Hands-On Inventory Management: 1st Edition (Hardback) book cover

Hands-On Inventory Management

1st Edition

By Ed C. Mercado

Auerbach Publications

128 pages | 13 B/W Illus.

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Hardback: 9780849383267
pub: 2007-12-13
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pub: 2007-12-13
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Better inventory management translates directly into better cash flow for businesses. However, in order to successfully manage inventory, businesses must strike a balance between customer demand and the amount of inventory they keep. Hands-On Inventory Management demonstrates principles key to developing an inventory management process, which will meet customer needs while keeping inventory costs at a level reasonable enough to produce a profit. 

The text explains basic inventory principles, calculations, and techniques using real-world examples. Different operational situations require different inventory planning and replenishment approaches; hence, this book emphasizes the prerequisites needed for success in a number of different industries. These prerequisites include top management support, a clear definition of responsibilities and alignment of goals throughout the company, as well as uncomplicated item identification. The author stresses the importance of accurate recordkeeping and delineates the most common causes of inaccurate records. He provides solutions to mitigate these causes and demonstrates how businesses can develop and administer a cycle counting program that will lead to a more well-managed physical inventory.

Using a building-block approach, Hands-On Inventory Management gives a clear view of what steps must be taken to strike a profitable balance between customer demand and inventory.

Table of Contents


Objective of Inventory Management

Reasons to Carry Inventory

Too Much Inventory

Too Little Inventory

Costs Associated with Inventory

Profits and Cash Flow are Different Things

Eternal Issues of Inventory Management

Prerequisites for Effective Inventory Management

Operational Environments

How Operational Situations Impact Inventory 

A Retail Store (Merchandising Environment)

A Producer of Retail Items (Make-To-Stock Environment)

A Specialty Steel Fabrication Shop (Make-to-Order Environment)

A PreEngineered Firm (Engineer-To-Order Environment) 

Flow Process Environment

Project Environment 

Types of Inventory

Different Inventory Items Require Different Controls

Classification by Stage in the Production Process

Classification by Responsibility

Classification by Value of Annual Usage—ABC Classification 

The ABC Classification

Other Ways of Classifying Inventory

Measures of Inventory Effectiveness

Percentage of Inventory with No Requirements (Demand) in

Upcoming X Months (Lower Is Better)

Percentage of Inventory with No Issues for the Last X Months

(Lower Is Better)

Days Inventory On Hand (Lower Is Better)

Other Measures

Aligning Goals with Other Departments

Purchasing and Inventory Management

Production and Inventory Management

Lowering Inventory Levels

Engineering, Production, and Purchasing

Responsibility for Inventory Management

Inventory Transactions

The Need for Inventory Records

When Should A Part Number Be Assigned?

Part Numbering Schemes

Significant Part Numbers

Nonsignificant Part Numbers

Combination Part Numbers

Why Use Records?

Bills of Materials

 Inventory Accuracy

The Need for Inventory Record Accuracy

Achieving Inventory Accuracy

Only Two Types of Inventory Transactions

Transactions that Increase Quantity on Hand 

Transactions that Decrease Quantity on Hand

Root Causes of the Most Common Transaction Errors

How to Error-Proof Transactions

First-Time Data Entry

Avoid Rekeying Data

Format and Error Checking in Documents

Cycle Counting and Physical Inventory

Objective of Cycle Counting

Where to Begin Cycle Counting

Definition of Cycle Count Variance

Definition of a CutOff Point

Example of Incorrect CutOff

Other Causes of Discrepancies and Suggested Analyses

Setting Up a Cycle Count Program

Physical Inventory 

Inventory Planning and Replenishment

How to Determine What and How Much Inventory Is Needed

Different Operational Situations Require Different Techniques

Inventory Planning: How Much Do We Need?

Dependent and Independent Demand

How Far Ahead To Guess Requirements?

Situation Example 1: Retail Store

Situation Example 2: Producer of Retail Products

Situation Example 3: A Specialty Steel Fabrication Plant

Situation Example 4: A Preengineered Conveyor Company

Situation Example 5: Producer of Configured Products


Situation Example 6: Maintenance, Repair and

Operating Items, Indirect items, Consumables

Situation Example 7: Food Processing Plant (Process

Flow Environment)

The Basic Reorder Point Technique

Economic Order Quantity (EOQ)

Visual Techniques

Materials Requirements Planning (MRP)

The Basic MRP Record 

Other MRP Details 

The Concept of Safety Stock

Stocking More Than We Need

Single Period Inventory Model

Summary of Inventory Planning and Replenishment

Storage and Physical Control

The Receiving Process

A Starting Point: Good Housekeeping

Assigning Physical Locations

Point-of-Use Inventory

Consignment Inventory

Success Factors for Consignment Programs

Supplier-Managed Inventory

Supply-Chain Management

Definition of Supply-Chain Management

The Systems Viewpoint 86

The Firm’s Place in the Supply Chain

Coordination with Other Elements in the Supply Chain

Opportunities for Improvement are All Over the Supply Chain

An Example of a Supply-Chain Opportunity

Lean Principles and Continuous Improvement

Lean Principles

Examples to Eliminate Waste

Tools for Lean Management

The Concept of 5 S

Just-In-Time (JIT) Concepts

Kaizen (Continuous Improvement)

For Further Reading

Subject Categories

BISAC Subject Codes/Headings:
BUSINESS & ECONOMICS / Purchasing & Buying