Inventory Management Cheat Sheet.

This inventory management cheat sheet provides a foundation of knowledge to build upon. In the links below you can dive into great detail in all aspects of inventory management. Collection of Supply Chain CHEAT SHEETS.

1. Inventory Types

Raw Materials: Basic materials used in production.
Work-in-Progress (WIP): Items that are in the process of being manufactured.
Finished Goods: Completed products ready for sale.
Maintenance, Repair, and Operations (MRO): Supplies used to maintain operations.

2. Inventory Control

Stock Levels: Monitoring quantities to prevent overstocking or stockouts.
Reorder Point (ROP): Trigger point for reordering stock to avoid running out.
Safety Stock: Buffer stock to handle fluctuations in demand or supply delays.

3. Inventory Valuation

Cost Methods:
- FIFO (First-In, First-Out): Oldest inventory is sold first.
- LIFO (Last-In, First-Out): Newest inventory is sold first.
- Weighted Average Cost: Average cost of inventory items.
Inventory Turnover: Measure of how often inventory is sold and replaced.

4. Ordering and Procurement

Economic Order Quantity (EOQ): Optimal order quantity to minimize total inventory costs.
Lead Time: Time between placing an order and receiving it.
Supplier Management: Relationships and negotiations with suppliers for cost-effective and reliable procurement.

5. Inventory Tracking

Barcoding/RFID: Technologies for accurate tracking and management.
Inventory Management Software: Tools for real-time tracking, reporting, and analysis.

6. Demand Forecasting

Historical Data Analysis: Using past sales data to predict future demand.
Market Trends: Adjusting forecasts based on industry trends and seasonal variations.

7. Stock Audits

Cycle Counting: Regularly counting a portion of inventory to ensure accuracy.
Physical Inventory Count: Comprehensive count of all inventory items periodically.

8. Metrics and KPIs

Inventory Turnover Ratio: Turnover = Average Inventory \ Cost of Goods Sold (COGS)
Days Sales of Inventory (DSI): DSI = Average Inventory \ COGS per Day
Stockout Rate: Stockout Rate = Number of Stockouts \ Total Number of Orders
Carrying Cost Percentage: Carrying Cost % = Carrying Cost \ Total Inventory Value

9. Inventory Optimization

ABC Analysis: Classify inventory into A (high value), B (moderate value), and C (low value) categories.
JIT (Just-In-Time): Ordering stock just in time for production or sales to reduce holding costs.

10. Risk Management

Shrinkage Control: Measures to reduce loss due to theft, damage, or errors.
Obsolescence Management: Strategies to deal with outdated or unsellable inventory.

11. Documentation and Reporting

Inventory Records: Accurate and up-to-date records of stock levels and movements.
Reports: Regular reports on inventory status, turnover, and financial impact.

Effective inventory management involves balancing these aspects to ensure optimal stock levels, minimize costs, and meet customer demand efficiently.

Inventory Management Quotes

“Make inventory a common enemy for your company.” ~Dave Waters
“The goal is not to improve one measurement in isolation. The goal is to reduce operational expenses AND reduce inventories and increase throughput simultaneously.” ~Eliyahu M. Goldratt
“Converting a classic batch-and-queue production system to continuous flow with effective pull by the customer will double labor productivity all the way through the system (for direct, managerial, and technical workers, from raw materials to delivered product) while cutting production throughput times by 90 percent and reducing inventories in the system by 90 percent as well.” ~James P. Womack
“Exceed your customer’s expectations. If you do, they’ll come back over and over. Give them what they want – and a little more.” ~Sam Walton, founder of Walmart.
“When you are out observing on the gemba, do something to help them. If you do, people will come to expect that you can help them and will look forward to seeing you again on the gemba.” ~Taiichi Ohno
“Quality is free. It’s not a gift, but it’s free. The ‘unquality’ things are what cost money.” ~Phil Crosby