a method to track inventory based on a prioritization scheme.

Does the course explain inventory valuation methods?

Yes. It covers how FIFO (First In First Out), LIFO (Last In Last Out), and WAC (weighted average cost) are important to inventory management.

Does the course include a way to check my understanding?

Yes. The course includes a Test Your Knowledge lesson.

How does the course connect to Lean and Six Sigma?

It addresses how Lean inventory management is important to a business and covers the importance of TIMWOOD and Lean Six Sigma to inventory management.