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Inventory is a major asset for most companies. By keeping stock, both retailers and manufacturers can continue to sell or build items. As an accounting term, inventory refers to all stock in the various production stages and is a current asset. As a business leader, you practice inventory management in order to ensure that you have enough stock on-hand and to identify when there’s a shortage.The verb “inventory” refers to the act of counting or listing items.
Staff attaches a necklace to a preprinted card and slips it into cellophane envelopes to create a finished good ready for sale. The following examples demonstrate how the different types of inventory work in retail and manufacturing businesses.A company that makes T-shirts has components that include fabric, thread, dyes and print designs.A jewelry manufacturer makes charm necklaces. Inventory ExamplesReal-world examples can make inventory models easier to understand.
The “theoretical inventory” is the 4% of food that was lost or wasted.The theoretical inventory of stock in the inventory record or system, which may differ from the actual inventory when you perform a count.An art store orders and pays for 40 tins of a popular pencil set. Its service inventory, therefore, is 120 meals per day.A restaurant aims to spend 30% of its budget on food but discovers the actual spend is 34%. The napkins fit easily in the dedicated storage space.A café is open for 12 hours per day, with 10 tables at which diners spend an average of one hour eating a meal.
Similarly, anticipation stock comprises raw materials or finished items a business purchases based on sales and production trends. Safety stock has carrying costs, but it supports customer satisfaction. The tertiary type of packing is bulk packaging for transport.Safety stock is the extra inventory a company buys and stores to cover unexpected events. Secondary packing is the packaging of the finished good and can include labels or SKU information.
Whereas all companies may have safety stock. Decoupling inventory is useful if parts of the line work at different speeds and only applies to companies that manufacture goods.
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