What Are the Best Tips for Computer Inventory Management?

Traditional inventory management refers to the business management of the entry, exit, and storage of materials. Each node enterprise independently manages its own inventory. It seeks to reduce the risk of inventory, reduce shortages and reduce uncertain demand from the perspective of maximizing the company's own interests. Maintaining a certain amount of own inventory can reduce risks such as stock shortages and demand uncertainties, and reduce dependence on external traders to a certain extent, but there will be rising inventory costs, bullwhip effects, upstream and downstream corporate interests, and difficulties in cooperation and communication. And other issues. The main technologies used in traditional inventory management are MRP / MRPII, economic bulk order method, demand forecast, order point and ABC method.

Traditional inventory management

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Traditional inventory management refers to the business management of the entry, exit, and storage of materials. Each node enterprise independently manages its own inventory. It seeks to reduce the risk of inventory, reduce shortages and reduce uncertain demand from the perspective of maximizing the company's own interests. Maintaining a certain amount of own inventory can reduce risks such as stock shortages and demand uncertainties, and reduce dependence on external traders to a certain extent, but there will be rising inventory costs, bullwhip effects, upstream and downstream corporate interests, and difficulties in cooperation and communication. And other issues. The main technologies used in traditional inventory management are MRP / MRPII, economic bulk ordering method, and demand

In the traditional inventory management model, the inventory management of each node enterprise is independent. Each department in the logistics channel manages its own inventory, has its own inventory control strategy, and is closed to each other. The assumptions of traditional inventory management are:

1. Material requirements are continuous

Traditional inventory management assumes that the demand for materials is stable, so the demand for each material is less than the total number of orders. Under the traditional production method, the enterprise produces according to the plan, and the production quantity generally does not fluctuate greatly, so the demand for materials is uniform. In modern enterprises, enterprises face the market and customers, and the production quantity varies. Therefore, the demand for materials is uneven and unstable, and the demand for inventory occurs intermittently. In fact, the time for placing an order in accordance with the EOQ® ordering method is often too early, resulting in a backlog of materials, which causes a large amount of inefficient use of funds and an increase in inventory costs. In addition, due to the imbalance in production demand, inventory shortages sometimes occur, which causes serious losses to production.

2. The demand for various materials is relatively independent

The traditional EoQ inventory management method does not consider the connection between material items, and the order points of various materials are determined separately. However, in actual production, the quantities of various materials must be reasonably equipped to manufacture and assemble into products. Because the traditional EOQ ordering method is oriented to a single part, each material is ordered independently, rather than the entire final product, so it is inevitable that the quantity of materials does not match during production and assembly.

3. After the stock is consumed, it can be replenished in time.

In traditional EOQ inventory management, once the inventory is lower than the order point or consumed, an order is immediately issued to ensure a certain inventory. This non-demand-based approach is not only unnecessary, but also very unreasonable. Under the condition of intermittent demand, it will inevitably cause a large amount of inventory backlog.

In short, due to changes in the business environment facing companies, many of the assumptions established in the EOQ model are becoming less and less authentic. Therefore, still using EOQ inventory management will not only help companies provide reliable data, but will also mislead the company's inventory management. This means that the need for a new inventory management system has arisen.

(1) Traditional inventory management focuses on inventory optimization of a single enterprise.

Traditional inventory management is mainly to coordinate and integrate the activities of various departments. For example, the purchasing department prefers a large number of purchases in order to reduce the purchase price, which increases the inventory. The sales department tends to prepare all kinds of products in order to avoid shortages and improve customer satisfaction. And maintain higher inventory levels, etc., while higher inventory levels will greatly increase storage costs. In this way, there may be some conflicts between the internal supply and marketing of the enterprise and the inventory management department, and the inventory management is mainly to solve the problem of inventory management coordination between internal departments of the enterprise, so as to maximize the benefit of the entire enterprise.

(2) There is a contradiction between customer satisfaction and inventory investment in traditional inventory management.

