Inventory management is essential in the production process, since it guarantees the financial situation of the company in order to obtain an optimal level of production, allowing for better decision-making through obtaining favorable results from the economic and financial point of view..
inventory-management-company-universal-products-las-tunas-cubaAll these decisions affect the liquidity of the company, which is why it is vitally important to know and apply inventory management techniques to improve its efficient management. In this context, the following research has been carried out on the Application of Inventory Management Techniques in the Marketing Company and Services of Universal Products of Las Tunas, the practical development of inventory policies and their management and in the conditions In which Cuban companies develop and in particular companies in business improvement, specifically the Universal Products Marketing and Services Company of Las Tunas, have allowed to apply inventory management techniques to improve the level of service it provides to its customers.The investigation was structured in two chapters. In the first one, the theoretical aspects related to the subject are exposed from the criteria of several authors specialized in the subject. In the second chapter, the company under investigation is characterized and inventory management techniques are proposed. Finally the conclusions and recommendations of the investigation are exposed.
Key Words: Management, inventory, Economic, Financial Administration.
Introduction
The Cuban economy is not oblivious to the changes that have occurred in the world; therefore, the use and adaptation to our conditions of the most modern management methods, including inventory management, is vital.
The current world is characterized by a high degree of turbulence, understood as the changing situation of the environment. A feature of high incidence in the current environment is competition, it helps organizations develop capacities to enter, maintain and expand in the market.
Today for the financial world it is important to determine what is the most optimal amount to invest in inventory. It is vitally important that Cuban companies put into practice all the management mechanisms that allow them to carry out their activity with the levels of efficiency demanded by the economic policy outlined by the country. Inventory management is one of the essential tools to lead any entity to the success of its management.
Given the need to develop techniques that allow selective control of inventories, this research is carried out at the Universal Products Marketing and Services Company, which could contribute to improving its Inventory Management.
The research is structured in two chapters, in the first the theoretical theoretical framework for inventory policies, and in the second, the application of techniques for inventory management.
The Universal Products Marketing and Services Company immersed in the entire process of transformation that involves the application of new inventory management mechanisms, presents difficulties in the financial order and that is why the following Scientific Problem has been defined:
Insufficiencies in inventory management that limit an adequate level of services and an advantageous financial position in The Universal Product Marketing and Services Company.
General objective.
Apply inventory management techniques based on an economic-financial analysis and techniques that allow establishing an advantageous level of services and cost for the organization.
Based on the general objective, the following specific objectives are proposed:
1- Develop the theoretical framework associated with inventory management.
2-Characterize and carry out an economic-financial analysis that assesses the current situation of the entity.
3- Formulate and apply inventory management techniques that allow establishing a level of services and an advantageous cost for the organization.
Hypothesis.
If inventory management techniques are applied in The Universal Product Marketing and Services Company from the application of an economic and financial analysis, it will contribute to establishing a level of services and cost that is advantageous for the organization.
Study object
Financial Economic Management
Field of action.
Inventory Management
Research Methods:
The materialistic dialectical method has been used for research as the universal method of knowledge. In addition to particular methods associated with business logistics.
• Historical-logical: to study the evolution and development of the object of study and promote a logical concatenation of the scientific tasks carried out.
• Analysis - synthesis: to analytically dismember the different edges of the Inventory Management process of the Marketing Company and Universal Products Services, analyze the different theoretical concepts and empirical data to apply the inventory management techniques.
In addition, empirical methods such as observation, interviews, and document review were used.
CHAPTER I. REFERENTIAL THEORETICAL FRAMEWORK ON INVENTORY POLICIES
1.1 Inventory management as a financial investment in the company
In the business world, inventory is the set of all property owned and available for sale to customers and converted into cash within the company's operational cycle. The survival and growth of an entity depends on the continuous generation of a certain amount of profits (after taxes), so supply management plays a very important role, since inventories are the fundamental factor for sales, and Sales are essential for obtaining profits. According to Weston, Fred and Copeland in their work "Fundamentals of Financial Administration" quotes "… for typical companies approximately 25% of the capital is invested in inventories, therefore, its proper administration is of great importance".
In the broad sense, inventory is the set of stocks held with the objective of satisfying demand at the lowest possible cost.
The inventories, in legal terminology, are used to designate the method to determine the patrimony by means of the current count and evaluation of all the assets, rights and obligations that comprise it. In economic and accounting terminology; Inventory is reduced to identifying certain stocks of goods at a date, either purchased goods or produced goods destined for sale or materials.
Inventory is a critical asset within most organizations. Various functions depend on it, such as production, sales, purchases, financing, becoming a core part of a business.
The purpose of the inventory is to provide the company with the necessary materials for its continuous and regular development, that is why it is vital for the consistent and coherent operation within the production process and thus meet the company's demand.
In general, inventory is the set of stocks held with the objective of satisfying demand at the lowest possible cost. Indistinctly, each author adapts the concept of inventory to certain ways of reflecting the situation of the organization's resources.
Andrés Suárez in his book «Financial economy of the company», refers to the balance sheet as an inventory of all the assets, rights and obligations of the company, showing the situation of the company from two points of view: the economic and the financial.
Weston and Brigham in their "Management Finance" are more specific in referring generally to the factors that lead to inventory analysis, briefly conceptualizing core inventory, safety inventory, and anticipated inventory.
