Information technology and inventory management

Information technology and inventory management

Computer information technologies have increased the introduction and supply of automated inventory management systems.

The main advantages are:

  • Easy adaptation of inventory management problems,
  • Variety of computer software products for inventory management,
  • Collection, rapid processing, and use on a real scale in the presence of rich information needed for sales and inventory management.

Inventory management information technologies allow:

Forecasting the demand for a day, month, week using advanced and detailed methods and models introduced as a program in the computer,

Daily reporting on all indicators necessary for operational, long-term management and the state of stocks,

Processing purchase orders, documents upon acceptance and transfer of ownership and operation without human intervention, the programs can be to the changing conditions.

The use of technologies requires the introduction of accurate information about revenues, sales, orders and the cycle of their implementation, distribution costs by elements, etc., information related to the characteristics of individual types of goods.

Information management of inventory management

The type and quality of information based on which inventories are analyzed, planned, and controlled determine the quality and efficiency of their management, based on the collected and processed information on inventories in current and past periods, managers have the opportunity to assess the effectiveness of management to reveal favorable and unfavorable trends.

And after the conclusions to take concrete action to more effectively manage. Inventories are an element of the current assets of the company.

The sources of information are the data from the operational and accounting activity:

  • Balance sheet, general ledger
  • References of the analytical accounting accounts from city 30 from which an assessment is made in the change of the maintained stocks by goods and commodity groups
  • Inventory data
  • Sales report in value and kind
  • Supply contract
  • Execution of deliveries by goods, suppliers, data from operational and accounting reports – gr.40
  • Sales, inventory, and revenue plans.

Inventory valuation allows summarizing information based on which the company can determine the amount of investment in inventories, financial resources at a specific time, or the average amount of investment in inventories for a certain period.

The choice of the optimal strategy in the management of inventories is determined by the possibilities for information support of the system. The companies implement modern information technologies, the problems are related to the lack of experience and awareness of what exactly the information should be, providing effective inventory management. Reference: “Inventory management in the organization”,

The main inventory management databases are:

  • Consumer demand as a measure is sales
  • Size and value of inventories
  • Costs related to the operation of the inventory management system

Delivery period

Inventories, whether from raw materials or finished products, ensure sales and ensure the continuity of the production and sales process.
The turnover of stocks by commodity groups and by goods is different. This is characterized by the physicochemical properties of the goods. For example, the sale of food products is faster than non-food products.

The average turnover is influenced by the structure of stocks and the turnover of goods or commodity groups, etc. individual turnover.

The indicator average turnover in days estimates the average period after which the cash invested in inventories will be returned in the form of cash.

Expenses for inventories

Costs in the inventory management system are all costs influencing the choice of strategy; namely:

  • Delivery costs
  • Storage costs
  • Costs due to shortage of stocks
  • Expenditures on information support of inventory management.
  • Inventory delivery costs.
  • Delivery costs are all costs associated with replenishing stocks. Depending on the size of the delivery or the number of deliveries, a distinction is made between the values ​​of the delivery and the operating costs of the supply system.

Inventory storage costs

This group includes the costs of the room in which the stocks are stored, regardless of whether it is owned or rented, costs of losses and absences, etc.

The main elements of inventory costs are:

  • Premises costs
  • Expenditures for salaries of staff and equipment, etc. costs related to customer service and maintaining the quality of stocks

Expenses due to losses and absences

Costs as a result of lowering the consumer qualities of stocks – the risk of expiration, obsolescence, obsolescence, etc. They are expressed in a reduction in the price or demand for the product

Insurance costs to compensate for possible losses in the event of an insured event

Costs resulting from the freezing of financial resources and slower-selling goods. These costs are proportional to the size of the stock and the storage time. Due to the variable size of the stock held, costs are determined based on the average stock.
There are two possible approaches to estimating storage costs:

Storage costs per unit of stock in value

Storage costs as a percentage of the value per unit of stock.

Expenses due to stock shortage

The lack of the required product leads to a break in sales. The costs resulting from the shortage are estimated by the percentage revenues from the unrealized sales. Assuming a surplus of stocks associated with a significant risk of becoming unsaleable, due to changes in consumer tastes, obsolescence, and obsolescence. When the costs due to shortages significantly exceed the costs of surplus, it is not justified to assume a shortage, but it is recommended to maintain larger inventories. This group of costs includes the costs of creating or purchasing and maintaining the inventory management information system.

Inventory management systems

The main parameters of the inventory management system are determined as a result:

  • Pre-control systems
  • Continuous monitoring systems
    Periodic control systems.

The characteristic of these systems is the pre-established amount of pre-demand, which is a constant value. These systems can be applied in constant search and the query is executed immediately.

Systems with continuous control of inventories.

Two varieties of these systems are known:

Rational system

Two-bunker system

In the rational system, the sizes of the maximum stock of goods and the size of the delivery are fixed, as the period between the two deliveries changes. Upon execution of the inventory, a delivery request is given, which is executed immediately.

Periodic control systems.

Periodic inspections (inventory) establish the amount of available stock. These systems have two varieties:

A system with fixed maximum stock

SS system

The qualification criteria are:

  • According to the nomenclature: single-product and multi-product
  • According to the nature of the formal conditions and consumption of stocks: determined and stochastic (probabilistic)
  • According to the number of sites: single-warehouse and multi-warehouse
  • Depending on the degree of satisfying demand: models with immediate satisfaction of demand, with untimely satisfaction of demand, and with incomplete satisfaction of demand.
  • The choice of a specific model for inventory management is determined by the nature of the basic parameters of the selected management system.
  • Problems in the practical application of inventory management models.

Inventory modeling

Inventory modeling is a complex process. The following more important problems must be taken into account in mathematical management models for making the right decision:

The model should reflect the main characteristics of the system based on which the inventory management strategy is chosen. The assumptions made must be analyzed very carefully

Models with estimated system parameters: demand, delivery time, costs. The quality of the developed and applied model depends on their correct forecasting

Different types of goods are stored in commercial companies. This requires that a different approach be applied when selecting the inventory management system and model

If applied incorrectly, even the best management models may not give the expected results. The implementation of the model in the company may be incorrect in the presence of unqualified and loyal staff.

The analysis of the applied model makes it possible to assess the effectiveness of the functioning inventory management system and to take concrete actions for improvement.

With the availability of electronic equipment for collecting and processing the information needed for management, the problems associated with determining the basic parameters of the inventory management strategy are reduced.

Inventory management rules

Inventory management means constantly monitoring your inventory of goods, raw materials, and parts. With good inventory management you can:

be sure that you will not run out of goods in stock;
be sure that you do not keep too much of a product in stock.


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