Inventory systems were created to control the entry and exit of items in warehouses. You have to be very careful with them because they make up the capital of a company.
Depreciation, for example due to expiration of certain products such as food, but also the theft of products by employees are normal situations.
That is why you have to know what we have and how much it is worth. Also to be able to maximize sales prices, whether we trade or manufacture.
One of the most famous methods to control inventory is the ABC system. This is based on the unit cost of the products by the value of the quantity in a given period of time.
The system is based on five points in which the data are obtained on the one hand and on the other in which there is a data crossing.
The first point is to obtain information on the amount of products consumed in a given time.
The second piece of information we need is the unit cost of each of the products in our inventory.
Next comes the only count that needs to be done. Multiply the amount of consumed in time by the unit cost.
Finally we have to order the results. For this we will start with the value of consumption. It will go from lowest to highest. There will be another cluman to sort the items by the unit cost value and it will also be from lowest to highest.
This system will help us to know which items are more important than those we have in our warehouse.
The name of Method ABC comes because the articles are then classified into class A, class B and class C.
Class A items will start at a unit cost of X dollars or the annual consumption is greater than Y dollars.
Class B items will be those whose unit cost will be between Z and Y dollars. And the annual consumption oscillates between M and N dollars.
Finally, class C articles will be those with a unit cost less than Z and annual consumption less than M.
Class A items are less but have a high cost. Therefore, it is not necessary to obtain security products, that is, in case there is a high demand, because it will usually end up being more expensive for us because there will be no such mismatch in supply and demand.
Class B items are right in the middle of cheap and expensive, so demand and consumption must be taken into account.
Finally, the class C items are those that have the least cost and therefore those that will have the most emergency reserves.
Thanks to this system you can plan and control inventories. It also allows there to be less shortage of items and there is better efficiency in the products that exist.