Several authors attach special importance to the smallest possible capital, since it is not convenient for the company to commit its resources in inventory that is excessive… ", and later,"… The good financial director tries to minimize inventory because its maintenance is expensive … »
In "Fundamentals of Financial Management," Weston states: "… inventory must be rotated promptly, since the faster the turnover is, the less the company must invest in the inventory to satisfy a demand for merchandise… ”,“… This financial objective is often in conflict with the company's objective of maintaining sufficient inventories to minimize inventory shortages and meet demand… ”
The revised bibliography reflects in one way or another the essential objective of inventory management, which can be summarized as: provide the level of inventory necessary to keep the operations of the company at the lowest possible cost. This means dealing with demand, promoting the functions of the company trying not to incur high costs.
Several authors attach special importance to short-term financial decision-making regarding inventories, referring to the role of the chief financial officer.
In the book »Finance in Administration«, Weston J. Fred and Brigham describe the advantages and disadvantages of having large amounts of inventory, arguing that financial managers generally tend to accept relatively large levels.
Likewise, it refers to an aspect that is not less important, but not less important: The risk associated with inventory management. In this regard, he briefly but precisely explains various types of risks, stating that various items can mean different types of risks, so an analysis similar to the case of the capital budget can be made. The treatment of this aspect gives the work its uniqueness as it is a subject insufficiently addressed in terms of inventory management.
As planned by Fred Weston, Eugene F. Brigham in his work "Finance in Administration" is reflected that "… the first step in the process to develop an investment model is to specify the costs that increase and those that decrease when the level increases of inventories ”.
The main decisions to be made regarding inventories are:
• What items should be included in warehouse stock?
• How much should be purchased?
• When should a purchase be made?
• What type of inventory control system should be used?
TYPES OF INVENTORY
Inventories are important to manufacturers in general and vary widely between different types of industry, and although each type of inventory does not usually appear separately on the company's balance sheet, it is important to understand the nature of each.
So we must take into account that there are three basic types of inventories classified according to their use in the following types:
Raw materials inventory:
They are the materials that intervene to a greater degree in production and are normally comprised of basic materials and in some cases composed of different parts that are purchased from another company; Its level is influenced by the anticipated levels of production, the frequency of use of the delivery time necessary to receive orders, the necessary investment and the physical characteristics of the inventory. Raw material inventories give flexibility to the company's purchasing process since they are necessary to maintain the production plan. Many authors have conceptualized this category linked to existence, inventories are temporarily immobilized resources and their maintenance and conservation are associated with material expenses.
Production in process inventory:
It consists of all the articles or elements that are used in the current production process. They are partially products that are in an intermediate degree of production and to which the direct labor and indirect costs inherent in the production process were applied at a certain time.. One of the characteristics of the production in process inventory is that the value increases as it is transformed into raw material in the finished product as a consequence of the production process.
Inventory of finished products:
It includes the articles transferred by the production department to the finished products warehouse because they have reached their total degree of completion and that at the time of the physical inventory taking it is still in the warehouses, that is, those that have not yet been sold. The level of finished goods inventory will depend directly on sales, that is, its level is given by demand.
1.2 Inventory management
Inventory management consists of providing the inventories required to maintain operations at the lowest possible cost, it also implies the amount of inventory that must be maintained, the date on which orders must be placed and the number of units to order.
Inventory management is the efficiency in the proper management of the registry, the rotation and evaluation of inventories according to their classification, through it the results of a company are determined. It allows others to establish the financial situation of the company and the measures to improve or maintain it.
In the assembly process production method, it generally requires more inventories of products in process than continuous systems but less than order processes.
However, inventory management, in general, focuses on 4 basic aspects
1. How many units should be ordered (or produced) at any given time?
2. At what point should inventory be ordered (or produced)?
3. Which inventory items deserve special attention?
4. Can you protect yourself against changes in the costs of inventory items?
Although the Inventory Administration is not a direct operational responsibility of the financial administrator, the administration of the inventories is of vital importance to improve the financial situation of the company, for the amount of the invasion that is generally required, as well as for the complexity and degree of difficulty that implies an effective financial administration, which will have the purpose of maintaining and / or increasing the productivity of the company, since if there are no inventories there are no sales and market loss, and if there are no sales there is no profit that in certain term would lead to business closure.
To achieve effective administration, it is necessary to establish policies; which must be jointly formulated by the sales, production and finance areas. These policies consist mainly of setting parameters for investment control, by establishing maximum levels of inventories that produce an acceptable and constant turnover rate. The maximum levels are established in days of production for raw materials and products in process and in days of entering for finished products, setting the days that are deemed appropriate according to the circumstances. Care must be taken as this policy is not susceptible of being established with fixed or rigid parameters when there are drastic and marked seasonal variations.
The overinvestment in inventories is a protection from the economic point of view, it constitutes a protection measure for the company that consists of minimizing the accelerated harmful effect, but it has a considerable opportunity cost that must be quantified.
Based on the above, the company's management must closely monitor which of the alternatives must be followed, and as a general rule it can be said that if the inflation rate exceeds the cost of capital, it should choose to increase investment in inventories, up to where and when the liquidity of the company allows it.
The administrator must avoid erosion of the gross profit margin to preserve the productivity of the company.
An alternative that sometimes produces very effective results to reduce investment in inventories, is the reduction of the number of raw materials, packaging, etc. They are used in production and studied in conjunction with the technical, marketing or sales and manufacturing departments. The results obtained are sometimes surprising, since there is generally a lack of standardization and consistent procurement policies for optimizing investment in inventories.
