Saturday 8 December 2018

Inventory planning & Control – Effective reduce waste

The process of determining the optimal quantity and timing of inventory for the purpose of aligning it with sales and production capacity. Inventory planning has a direct impact a company's cash flow and profit margins especially for smaller businesses that rely upon a quick turnover of goods or materials.

In the previous article, we discussed the implementation of business assessment as part of inventory optimization efforts. This time we will discuss the next action, which is making inventory planning. Inventory control means to monitor the stock of goods used for production, distribution and captive (self) consumption.

The existence of complete and accurate data is very important in the process of making stock planning. In the business assessment stage, the organization must have obtained the gap data. To run the process of standardization and improvement, it is very important to have in-depth knowledge of operations, especially if the business has grown (e.g. through acquisitions) and has a large and varied source of data.

Inventory planning should be supported by accurate data on:

  1. Currently owned stock

  2. Open orders (sales, production, purchase)

  3. Lead time

  4. Standard cost or average cost

  5. Bill of material (BOM)

The following steps should be taken when making inventory planning:

  • Create a classification of the following three segments: raw material, work-in-process or sub-assembly, and the finished product.

  • Create two categories for each segment: stock and non-stock categories (purchase to order and make to order).

  • Plan each segment and the factors involved in the process.

  • Create a stock classification of raw materials (raw material).

  • Calculate safety stock and minimum order quantities for inventory optimization and transaction cost optimization while pursuing service targets to customers. Develop inventory planning for raw materials from safety stock calculations and existing order quantities.

  • Repeat the above steps in other segments to produce a comprehensive inventory plan to achieve the desire level of customer service.

  • Identify the impact of initial inventory and plan stock investment.

  • When planning has been establish, upload the planning parameters to the transaction system.

After inventory planning is establish and mature, the team within the organization will move to the next stage, i.e. execution process according to the plan.

The role of planning and inventory control

Planning and controlling are part of the inventory management. Control is an act so that the activities undertaken by as well as possible in accordance with a predetermine plan.

Control without planning is futile and planning without control is ineffective actions. Can generally be formulate here that the meaning of planning and controlling. The raw materials according to is an activity estimate needs supplies of raw materials, either in quantitative or qualitative. So that companies can operate as plan, in short that the meaning of planning and controlling supplies of raw materials, Semi-finish materials and supplies inventories of finish goods. As a whole is define as an attempt to determine the magnitude of the level of planning and control it efficiently and effectively.

Determine Control

To determine the inventory control of the raw materials effectively require the purpose of effective planning and control of activities is also the (Controlling). As for the purpose of planning the raw materials are:

  • In order for the amount of the preparation material provide too little not too too much, it means in a sufficient amount of efficiently and effectively.

  • The company's operations in particular production process can run efficiently and effectively.

  • The implications of the provision of an efficient material in order to smooth production process, means must be provide to a number of investment capital in sufficient quantities.

To set the level of inventories in the amount, quality, and a great time. Inventory control of materials require for effective and efficient, and therefore the author presents the notion of controlling supplies of raw materials.
Control inventory according the sequence of activities from activities that are closely link. To each other in all of the company's production operations in accordance. What has already been plan ahead good time, quantity, quality or cost.

It is a function of managerial control is very important because physical supplies many companies engage in stock investments the biggest dollars current assets.
Because the company must hold an appropriate inventory level because if too much inventory means more money or capital are embed and fees incur. the large amount of inventory and when the inventory is too small it will interfere with the smooth running of the production activities of the company.

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