Approaches to inventory management. Optimization of inventory management systems
Various approaches to inventory management Inventory management is of great importance in the management of a trading enterprise. Therefore, to effectively manage a trading enterprise, it is first of all necessary to use an optimal inventory management model. Irrational management of enterprise inventories often leads to large economic losses. Effectively solving inventory management problems requires the use of appropriate techniques.
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Lecture 4. Different approaches toinventory management
Inventory management It has serious importance in the management of a commercial enterprise.An uninterrupted supply of goods to customers ensures a constant influx of goods into the trading enterprise in order to satisfy needs.The absence of any product can lead to reorientation of consumers to another trading enterprise. Hence, for effective management of a trading enterprise, first of all, it is necessary to use the optimal inventory management model.
Inventory- This a certain amount of a resource or goods, used by an organization in its business activities to maintain a continuous production process.
Irrational management of enterprise inventories often leads to large economic losses.Insufficient stockcan lead to disruption of the rhythm of production,increase in production costs,failure to meet deadlines for completing work under contracts, loss of profit, if we are talking about an industrial enterprise. Though, the situation is extremely undesirable,when the stock is too large.In this case it happens"freezing" working capital of the organization.As a result, the moneywho could" work " , generate income rest in warehouses in the form of stocks of raw materials, materials, components.
Effective solving inventory management problems requires use appropriate methods.
- Dependent and independent demand
Main feature,defining the methods used for planning and inventory control,- the nature of demand for these stocks. There are dependent and independent demand. Items used dependent demand, usually, are subassemblies and components,used in the production of the final product.
Demand (i.e. use) for subassemblies and components is determined by the volume of production of finished products.A classic example here is the need for wheels for manufactured cars.If each car requires five wheels,then the number of wheelsrequired for the production of a batch of cars,is a simple function of the volume of this batch. For example, 200 cars require 1000 (200 ∙ 5) wheels.
Items with independent demand- this is, most often, finished goods,final products.Usually the finished product is sold(or shipped) to the customer - it is not involved in the production of any other product. In this case, as a rule, it is impossible to accurately determine the need for a product for any period of time,since there is usually an element of chance in demand.
Thus, with independent demand, forecasting plays a big role in inventory management,while for dependent demand the need for inventories is determined bybased on the production plan.
Inventory management theorycombines methods for analyzing problems of regulating stocks of a certain product with independent demand for this product.
In problems of this kind it is necessary to find a rational amount of reserve, considering, that losses arise both from unsatisfied demand, so and because that the product is stored in a warehouse.
The problem of inventory management arises when considering a variety of economic objects.Inventory management problems are common in retail analysis.In this case, the stocks of some product in the store are considered.Typically, demand is considered a random variable with a given distribution.The stock is replenished by delivery of goods from the wholesale base at the request of the store,Moreover, the delivery time can be fixed or it can be a random variable.The manager is faced with a question:when to apply for restocking,and what quantity of goods to require in the application?
Manage inventorynecessary at production facilities,where it is necessary to determine the rational level of raw material reserves,tools, etc.Excessive inventory in this case leads to irrational use of working capital,requires significant costs for storage and care.On the other side, lack of raw materials, materials or tools causes production disruptions.Therefore, establishing a rational amount of stock is a means allowing, on the one hand, liquidate unnecessary inventory,and on the other hand- ensure rhythm of production.
Inventory Managementconsists in establishing the moments and volumes of orders for their replenishment.
A set of ruleson which such decisions are made, called strategy (system) inventory management.
Optimal strategy is considered the one which ensures minimum costs for bringing products to consumers.
2. Basic inventory management strategies
Any inventory management strategy must answer two basic questions:when to order the next batch of products,and how many goods to order?
There are two main strategies for inventory regulation:
) fixed order quantity system;
) system with a fixed order frequency.
Fixed Order Quantity System assumes that the size of incoming batches- constant valueand subsequent deliveries are made at different time intervals.A batch purchase order is placed when the stock size is reduced to a predetermined critical level, called "order point" ( in foreign literature the abbreviation ROP is used- Reorder Point). Thus, The intervals between deliveries depend on the intensity of product consumption.
The time interval between submitting an application and the arrival of the batch at the warehouse is calledprocurement period. In the model, the duration of the procurement period can be considered constant,or be a random variable with a given distribution.
As a disadvantageThe first strategy is usually called the need for regular accounting of material assets in the warehouse, with that so as not to miss the moment of advance"order points".
A fixed size strategy is more suitable for those in charge,important materialssince it provides for stricter control over the state of reserves, hence, a faster response to threatened stock outs can be achieved.