An important part of the financial management of inventories is the formal and continuous contact of the purchasing department and management, with the suppliers of the main raw materials consumed in the company's production, trying to optimize deadlines, shipments, mode of shipment, means of transport, etc., as the above will result in good results and will be an important means of keeping the investment in inventories within the approved parameters and the desired levels.
The essence of inventory management is to provide the level of inventory necessary to maintain business operations, cope with demand, and provide business functions while avoiding high costs.
In business there is a reality recognized by many, but unfortunately rationalized and implemented by few "who buys well, sells or produces well." Having a good purchasing policy will allow a smooth management of the company and reduce its costs, which will obviously improve its profitability. Due to the above, it is necessary to study inventories from the moment the purchase is projected, that is, to involve them in the planning processes of the company and its mandatory counterpart, control.
Inventories as a financial investment in the company.
Inventory has often been referred to in studies as a financial investment. This is well defined by Lawrence Gitman in his "Fundamentals of Financial Management" which cites the following: "Inventory is an investment in the sense that it requires the company to commit its money."
As planned by Fred Weston, Eugene F. Brigham in his work "Finance in Administration" is reflected that "… the first step in the process to develop an investment model is to specify the costs that increase and those that decrease when the level increases of inventories ”.
1.3 Economic Financial Analysis
Importance of Financial Economic Analysis
El análisis de la gestión económica- financiera reviste gran importancia ya que nos brinda la información acerca de la salud financiera de un negocio y nos permite profundizar en las causas que derivan del comportamiento de los diferentes indicadores económicos financieros independientemente de su naturaleza ya que podemos proyectar los resultados futuros, garantizar en gran medida la utilización racional de los recursos financieros, materiales y laborales, logrando así una administración dinámica y eficiente.
The analysis technique includes the study of trends and the relationships of causes and effects between the elements that make up the financial structure of the company. It is a totally necessary condition to achieve the successful operation of any economic system in the analysis process, where information is obtained on the state of the system, on the success and negligence in its activity about the advantages and disadvantages of one or the other economics management method. As a result of this the possibility arises of selecting the optimal decisions or close to these, which largely responds to the interests of a given system and of society as a whole, that guarantee the rational use of financial, material and labor resources. that are owned.
Because each industry has its own characteristics that influence its financial structure and returns, it is valuable to make the comparison with the standard ratios, which are the result of the arithmetic mean of the individual ratios of a particular branch of industry, obtained in your operating experience.
Liquidity Analysis:
They study the ability to pay cash or money of a company. Within it are determined:
Working Capital.
The administration of Working Capital refers to the management of current accounts that include current assets and liabilities. The most common definition of it is the difference between current assets and current liabilities, that is, the funds or resources with which a company operates in the short term, after covering the amount of the debts that are also due in that short term, for what this measure should be positive.
In the financial analysis, deciphering the behavior of Working Capital is of vital importance, due to the close relationship it establishes with operations that affect current or current items, and which are the effect of the operations that the company commonly carries out.
General Liquidity.
It is the ratio of current assets to current liabilities. It allows to measure the ability of the company to cover its short-term obligations, based on its current assets, at a certain time.
When this ratio is less than 1, the entity has lost its general liquidity and is technically in a situation of suspension of payments. It should reach values greater than 1, although the most appropriate, in general, is that it behave with a value of 2, or almost 2. If the current assets are considerably greater than twice the current liabilities, it is possible that the The company is immobilizing its current assets, and therefore obtain little profitability from them by having an excess of them.
Immediate Liquidity or Acid Proof.
It measures the ability to face the most demandable obligations, that is, short-term debts, from current assets without the inclusion of items
less liquid; inventories.
To consider that the company will not have liquidity problems, this ratio must approximately equal the short-term callable. If the ratio is less than 1, there is a dangerous situation, in which it is possible that there will be problems in meeting the payments. If the ratio exceeds 1, be careful, your investments in available and realizable may be underused.
Solvency.
It measures the ability of the company to face all its debts, both short and long term, with its real assets (current and fixed assets). According to auroral criteria, it must reach values greater than 1, although the most appropriate, in general, is that it behave with a value of 2, or almost 2.
Activity Analysis.
They measure the efficiency of accounts receivable and payable, the efficiency of the consumption of materials, production, sales and assets with which the company operates.
Inventory rotation (R INV.).
It indicates the speed of the company in making its sales, the speed of consumption of materials and the speed of production. It is defined as cost of sales divided by the average of the inventory during the period.
This index reports the times that, in a given period, the inventory of finished products has been renewed due to merchandise sales. A higher turnover will generally correspond to higher profits, less resources applied to inventory maintenance, better possibility of competing on prices and more prompt completion of inventories of finished products.
Therefore, inventory turnover is a valuable measure of administrative efficiency in the field of sales and the quality of goods sold.
Accounts Receivable Rotation.
It allows knowing the number of times the average customer of the company is renewed, the number of times the commercial circle is completed in the period to which the net sales refer. It is necessary to know the cycle that the company has to carry out the analysis.
Rotation of Accounts Payable.
Indicates the number of times the average of accounts payable to suppliers is renewed in the period or year to which the net purchases refer. It allows to know the speed or efficiency of payments of the company.
In the case of our company, it is necessary to determine the purchases for the period. As the company does not have a specific account to collect this data, it is necessary to find out what the purchases of materials and merchandise were, since these constitute the fundamental amount of the purchases made by the company.
