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Basic Principles of the Inventory System

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Basic Principles of the Inventory System

In principle, Inventory is your property and in every inventory process there will always be costs. 

This means that the more inventory you have in your warehouse, the higher the costs you will have to spend to manage it.

The question that often arises then is “How much stock should be in your warehouse?” There is a wrong assumption that a sense of security will arise if the stock in the warehouse is stored in large quantities. 

This mindset often appears when the sales or sales department meets the logistics department.

With the principles of managing the basics of good logistics, a reference or method will be obtained for storing stock and distributing it to warehouses within a company network.

Inventory exists throughout the logistics of an industry. Starting from raw materials from suppliers, then entering the factory, while waiting for the completion process, when the goods are ready to be sold until the goods are in the main warehouse or branch even when the goods have arrived in the hands of consumers, inventory costs are always present at every point in time. these stages.

Basic Principles of Inventory System

To answer the question "How much stock should be in the warehouse?" so it is necessary to first understand the basics of the main idea to ascertain how the pattern and method to determine the magnitude of the quantity is correctly.

The basic principles of the inventory system, among others:

1. When the goods should be held

2. How much should be held

3. Where the goods will be held

Now, let's discuss more about the three things above.

When the Goods Must Be Held

In this case the target to be achieved is to place an order at the right time. By knowing when is the right time to place an order or procurement, the fulfillment of consumer needs will be fulfilled and stock of goods will be available in sufficient and safe quantity.

This condition can be done in the following way:

1. Locate the source of the goods (Supplier) Nearest

2. Determine the most appropriate procurement method by industry and type of goods

3. Minimize damage to items

How Many Should Held

In this case the target is to be able to hold stock with optimal quantity. Accurate calculations concerning the pattern and behavior of goods and consumers as well as the work program to be achieved are the main tools to ensure that the stock of goods to be held is optimal.

This can be done in the following ways:

1. Reduce the stock of stored goods

2. Cross docking

3. Reduce the amount of safety stock

4. Adjust Reorder point level

5. Planned promotions

6. Do not sell goods that are not currently being produced

Where the goods will be Held

In this case the target to be achieved is how the stock is stored in a strategic place. Stock storage in a place far from your target customers will cause waiting times and lead times to be longer.

For this reason, it is necessary to carry out further analysis related to the location based on the level of market crowd, warehouse area and available transportation.

This condition can be achieved in the following ways:

1. Store stock items in strategic places

2. Store maximum items in the main warehouse Demand Forecast scoring

That's a brief review of the Basic Principles of the Inventory System, hopefully it will be useful and useful for you

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