Introduction to Inventory

The instructor of this course has kept this course very practical along with textbook definitions and relevant theory. When preparing monthly or quarterly income statements, the amount of revenue is recorded at the top of the income statement.

That is, the quantities and prices of the goods you most recently received should be entered into the computer program either by you or by the restaurant’s purchaser. These prices and quantities are automatically used to calculate the cost of the goods on hand.

A Good Starting Count

We make the assumption that you’re starting from scratch, with only a vague system for tracking your inventory. You may not have part numbers, named locations, or the most basic attributes of a simple inventory system. The most basic definition of inventory is the materials or “things” your business owns. In most cases, when we refer to inventory, we simply mean all the materials the business has kept in stock—to sell.

• But there’s still one more important way to use your inventory usage rates to save money and boost profit.
• Units of Measure, things like “pcs” “ea” “lbs” “bags” etc… give meaning to quantities.
• This way, it is harder to, for instance, accidentally change the state of nodes inside the “test” environment when you actually wanted to update some “staging” servers.
• The receiving of deliveries can be time consuming for both the food establishment and the delivery service.
• At worst, it’s mind-numbing tedium that costs lots of money.

For these reasons, inventory management is important for businesses of any size. Knowing when to restock inventory, what amounts to purchase or produce, what price to pay—as well as when to sell and at what price—can easily become complex decisions. Small businesses will https://online-accounting.net/ often keep track of stock manually and determine the reorder points and quantities using spreadsheet formulas. Larger businesses will use specialized enterprise resource planning software. The largest corporations use highly customized software as a service applications.

Major Inventory management principles

Cross-docking is a technique whereby a supplier truck unloads materials directly into outbound trucks to create a JIT shipping process. This essentially eliminates warehousing, and there is little to no storage in between deliveries. Inventory Basics This technique splits goods into three categories to identify items that have a heavy impact on overall inventory cost. To better visualize these eight steps, try creating an inventory process map like the one below.