Materials Purchases = Material Expenditure + Final Inventory - Initial Inventory.
Cash Cycle.
It is the integral part of the operating cycle, its interval is included between the payment to suppliers and the collection to clients. It is in the interest of every company that this cycle is as short as possible to reduce its financing needs.
Poor management of the cash cycle management creates significant financial stress for companies, so all appropriate measures must be implemented to make this cycle as short as possible. The ideal situation is for those companies that manage to have a cash cycle where operation activities are more than financed from the funds of suppliers and clients.
When analyzing the cash cycle, it is useful to distinguish two factors: the operating cycle and the payment cycle, which combine to determine the cash cycle.
The cash cycle relates the operating cycle and the payment cycle as follows:
Operating Cycle.
Cash cycle (CE) - Operating cycle (CO) - Payment cycle (CP)
The operating cycle (CO) is a measure of the amount of time that elapses from when the raw material is purchased to produce goods until it is charged to the customer, through the production, storage and sale process. The operating cycle takes into account two liquidity determinants:
1. The inventory conversion period (PCI), which is an indicator of the average time it takes a company to convert its accumulated inventories of raw materials and materials to production in process, from production in process to finished production, and from production ended in sales made to customers. This period is measured by the average terms of the inventories of materials, production in process and finished production.
2. The accounts receivable conversion period (PCxC), which is the indicator of the average time it takes for a company to convert its accounts receivable into cash. This period is measured by the average collection cycle.
The operating cycle focuses on the timing of cash inflows, but circumvents the timing of outflows (at which point we must pay for purchases and labor). However, the company's financing requirements will be influenced by its ability to delay payments by purchasing materials on long-term credit or by making labor payments after work has been completed.
CO = PCI + PCxC
Payment Cycle.
The payment cycle (CP) is the indicator of the time that elapses as an average between the date of purchase of the materials and the date on which the payment is made to the suppliers.
Inventory Rotation
Inventory turnover is the indicator that allows us to know the number of times the inventory is carried out in a given period. It allows to identify how many times the inventory is converted into money or accounts receivable (it has been sold).
It is one of the parameters used for inventory control in companies dedicated to sale, it is determined by dividing the cost of goods sold in the period by the average of inventories during the period. (Cost of goods sold / Average inventories) = N times.
Inventory turnover determines the time it takes to complete the inventory, that is, to sell. The higher the turnover means that the goods remain less time in the warehouse, which is a consequence of good administration and inventory management.
Finished Products Inventory
Inventories of finished products: this type of inventory is for all the goods that a manufacturer is produced to sell to its customer.
1.4 Insurance or provisioning costs
The insurance costs are intended to determine total values that allow us to know, approximately, the costs incurred by the supply system and also to determine indicators, which, keeping up to date, allow decisions to be made in the "Inventory Management" processes.
The costs considered relevant in this process are: acquisition costs, order issuance costs, storage costs, opportunity costs, and inventory breakdown costs. The storage cost added to the opportunity cost is used in some specific processes under the term inventory maintenance cost. Each of these relevant costs are considered as simple or complex items in which different elements of the expenditure concur.
Costs: they represent a portion of the purchase price of articles, properties or services, which has been deferred or has not yet been applied to the realization of income.
Acquisition cost is the cost of placing orders, that is, of the entire administrative - accounting process (buy, receive, control, pay, etc.). Among them are: purchasing costs, invoice processing, quantity discounts and freight savings. They have a decreasing variable behavior.
Acquisition Costs: It is the total amount invested in the purchase of the merchandise, or the book value of the product when it comes to material in progress or finished products.
Opportunity cost is the cost that arises when making a determination that causes the resignation of another type of alternative that could be considered when carrying out the decision. In this case, the opportunity cost is the lost benefits of discarding the best alternative.
Because opportunity costs are not costs incurred by the company, they are not included in the accounting records. However, they are relevant costs for decision-making purposes.
Storage Costs.
Storage, maintenance or stock ownership costs include all costs directly related to the ownership of inventories such as:
• Financial costs of inventories
• Warehouse expenses
• Insurance
• Deterioration, losses and degradation of merchandise.
They depend on the storage activity, whether it is managed by the company or not, or that the merchandise that is stored in a warehouse by the supplier or that is owned by the manufacturer.
To record this complexity, a detailed list of the costs of storage, maintenance or possession of the stocks is included below in the most general case possible. However, a simplified method of calculating these costs (the annual "ad valorem" rate) that is used very frequently will be presented later.
The classification of the storage costs that are included below is made by activity (storage and maintenance), by imputability (fixed and variable) and by origin (direct and indirect).
Storage Costs
All stored material generates certain costs.
Stock costs depend on two variables; the quantity in stock and time in stock.
1.5 ABC Method for Selective Inventory Control
In practice, the ABC method is one of the most used methods in inventory management. This is based on the way of classifying products according to established criteria with the aim of minimizing inventory investment and ensuring that the company has with sufficient stocks to meet the demand when it occurs and for the production and sale operations to function without obstacles, taking the value of inventories as a criterion and giving relatively arbitrary percentages to make this classification.
Each company has its peculiarities, to use this method you must be aware of the realities of your company. One must think not only about costs, it is important to see other criteria, which is undoubtedly the main difficulty in this type of analysis. It is undeniable, however, that a small percentage of products, from any criteria, is essential for the operation of the company and / or to improve its profitability.
