Introduction
In this paper we will talk about what a warehouse is and about the ABC method of inventories, which is its function and why in a company it is important to have inventory control, the types of existing inventories.
Development
However, Warehouse is a service unit in the organic and functional structure of a commercial or industrial company with well-defined objectives of safeguarding, custody, control and supply of materials and products.
Inventory is the set of merchandise or items that the company has to trade with, allowing the purchase and sale or manufacture first before selling them, in a given economic period. They should appear in the group of current assets. It appears on both the balance sheet and the income statement. It is a tangible asset of the company.
An inventory aims to provide or properly distribute the necessary materials of the company, placing them in an available way at any time avoiding lost costs of the same. Therefore inventory management needs to be carefully controlled and monitored.
Inventory management
It is the efficiency in the proper management of the registry, of the rotation and evaluation of the inventory according to how it is classified and what type of re-inventory the company has, since through all this we will determine the results (profits or losses) in a way reasonable, being able to establish the financial situation of the company and the necessary measures to improve or maintain said situation.
Inventory management is essential within a production process since there are various procedures that will guarantee us as a company, achieve satisfaction in order to obtain an optimal level of production. This policy consists of the set of rules and procedures that ensure the continuity of the production of a company, allowing reasonable security regarding the shortage of raw material and preventing access to inventory, in order to improve the rate of return. Your success will be framed within the inventory management policy:
Importance
Inventory management, in general, focuses on four basic aspects:
- How many units should be ordered or produced at any one time When inventory should be ordered or produced What inventory items deserve special attention One can guard against changes in the costs of inventory items.
For this you need a certain inventory control of existing goods and those that no longer exist in our warehouse for which we will talk about the ABC method.
Inventory Management Techniques
The methods commonly used in inventory management are:
- The ABC system. The basic model of economic order quantity CEP.
The ABC system
The ABC system is a method of classifying inventories based on the book value (cost or acquisition) of stored materials. Traditionally, thousands of items are stored in companies, especially in the manufacturing industry, but only a small percentage represents a book value important enough to exercise strict control over it.
As a general rule, between 5 and 15% of the items in inventory represent between 70 and 80% of their total value. These articles are classified as "A articles". "Items B" represent approximately 30% of total stocked items, but only 15% of the total inventory value. "C items" generally make up 50-60% of all stored items but represent a modest 5 or 10% of the total inventory value.
A principle underlying the application of ABC analysis is that each type of article requires different levels of control. Thus, the higher the inventory value, the more control over it. Class A will need to be controlled more closely, however, classes B and C require less strict attention.
The first step in the application of the ABC analysis is the classification of all the articles in each of the classes. This means that each item in the warehouse is assigned a book value (cost or acquisition). This value is obtained by multiplying the unit cost by the annual demand for each item. Subsequently, all the articles are ordered according to their value. The resulting classification may not be exact, but it is usually fairly close to reality in most companies.
The next step in ABC analysis is to determine the level of control for each type of item stored. The greatest control effort must be made on "class A" items. This translates into the need to make a correct forecast of demand and to implement a strict system for registering warehouse movements. At the same time, the most appropriate inventory control system must be implemented (deterministic, probabilistic; quantity or fixed period, etc.).
Items B and C require less strict control. Thus, larger safety stocks can be maintained in this type of item without fear of incurring excessively high costs. In these cases, it is not necessary to implement inventory control systems, just direct visual control being sufficient.
A company that uses this system must divide its inventory into three groups: A, B, C. The maximum investment has been concentrated in products "A". Group "B" is made up of the articles that follow "A" in terms of the magnitude of the investment. Group "C" is made up mostly of a large number of products that only require a small investment. Dividing its inventory into products A, B, and C allows a company to determine the level and types of inventory control procedures required. Control of products "A" must be the most careful given the magnitude of the investment involved, while products "B" and "C" would be subject to less strict control procedures.
conclusion
In a company you need to have a certain type of inventory control to have a scope of your material, so I can say that the ABC system is a method that serves to assign costs, correct deficiencies that can be had when comparing the resources consumed with the final products. The ABC system assigns the total cost of all activities that were used to manufacture the product.