Fixed order frequency system. In this case, products are ordered at regular intervals,and the size of the stock is adjusted by changing the batch size.The batch volume is assumed to be equal to the difference between the fixed maximum level,until which the stock is replenished,and its actual size at the time of order.
The adjustable parameters in such a system are: maximum (planned) level (Max) and the time interval between two orders(l, also called planning period) .
The advantage of such a system- no need for regular accounting of materials. Flaws: sometimes you have to place an order for a small quantity of products,and in case of unexpectedly intense consumption, the stock may be exhausted before the next ordering time.
Modifications to Basic Inventory Management Strategies P are used to improve the characteristics of basic strategies.
System with fictitious stock level. It is a modification of the first of the main strategies.Used in situationswhen the demand intensity is a random variable,or the duration of the procurement period is a random variable,or both of these parameters are random variables.Given this state of affairs, it is possible thatwhen, upon arrival of the ordered quantity of products at the warehouse, the stock level will still be lower"order points", i.e. I'll have to place a new order right away.But why wait for the arrival of the previous party,if the need for an immediate order for the next one can be predicted?
When using this strategy as an indicator,used to determine when to order, applies fictitious stock level- Y(t) . It represents the sum of the available stock in the warehouse and the quantity of productsin the process of delivery.The strategy is as follows:when the fictitious stock level is reached"order points" a new order is being processed.
System with fixed periodicity and two fixed levels. It is a modification of the second of the main strategies.Here, in addition to the upper maximum stock level,the minimum is also set.If the stock level is reduced to the minimum level before the next order occurs,then an extraordinary order is made.The rest of the time, this system operatesas a system with a fixed order frequency.
The advantage of the strategy is that it eliminates the possibility of material shortages.The need to regularly monitor inventory levels may be cited as a disadvantage.
4. Objective functions of inventory management models
The criterion for the optimality of the strategy is the minimum total costs,related to the formation and storage of reserves, and losses, arising in the event of interruptions in supply to consumers.In this case, only those expenses are taken into accountwhich depend on the size of the shipments and the amount of stock.
Since the stock changes over time,applications for its replenishment are also submitted periodically,When studying inventory storage systems, the average cost of operating the system per unit time is usually minimized.
Despite, that any inventory management model is designed to answer two basic questions(when and how much), there are a significant number of models,for the construction of which a variety of mathematical apparatus is used.
This situation is explained by the difference in initial conditions.The main basis for classifying inventory management models is the nature of demand for stored products(remember, that from the point of view of a more general gradation we are now considering only cases with independent demand) .
So, depending on the nature of demand, inventory management models can be
deterministic;
probabilistic.
In turn, deterministic demand can be static, when the intensity of consumption does not change over time, or dynamic, when reliable demand may change over time.
Probable demand can be stationary, when the probability density of demand does not change over time, and non-stationary, where the probability density function varies with time.The above classification is illustrated by the figure 1.
Figure 1 Types of inventory management models depending on the nature of demand
The simplest case is the case of deterministic static demand for products.However, this type of consumption is quite rare in practice.The most complex models- non-stationary type models.
In addition to the nature of demand for products, when building inventory management models, many other factors must be taken into account, For example:
deadlines for order fulfillment.The duration of the procurement period can be constant or be a random variable;
inventory replenishment process.Can be instantaneous or distributed over time;
existence of restrictions on working capital,warehouse area and so on.
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Inventory management is a fairly traditional area of practical work, which began to develop as an independent direction in the early 20s of the last century. The gradual accumulation of material led in the 30s to 40s to the formation of a theory of inventory management, focused on optimizing the level of inventory in an organization. A variety of specialized literature in Russian on production management, and later on production and operational management, helped by the 80s and 90s to make the tools of inventory management theory easily accessible for practical use. In this case, the emphasis was placed exclusively on the calculated component of the stock level. With the concerns of perestroika and the development of a market economy in Russia, the problems of direct inventory management seemed to fade into the background and began to be considered only at the level of performers and lower-level management.
Meanwhile, foreign science and practice of management (and, above all, logistics management associated with the management of a new object - material flows) over the past 20 years has taken a giant step from improving methods and models for calculating inventory levels to improving the inventory management process based on analysis results of stock level calculations. The result of this step is very noticeable when comparing the main issues being resolved at enterprises abroad and in our country. As a rule, various educational programs, corporate and educational seminars, trainings and meetings with specialists conducted by the author throughout the country show the same picture: when asked what the listeners, usually representatives of middle and senior management, would like find out on the topic of inventory management the answers are: “How to calculate...”, not “How to manage...” or “How to make a decision about...”Modern domestic practice of inventory management is often characterized by: - spontaneously or traditionally established methodology for inventory management at all stages of the movement of material flow in the organization;
Lack of attempts to algorithmize methodological work on inventory management;
Insufficient statistical basis for calculating inventory levels;
High level of error in forecasting stock requirements;
Weak methodological interaction between services of various functional areas of logistics related to the formation of inventories;
Lack of a clearly formulated logistics strategy for inventory management.