The ABC analysis, called the 80-20 curve, is based on the contribution of the economist Wilfredo Pareto, after a study of the distribution of income in Italy, where he observed that a large percentage of income was concentrated in a small part of the population, this principle was called the Pareto Law. The Pareto principle separates the vital few from the vital many and can be defined as ´´There are few critical values and many insignificant, resources should be concentrated on critical values and not on insignificant ones.
Companies using this method divide inventories into three groups
: A, B, C. In group A the products with the highest investment are concentrated, in group B those 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.
The division of inventories 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.
The objective of the ABC method is to classify the products in inventory to establish differentiated strategies that enable efficient and customer-oriented Supply Management.
The following graph gives us an overview of the ABC classification. Percentages were not used explicitly, so as not to fall into the temptation to dogmatize about a particular value, the idea is that the products of zone A are sought models that allow very strong control over the key criteria being handling and as products move away from this area, the models can be more flexible; This does not mean that physical inventory control is neglected.
The general approach of the ABC Method can be stated as follows:
"In any inventory, a small fraction determined in terms of elements represents a majority fraction in terms of effects."
From the point of view of economic effectiveness, this approach supports the need for inventory classification and selective control.
When applying the method, a curve is obtained that represents the statistical distribution of the effect of the lines considered. Three zones are defined in this curve, whose limits are determined by the ranges assigned to it.
The characteristics of each zone are as follows:
ZONE A: It groups 10 to 20% of the total of the lines and represents 60 to 80% of the total economic effect. These lines will be classified as A and are the most important for the company according to the base parameter considered.
ZONE B: Groups 20 to 30% of the total items and represents 20 to 30% of the total economic effect. These lines are classified as B and are of medium importance to the company.
ZONE C: It groups 50 to 70% of the total items and represents 5 to 15% of the total economic effect. These lines will be classified as C and are the least important for the company according to the base parameter considered.
There is consensus in the consulted authors in using to define the ranges of the classification zones the criteria of the specialists that express the magnitude of the economic effect that one wants to strictly control. The most generalized experiences involve for Zone A adopting up to 80% of participation in the total economic effect and for Zones B and C up to 15% and 5% respectively.
The articles in zone A are the ones that require the greatest capital investment and a maximum of control, require a minimum supply period since they are based on the principle of Exception Management applied to a few but economically important ones.
The articles in zone B are of intermediate category. Many of these can be managed through a periodic review system, or a Maximum - Minimum inventory.
Items in zone C make up the largest proportion but in turn represent the highest monetary value. These are consumer items that have infrequent demand or low unit cost. Associated with articles from one area or another are the levels of services that must be differentiated by the strategic importance of the product.
In the policies that are established, the good judgment of the specialist cannot be underestimated because there may be articles that, even being in zone B or C, require differentiated attention. Most of the applications of the ABC Method use the value of consumption as the base parameter, however, the author requires the joint interaction of this and other base parameters for the decision-making process.
In the research context, the author proposes the use of the ABC Method based on the base parameters:
1 Value of consumption
2 Value of balance in stock
The application of the ABC Method with a multivariable approach makes it possible in the framework of the company to make Inventory Management more effective. Some advantages that may be considered are the following:
1 It constitutes an instrument that allows to measure the quality and the adaptation of the inventory policy the variations that the demand experiences.
2 It is a means that serves to identify the articles that have more weight in the matter of existence and that, therefore, deserves greater attention for the potential sequences that derive from that right and that affect in a special way the results of the organization.
3 Lay the groundwork for conducting vendor market research.
4 It contributes to the economic foundation of the differentiated service levels for the products in stock with a direct impact on the security inventory, order point, minimum, average and maximum inventory.
5 It makes it possible to measure the effectiveness of the movement of the most important products and their disposition in the warehouse attending to the demand.
6 It makes it possible to determine which lines are of little movement, as well as their nature.
7 Contributes to the reduction of the time invested in stock control operations.
8 It improves the decision-making process by allowing a comprehensive evaluation of each product.
Classification criteria are called base parameters, which are quantifiable and express the economic importance of the products in inventories. The most commonly used base parameter is the consumption value. However, there are other parameters that can be used such as the value of the actual balance in stock, the average inventory value, the number of movements, the volume occupied by the products in stock, the expiration date, among others.
CHAPTER II. INVENTORY MANAGEMENT PROCEDURES
2.1- Characterization of the Universal Products Marketing and Services Company of Las Tunas
The Universal Products Company of Las Tunas was created in 1977, belonging on that date to the defunct State Committee for Technical Material Supply (CEATM), currently appointed by resolution no. 625 of 2004, Marketing and Service Company of Universal Products of Las Tunas. It sells consumer and intermediate goods on a wholesale basis, and it also provides Gastronomy, Photography, video services in CUC and MN, as well as selling photographic rolls, films, photography accessories, and items related to the activity.
This entity is currently in Business Improvement, being the only one in the commerce sector in the province, it has a General Director, two directorates, a Financial Accountant and a Human Resources one, as well as three Base Business Units (UEB), one in National Currency; Vide Cuba; Production and Service.
Social object of the company
It is covered by Resolution 263 dated June 5, 2007 of the Ministry of Economy and Planning, the following activities being possible:
1 Market wholesale consumer and intermediate goods, in Cuban pesos, according to approved nomenclature.
2 Provide photography and video services at VideCuba centers to legal entities in Cuban pesos and convertible pesos and natural persons in convertible pesos.
