What is inventory analysis and how does it work?
- Внедрение информационных систем учета и управления
- 22 August 2024
Inventory analysis is the process of evaluating inventory performance to ensure the constant availability of the right quantity and type of products. Inventory represents significant expenses for manufacturing companies, and proper management is crucial for the financial health of the business.
Importance of Inventory Analysis
Necessary inventory helps reduce capital costs and expenses, minimize product shortages, and increase profitability and cash flow. It also contributes to higher customer satisfaction and loyalty.
Methods of Inventory Analysis
There are many methods of inventory analysis, focusing on two key indicators: sales volume and contribution to profit. Here are some of them:
- ABC Analysis: Sorts products into three categories based on sales volume or profit.
2. FSN Analysis: Classifies inventory into fast, slow, and non-moving groups based on turnover speed.
3. Cost and Importance-Based Methods: Used to evaluate materials needed for production.
4. Product Distribution Analysis: Divides items into vital and desirable based on their necessity for producing the company's key products.
5. HML Method: Sorts supplies into high, medium, and low-cost categories.
Key Inventory Performance Indicators
Widely used inventory indicators include:
• Inventory Turnover Ratio: Shows the speed of sales.
• Gross Profit: Assesses profitability.
• Return on Investment: Profitability indicator.
• Days of Inventory on Hand: Determines how many days inventory is on hand.
• Backorder Rate: Helps determine if the company orders the necessary products.
Automating Inventory Management
Trying to track all this information manually can quickly become an impossible task. The solution is an inventory management system that can track orders and inventory in real-time, providing the business with the information needed to increase profitability.