Types of Inventory Control. Having good inventory management is critical to the success of any type of business. Especially because if you don't work this point well, big losses will happen in your company.
But to be able to manage your inventory well, it is very important to understand the types of inventory control to understand, in fact, which one is best for your business model. Therefore, we will show here 08 main types of inventory control. Thus, you will be able to understand which one is the best option for your company.
All in a well summarized and practical way! You want to receive tips and information to set up your own business. So subscribe to this channel and stay on top of everything you need to know to open your own company.
In order for the types of inventory control to be very clear to you, you must first understand what inventory control is. Which, in short, is knowing exactly the ideal amount of each item in your stock. And so, control all the movement of products and raw materials of your business.
As well as managing your inputs and outputs well. Bear in mind that poorly managed inventory represents a great loss for the company. So, if you want to go deeper into how to have an inventory control, we recommend watching our very practical video about it.
If you want to watch it, just click this button above or the link we left in the description. That said, so let's now go to the 08 types of inventory control. 1.
FIFO (PEPS These acronyms mean First In First Out (which is English) or First that Enters, First that Sai (in Portuguese). That is why it is also known as PEPS. Basically, FIFO is an inventory management methodology that works on the following principle: the first products purchased by your company are the first items to be sold to customers.
And this also applies to inputs: the first items purchased will be the first items to be used. This methodology is essential to work with, mainly, with perishable products, which have an expiration date to be considered. Even because the oldest item is the first to be sold or used.
That is, literally, it is an order of receipt of goods or products chronologically . And if you want to better understand how FIFO works, we have a video that shows it well. To watch it, just click this button above or the link we leave in the description.
2. LIFO (UEPS) F Formed by the first letters of the English acronym “Last In, First Out”, which in Portuguese would be “Último a Dentro, Primeiro a Sair” (hence the UEPS). This type of inventory control considers that the last item to enter the stock will be the first to be released or used.
In this case, it is not recommended for types of inventories that work with products or materials that have an expiration date. Like food. But generally, LIFO is used when there is a large inventory turnover with non-perishable materials.
Or when there is a large variation in prices due to inflation, for example. Thus, the last items to enter the stock are closer to reality. 3.
AVERAGE COST This type recalculates the cost of each unit of stock, through the average of the purchase values of the item. Thus, when a new unit comes into stock, the average cost tends to change. Therefore, it is also known as Weighted Moving Average (WPM).
Which basically is a model that proposes the sum of the value of the products in stock with the new ones. Thus, this value is divided by the total quantity of items in the stock as a whole. Thus, the result will be the average cost of each item in the inventory.
Generally, it is used to keep the price updated according to changes in market values. 4. ABC CURVE In a practical way, this is a method for classifying and ordering information and data in terms of importance.
In other words, the ABC Curve establishes an order of priorities. That is, it categorizes and prioritizes the items that are most important to the company. Therefore, focus on what adds more value and brings more return to your business.
It is called ABC because each letter represents one of the 3 categories of a curve. Thus, the letter A represents the highest value or quantity. The letter B is part of the middle and the C represents the smallest value or quantity.
Thus, when placing this data, a graph is constructed in the form of a curve. So, the name Curva ABC came up. So, if you want to understand more about this type of stock, watch our video that shows it in a very didactic way.
To watch it, just click on this button above or on the link in the description. 5. INVENTORY TURN This model basically helps in analyzing and understanding inventory performance.
Briefly, the ratio of the company's average stock to total sales in a given period of time is calculated . Dividing these two points will show how many inventory turns the company had in that period. Thus, it will be possible to assess how long each item is in stock.
In this way, you will have a solid basis for devising sales strategies that further improve inventory turnover. Optimizing processes and costs as well. 6.
DROPSHIPPING In a literal translation, dropshipping comprises 2 terms in English: drop (which is to drop) and shipping (which means shipping). Therefore, it is a business model in which the reseller makes sales without keeping products in stock. And in this way, he sells products that remain in the suppliers' stock, who will also be responsible for sending the goods directly to the buyers or customers.
That is, the owner of a dropshipping business acts as a sales intermediary, being responsible for marketing and sales efforts in general. It would be like a kind of outsourced showcase, where all booking and delivery processes are carried out by the suppliers/producers of the products in question. Drpshipping is a model widely used for e-commerce, but it can be used in physical stores as well.
And we also have a video on this type of inventory control. If you want to understand more about how it works, we highly recommend watching it. To do so, just click on this button above or on the link in the description.
7. SPECIFIC PRICE This type is already used by companies that work with products with more expressive values. Like machinery or vehicles, for example.
That is, each price is determined individually. Each stock item has a specific value. In this way, the ending stock is calculated according to each unit with its respective price.
8. JUST IN TIME Just in time is an English term that means something like “just in time” or “at the right time”. Basically, it is a management methodology in which the company buys and produces only the exact amount of raw materials or products to meet the demands of its customers at the right time.
That is, Just in Time means that the company does not produce, transport, sell or buy something before the right time. So, he makes the company use its resources in the leanest possible way, but at the same time efficiently. And this helps in managing the processes found along the production chain.
Focusing on meeting the real demand of the business. In this way, it helps to reduce or even eliminate the need to have a stock. So, if you want to learn more about Just in Time, watch our video that shows it in a very practical way.
To do so, just click on this button above or on the link in the description. These are the main types of inventory control. We tried to present them in a summarized way to make the video more practical.
In this way, you will be able to have a broader view to understand which model fits best with your company's operation. However, they are not the only ones, but they are quite used. So, if you know any other guy that we don't talk about here, write in the comments and share with us!
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And just to recap the types of inventory control we're talking about here: 1. FIFO (PEPS) 2. LIFO (UEPS) 3.
AVERAGE COST 4. ABC CURVE 5. INVENTORY TURN 6.
DROPSHIPPING 7. SPECIFIC PRICE 8. JUST IN TIME We hope you enjoyed it!
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