3 To commercialize, in convertible pesos, cameras, films, rolls, photography accessories, materials for photographers and related articles with the activity of photographs and video, as well as office supplies and costume jewelery in the centers of Vide cuba, according to approved nomenclature.
4 Provide gastronomic services in convertible pesos at VideCuba centers.
5 Provide storage and conservation services for the goods of the special and state reserve, in Cuban pesos.
6 Provide rental services for warehouses and cold rooms in Cuban pesos.
7 Provide cargo transportation services in compliance with the regulations established by the Ministry of Transportation, in Cuban pesos.
8 Provide photography services for identity cards at VideCuba centers to Cuban natural persons in Cuban pesos.
9 Provide photography services in the wedding palaces to Cuban natural persons in Cuban pesos.
Company Functions.
1 Comply with and enforce current legislation.
2 Direct and direct the actions of the different areas and Base Business Units for the efficient fulfillment of the assigned missions.
3 Organize, in conjunction with the Union, the entire system of stimulating workers, in correspondence with their productive results or in the provision of services.
4 Respond to the Ministry of Internal Trade, for the results of the Company.
5 Respond for the safety and protection of the Company and its Base Business Units.
6 Guarantee corporate image and industrial culture.
Mission
Commercialize products and services in the branches of Chemistry, Hardware Stores, Food, Metals, Wood, Packaging, Industrial, Textile and Footwear, Personal Use Items, Equipment, as well as gastronomic services, photography and videos at competitive prices. with the required quality, speed and efficiency capable of meeting the expectations of our customers, offered in our trading units in both MLC and MN.
View
1 The national and provincial demand is known.
2 After-sales warranty services are offered.
3 There are trained, trained and motivated workers and managers to provide excellent services.
4 You work with a high sense of belonging.
5 The necessary and timely supplies for the production and provision of the service are guaranteed.
6 High protection of our products and services is offered to customers.
7 It is a highly effective, efficient and effective organization.
8 Collections and payments are professionally carried out within the established deadlines.
9 Scientific research and technological innovation of greater technical, economic and financial feasibility are applied in a timely manner.
10 It is a company constantly perfected according to changes in the environment.
The organic template is as follows
Workforce / Number
Leaders 17
Administrative 5
Technicians 70
Operators 46
Services 94
Total 232
Characterization of the UEB NATIONAL CURRENCY.
The National Currency Base Business Unit is located on the eastern road S / N, Industrial Zone, in the municipality of Las Tunas. It was founded on June 2, 1977 with subordination to the Universal Products Marketing and Service Company Las tunas. It has the fundamental task of managing, storing and distributing the products purchased and stored to the population and different organisms.
The company's mission is that:
1 The national and provincial demand is known.
2 We offer after-sale warranty services.
3 We have trained, trained and motivated workers and managers to provide excellent services.
4 We work with a high sense of belonging.
5 We offer a high protection of our products and services to our clients.
6 We are highly effective, efficient and effective.
7 We timely apply scientific research and technological innovation of greater technical, economic and financial feasibility.
It is a Unit constantly perfected according to the changes in the environment.
This Unit for a good operation has a total of 72 workers, 27 women and 45 men, who have made it possible to meet all the goals set in previous years in conjunction with the cooperation group and the factors of the unit. It is good to point out that these 72 workers constitute the workforce that the unit has to face the problems that may arise in order to provide a service with the required quality, it is distributed as follows:
In addition, this UEB has a Warehouse Base, a unit in Puerto Padre and the management of the UEB.
Characterization of the base business unit VideCuba.
The work was carried out in the VideCuba Base Business Unit belonging to the Universal Products Marketing and Services Company.
Tunas, located on the eastern road S / N in the industrial area of the municipality of Las Tunas.
For the development of its activities it has four establishments and a management unit as detailed below.
1 Unit "The terrace" located in the municipality Las Tunas.
2 Photographic studio "The painting" located in the municipality of Las Tunas.
3 A photographic studio located in the municipality of Puerto Padre.
4 A photographic studio located in the municipality of Colombia.
5 The Directorate located in the socio-administrative building of the company.
This UEB for its operation has a total of 40 workers, of them 10 (25%) women and 30 (75%) men. It is good to point out that these 40 workers constitute the workforce that the unit has to complete its circulation plans and be able to provide a service of the required quality.
Resolution 263 dated June 5, 2007 of the Ministry of Economy and Planning states, as its corporate purpose:
2 Provide photography and video services at VideCuba centers to legal entities in Cuban pesos and convertibles. And natural in convertible currency.
3 To commercialize, in convertible pesos, cameras, films, rolls, photography accessories, supplies for photographers and related articles with the activity of photographs and video, as well as office supplies and costume jewelery in the centers of Vide Cuba, according to approved nomenclature.
4 Provide gastronomic services in convertible pesos in the centers of Vide Cuba.
5 Provide photography services for identity cards at Vide Cuba centers to Cuban individuals in Cuban pesos.
6 Provide photography services in the marriage palaces to Cuban natural persons in Cuban pesos.
The UEB's functions include:
1 Comply with and enforce current legislation.
2 Efficiently fulfill the assigned missions.
3 Organize, in conjunction with the Union, the entire system of stimulating workers, in correspondence with their productive results or in the provision of services.
