Module 6 Inventory Management Techniques III
Uploaded by
Reise MendozaModule 6 Inventory Management Techniques III
Uploaded by
Reise MendozaModule 6 - Inventory
Management
Techniques III
by: CHARMAINE GAY E. MEDINA, LCB, LPT
LEARNING OUTCOMES:
At the end of the module, you should be able to:
Discuss the last three inventory management
techniques.
Analyze each inventory management techniques
and its examples.
Apply it in your daily life and future career.
BULK SHIPMENTS
This technique is based on the assumption
that buying in bulk is cheaper. The method is
great if a business is sure that their products
will sell but can pose challenges when
demand suddenly changes backordering.
A backorder is when a customer places an
order for stock that is not yet available.
HIGHEST POTENTIAL
FOR PROFITABILITY
Pros of Bulk FEWER SHIPMENTS
MEAN LOWER SHIPPING
Shipments COSTS
WORKS WELL FOR
STAPLE PRODUCTS WITH
PREDICTABLE DEMAND
AND LONG SHELF LIVES
HIGHEST CAPITAL RISK
POTENTIAL
Cons of Bulk INCREASED HOLDING
COSTS FOR STORAGE
Shipments
DIFFICULT TO ADJUST
QUICKLY WHEN
DEMAND FLUCTUATES
SOLID BULK LIQUID BULK
FIFO & LIFO
FIFO stands for first in first out. It is an
inventory accounting method that says the
first items in your inventory are the first ones
to leave, so you always get rid of your
oldest stock first.
FIFO & LIFO
LIFO stands for last in, first out. It is an
inventory accounting method that says your
last items in your inventory are the first
ones to leave, meaning that you get rid of
the newest stock first.
If you’re operating a food business or otherwise
handling food Inventory management or any other
perishable items, you pretty much have to use the
FIFO rule. Otherwise, you’ll end up with obsolete
inventory that you have to write off as a loss.
LIFO is an excellent method for non-perishable
homogeneous goods like brick or stone, so if you
get a fresh batch of items like these, you don’t
have to rearrange your warehouse or rotate
batches because they’ll be the first ones out
anyway.
FIFO
LIFO
BACKORDERING
refers to a company’s decision to take orders
and receive payments for out-of-stock
products. It’s a dream for most businesses but
it can also be a logistical nightmare … if
you’re not prepared.
When there’s just one out-of-stock item, it’s
simply a case of creating a new purchase
order for that one item and informing the
customer when the backordered item will
arrive. When it’s tens or even hundreds of
different sales a day, problems begin to
mount.
If you’re a small retailer, it may not be feasible
to risk overstocking. In this case, you might
consider labeling the item’s “Buy now” button
as “Pre-order” or “Get yours when it comes
back in stock.” This creates a reasonable
expectation for customers that it will take a bit
longer to arrive.
Alternatively, some businesses run with a “no-
stock” approach which involves taking only
backorders until they’ve generated enough
sales to then place a large bulk in order with a
supplier.
INCREASED SALES AND
CASH FLOW
Pros of MORE FLEXIBILITY FOR
SMALL BUSINESSES
Backordering
LOWER HOLDING
COSTS AND LOWER
OVERSTOCK RISK
HIGHER RISK OF
Cons of CUSTOMER
DISSATISFACTION
Backordering
LONGER FULFILLMENT
TIMES
"Make everyday a
little less ordinary."