The traditional inventory management model is that each enterprise has its own policies, that is, the retailer has its own inventory, the wholesaler has its own inventory, the supplier has its own inventory, and their respective inventory strategies are different and closed to each other, resulting in a lack of information sharing, lack of cooperation and coordination. . On the other hand, in order to meet customer demand and avoid lost sales opportunities or unplanned shutdowns due to out-of-stocks, every company tends to maintain "insurance" inventory, which leads from retailers to wholesalers to manufacturers To the supplier, each enterprise accumulates more and more "insurance" inventory in turn, which eventually causes a large number of goods to be held in the warehouse of each enterprise, resulting in a large increase in inventory costs, and ultimately leading to an increase in the price of the product, which reduces customer satisfaction. This is the contradiction between customer satisfaction and inventory investment. From the perspective of improving customer satisfaction, the price of goods is an important consideration. Reducing prices is based on reducing costs, and as a component of costs, inventory costs must be reduced. Insurance inventory must first be reduced, but the result may not be able to meet customer needs in a timely manner, and satisfaction is reduced. Under the traditional inventory management model, this contradiction can hardly be resolved.

Traditional inventory management is aimed at a single enterprise, and the main purpose is to classify and focus management of the enterprise's inventory, determine the order time and order quantity, so as to minimize the total inventory cost of the enterprise. The specific methods mainly include economic batch model (EOQ) and inventory classification management method (ABC). The technical methods often adopted by production enterprises include material demand planning (MRP), manufacturing resource planning (MRP), just-in-time production (JIT), and fine production (Lean Production). MRP is based on the market demand forecast and customer orders. Based on the product production schedule, the material structure table and inventory status of the product, the data is processed by the computer to determine the required amount and time of the required materials. The use of computer technology Improve traditional inventory management methods. The basic idea of just-in-time production can be summarized as "produce the required product in the required amount when needed", that is, through the planning and control of production and the management of inventory, the pursuit of a non-inventory, or inventory to the minimum production system. However, MRP and JIT only consider the use of internal resources of the enterprise, and all optimization work focuses on the optimal application of the resources of the enterprise.

The traditional inventory management thinking is based on uninterrupted production, and inventory management serves production. All the inventory management system does is to place orders and reminders, or use the order point method to determine when to place an order, or use the economic batch method to determine the optimal batch for each order. The order point method is a method of predicting future material requirements based on past experience. The essence of this method is to follow the principle of "stock replenishment" to ensure that there is a certain amount of inventory in the warehouse at any time, so that it can be taken at any time when production is needed. use. The economic batch method uses the economic batch formula to calculate the order volume that minimizes the sum of order costs and inventory costs. These methods seem to be scientific. The inventory models established by these methods were once called "scientific inventory models", however, this is not the case in practical applications. These methods are based on assumptions that can not stand the test of practice, and are keen to seek a mathematical model to solve the inventory optimization problem, without realizing that the benefit of inventory management is a large amount of information processing problems. The assumptions of traditional inventory management are:

1. The requirements for various materials are independent of each other.

The traditional inventory management method does not consider the connection between the material items, and the order points of each material are determined separately. However, in actual production, the quantities of various materials must be reasonably configured to be manufactured and assembled into inter-production.The quantities of various materials must be reasonably configured to be manufactured and assembled into products. The method is to face a single part and order each material independently. Therefore, it is inevitable that the quantity of materials does not match during production and assembly.

2. Material requirements are continuous.

The traditional inventory management model assumes that the demand for materials is relatively stable, so the demand for each material is less than the total number of orders. Under the traditional production method, the enterprise produces according to the plan, and the production quantity generally does not fluctuate greatly, so the demand for materials is uniform. In modern manufacturing, enterprises face the market, the demand for materials is uneven and unstable, and the demand for inventory occurs intermittently. In fact, the ordering time of the inventory management system using the traditional ordering method is often too early, which results in a material backlog, which leads to a large amount of inefficient occupation of funds and an increase in inventory costs. On the other hand, due to the imbalance of production demand, inventory shortages will be caused, which will cause serious losses to production.

3. After the stock is consumed, it can be replenished in time.

In traditional inventory management, once the inventory is lower than the order point or consumed, an order is immediately issued to ensure a certain inventory. This non-demand-based approach is not only unnecessary, but also very unreasonable. Under the condition of intermittent demand, it will inevitably cause a large backlog of inventory.

Due to the changes in the business environment facing enterprises, the authenticity of many assumptions established in traditional models is getting worse. Therefore, still using traditional inventory management will not only help companies to provide reliable data, but will also mislead the company's inventory management.