4 Respond to the Marketing and Services Company of Universal Products Las Tunas, for the results of the UEB
5 Respond for the safety and protection of the base business unit.
6 Guarantee the corporate image.
Characterization of the UEB Assurance
The Base Insurance Business Unit is located on the eastern road S / N, Industrial Zone, in the municipality of Las Tunas. It was founded on June 2, 1977 with subordination to the Universal Products Marketing and Service Company Las tunas. It has the fundamental task of supplying and providing services. In addition to the UEB that make up this Company, the fundamental services are transportation, the hygiene of the center, as well as the consumption of the entity's workers of any material, be they office, construction, cleaning, greases, lubricants, supplies, basic means and those relating to dining room and cafeteria.
Mission
8 The national and provincial demand is known.
9 We offer post-sale warranty services.
10 We have trained, trained and motivated workers and managers to provide excellent services.
11 We work with a high sense of belonging.
12 We offer a high protection of our products and services to our clients.
13 We are highly effective, efficient and effective.
14 We timely apply scientific research and technological innovation of greater technical, economic and financial feasibility.
2.2 Characterization of Inventories
The inventories taken as a sample for the analysis were finished articles from the UEB national currency warehouse at the Universal Products Marketing and Services Company. A sample of 20 articles was taken, which are used for the sale of the units of the Internal Trade Sector.
12 6-rate
Coffee Maker Joints 13 3-rate Coffee Maker Joints
14 Pressure Cooker Fuse
15 LP 10 A Switch
16 Fluorescent Lamp 10W
17 Salfumán 500 ML
18 Water Sheets
19 Simple Switch 120V
20 Cap for Simple Switch 120V
21 Soap Wash
22 Cleaning Powder
23 Roll Deodorant 90 ML
24 Economic Brooms c-handle
25 Plastic Cups 8 ounces
26 Hydraulic Tube
27 Hoses
28 4 Inch
Tubes 29 2 Inch Tubes
30 Decorated Deep Dishes
31 Personal Mattress
2.3 Proposal of Procedures for Inventory Management in the Marketing and Services Company of Universal Products of Las Tunas
The Inventory Management Techniques were:
1 Economic-Financial Analysis
2 Insurance or Supply Costs
3 ABC Method
The Financial Economic Analysis was carried out with the objective of knowing the financial situation of the company, since it does not carry out an in-depth analysis of its financial situation, analyzing the periods 2007-2008.
Attending a series of indicators shown below:
Liquidity Analysis (working capital, solvency), Activity Analysis (Accounts Receivable, Accounts Payable), Inventory Analysis and finally the cash cycle analysis.
The Supply Costs were calculated for the months of January, February and March 2009. Table 1.1 is proposed for the calculations in MN, the table
1.2 for the organization's sales revenue, as well as the provisioning costs by weight of income in table 1.3.
2.4 Validation of the Procedures for Inventory Management in the Marketing and Services Company of Universal Products in Las Tunas
2.4.1 Analysis of the Financial Situation of the company
Liquidity analysis
Working capital
This indicator is considered positive when current assets are higher than current liabilities, in this case when analyzing both periods it is observed that in 2008 there is an increase with respect to the previous year of 1,731mp The fundamental cause is given by the increase in assets current at $ 19,272362 mp, specifically the short-term accounts receivable increased by $ 19.901809 mp representing 78% of the current assets, the account owed from the state budget increased by $ 40,352 mp, the inventory by 145,883 mp While the Current Liabilities increased due payrolls increased by 2,676 mp, withholdings payable by 3,354, accounts payable Tangible Fixed Assets by 2,053 mp, obligations with the state budget by 27.09, vacation provisions by 1.745, mainly highlighting the short-term accounts payable at 16180.16 mp, representing 76.96% of current liabilities.
General Liquidity
In 2007, for each peso of short-term debt, the company had $ 1.16 of current assets, however in 2008, its ability to pay was less than $ 1.12. During both years, this indicator behaves favorably, showing that the company has a acceptable liquidity exceeding the established norms. Although it reflects a decrease in 2008 with respect to 2007 1,125-1,159, the difference is 0.34 cents.
Immediate liquidity or acid test
When analyzing the immediate liquidity, it is observed in 2007 that for each peso of short-term debt, the company has $ 0.81 pesos of available and realizable assets, discounting inventories, which represents 22.34% of current assets, demonstrating that the company had assets liquids to meet your short-term liabilities. In 2008 the company had $ 0.99 pesos of available assets to meet its short-term liabilities, this ratio increased from one year to the other, but even so, the company's situation was favorable.
Solvency
At the end of 2007, real assets covered 1.06 times all debts, that is, for each peso of external financing, the company had $ 1.06 of real assets to cover all obligations. While in 2008 it had 1.05 of real assets to cover all its obligations
Activity analysis
Collection Cycle
In 2007, accounts receivable rotated 7 times a year every 51 days, while in 2008 they did it 4 times every 89 days. As can be seen, the collection cycle increased in 2008 with respect to the previous year by 38 days, including the increase in the average of accounts receivable that remain pending payment. When comparing these results with the average collection cycle, the company does not comply with the established parameters, which is 40 days.
Payment Cycle
In 2007 the payment cycle was 14 days and 24 for 2008, this situation is not favorable for the company since it reduces the payment cycle to meet the commitments made, despite this the payment cycle is within of the parameters established for both periods, therefore it is appreciated that the company has sufficient financing reserves.
Inventory analysis.
The inventory cycle decreased in 2008 compared to 2007, since in 2007 every 49 days inventories rotated 7 times, while in 2008 they did 12 times every 29 days, which shows that the company has inventory levels available for sale.
FINISHED PRODUCTION
Finished Production inventory are inventories that are ready for sale.
During 2007, the finished production rotated once every three days approximately, while in 2008 there were no finished articles at the end of the period due to negative incidents caused mainly by the prices assumed by the company by indications of the Finance and Prices of the MINCIN corresponding to the trade sector made in the UEB National Currency of the goods affected by Hurricane IKE in its devastating passage through the territory of Las Tunas.
CASH CYCLE ANALYSIS
A decrease of 18 days is observed in the cycle of operations in 2007 with respect to 2008, since in 2007 it was 100 days, while in 2008 it is 118 days. In 2007 the cash cycle was 4 times every 86 days, that is, there were 86 days between cash disbursement and income from operations. In 2008 this operation was performed 4 times every 94 days, 8 days more than the previous year.
2.5 Calculation of the costs of supplies or supplies
In the Universal Products and Services Marketing Company, the supply costs have been calculated for the first time, taking into account all its elements. The Company only considered acquisition costs in its analyzes as purchase costs in the period, although in the structure of supply costs acquisition costs represent the highest specific weight, all the elements that compose it must be calculated, since that these represent an important reserve for the reduction of total expenses.
Considering only acquisition costs as total purchase costs, important efficiency reserves in the performance of this supply management were unknown.
The supply costs by income weight are shown below for the month of, January, February and March in Table 1.3
As reflected in the previous table, the Provisioning Costs by Revenue Weight indicator only considered the Acquisition costs, obtaining as a result 0.30 purchase pesos per revenue weight in the month of January, 0.23 in February and 0.27 in March. When taking into account the supply costs, the result obtained is 0.54 in January, 0.41 in February and 0.47 in March, allowing to know in more detail the efficiency in relation to purchase management.
The application of the ABC Method was done through an Excel application. The selected sample corresponds to the account number 06 finished production, which refers to the finished articles from the UEB warehouse, national currency in the Product Marketing and Services Company
Universal. The period considered was April 2009.
Classification according to the base parameter. Consumption value
Total products classified 20
Total products classified as A-9
Total products classified as B-7
Total products classified as C-4
Classification according to the base parameter. Stock Balance Value
Total products classified 20
Total products classified as A-12
Total products classified as B-4
Total products classified as C-4
The following conditions emerge from the analysis of the results obtained.
The finished items classified as A in terms of consumption and the balance in stock are shown below:
1 6-rate Coffee Maker
Joints 2 3-rate Coffee Maker Joints 3
Pressure Cooker Fuse
4 10A Switch
5 10W Lamp
6 Salfumán 500 ML
7 Water Sandpaper
8 Single Switch
9 Cover for switches
Being those of greater demand in relation to the selected sample. These are articles that have a high impact on the results of the organization and the level of customer service.
The items shown below are classified as C according to consumption and according to the balance in stock:
1 Tube 4 Inches
2 Tube 2 Inches
3 Decorated Deep Plates
4 Personal Mattress
and according to existence
1 Washing Soap
2 Cleaning Powder
3 Roll Deodorant 90 ML
In this situation, it is recommended to analyze the size of the order to avoid accumulation of these inventories in the warehouse.
Articles:
4 Washing Soap
5 Cleaning Powder
6 Roll Deodorant 90 ML
They are classified as A according to existence and are items B according to consumption. In this situation, the place of these items in inventory must be analyzed in order to avoid their slow rotation in the warehouse.
The various aspects of inventory responsibility affect many departments, and each department exercises some degree of control over products as they move through the various inventory processes. That is why managers must receptive to implement each of these models, which will be very useful and helpful to the company and may have control of each of these products.
All of these controls, which cover the procedures for developing sales budgets and forecasts up to the operation of a cost system by the accounting department for the determination of inventory costs, constitute the internal inventory control system.
CONCLUSIONS
The investigation confirmed that:
In the company there are affectations in the Current Assets items, and in the rotation of the cash cycle in 2008, which brings with it risks in the financial economic situation.
Provisioning costs were calculated for the first time, detecting important reserves that the company did not take into account, which influences the efficiency of the organization.
The application of the ABC method with a multivariable approach allowed to accurately evaluate the finished articles taken as a sample, with the aim of improving the process and decision making in the company.
The use of computer systems in ABC analysis favored the process for applying inventory management techniques, contributing to the improvement of the level of service to customers.
recommendations
Based on the proposed analysis, the company is recommended to look for alternatives to reduce the cash cycle.
Apply the calculation of supply costs to really know the costs incurred or by provisioning.
Carry out the ABC analysis of other items to find out the demand or the inventory turnover income in the warehouse to help managers make better decisions regarding inventory management.
Work in the preparation and improvement of the personnel that carry out the inventory management activity.
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Electronic literature consulted:
1. Inventory Management (Online Documents), Available at www.gestiopolis.com. February 2009
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3. Financial Administration of Available Inventory: www.monografias.com
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7. Inventory Management
8. Summary
Inventories (Online Documents): http://www.monografias.com May 2009 9. Inventory Work (Online Documents) Available: http://www.monografias.com May 2009
10. Competitive Advantages Available http: //mktglobal.iteso.mx/numanteriores/1999 / Nov 99 20 May 2009.
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