Within domestic enterprises, therefore, the calculated level of work with inventories cannot be considered fully developed. It still raises not so much practical as methodological questions. Foreign practice of inventory management has in many ways gone beyond the calculated level of work, and this is due, first of all, to a much longer period of direct improvement of inventory management within the logistics systems of enterprises. To analyze the feasibility and effectiveness of modern approaches to inventory management, it is necessary to turn to the experience of their application at foreign enterprises, and, above all, to historical experience.
Historically, the first approach to inventory management was to maximize inventory levels. From the time of Adam until the beginning of the 20th century, high levels of inventory were synonymous with wealth and prosperity of the enterprise. In the Soviet economy, maximizing inventories in organizations was not welcomed by management, but was actually present, as it was caused by the objective need to reduce direct dependence on suppliers, consumers and related enterprises.
The strategy of maximizing the inventory of individual product items may also be appropriate in an effective market-oriented business due to the high costs of stock shortages of these items and an unstable external environment.
Preparations for the First World War led to many economic discoveries, including the conclusion that high levels of inventory required significant capital investments and losses of the alternative component of this capital. Since the beginning of the 20th century, the theory of optimizing inventory levels began to develop according to the criterion of minimizing the total costs of creating and maintaining inventory. At the same time, a generally positive attitude towards reserves remained. A new approach to inventory management was to recognize the need to maintain inventory, but in an optimal, economically feasible volume. Work on optimizing inventory levels led to the development of a methodological basis for optimizing inventory size, the development of the classical apparatus of inventory management theory, and the development of the calculated level of work with inventory. In our country, the problem of optimizing inventory levels at many enterprises still remains unresolved. The beginning of the third approach to inventory management from a historical point of view is associated with the establishment of logistics in business and the development of Japanese management. It was Japanese specialists who were able to take a fresh look at the stock and notice that the stock is always a buffer, smoothing out the conflict between the characteristics of supplies that replenish the stock and the characteristics of consumption, which requires the use of stocks. Stock is always a loss - they said. Stock is a screen behind which the lack of work is hidden. A stock is a sign of an existing conflict situation within an enterprise or between enterprises. Inventory is a phenomenon that allows a business to operate without solving the problem causing the inventory. But is this the goal of a competitive enterprise? A modern enterprise is interested in solving its problems, and, consequently, in reducing inventories caused by these problems. Minimizing inventories became the slogan of Toyota, and then of the entire world economic community. Minimizing inventory reflects a strongly negative view of inventory. Implementing this management approach can result in the same quantitative inventory levels as inventory optimization. Moreover, the apparatus for calculating inventory levels in both cases may be identical.
The fundamental difference between the last two approaches to inventory management (optimization and minimization) is that inventory optimization concentrates on the estimated level of work with inventory, and inventory minimization is associated primarily with the work of integrating the links in the material flow chain associated with the inventory in question. , that is, with the inventory management process itself. So, three approaches to inventory management are currently available to modern enterprises: - maximization, - optimization, - inventory minimization.
These approaches are not mutually exclusive. They do not have an unambiguous assessment of the feasibility of use. Their use is determined by: - characteristics of stock consumption; - adopted development strategy of the organization;
Differentiation of approaches to inventory management by item items significantly increases the efficiency of inventory management in the organization as a whole.
Optimization of inventory management systems
Determining the optimal sizes of stocks of raw materials, food, medicine, energy resources, parts for assembling machines, etc. etc. is one of the most important tasks when planning a business.
The state has a system of strategic resources. A thermal power plant has a supply of coal, a hydroelectric power station has a supply of water resources, a nuclear power plant has a supply of nuclear fuel, a trading company has a supply of goods, a store has a supply of food, a person tries to have a supply of food and medicine.
Obviously, if the stock runs out, but there is demand, then the company incurs losses due to the absence (shortage) of goods.
Depletion of reserves at power plants is generally unacceptable. On the other hand, an increase in inventories leads to an increase in fees for their storage and a freezing of funds.
Therefore, the task arises of determining the size of the stock that would be optimal in the sense of minimizing total costs.
Inventory management tasks are very diverse. They can be classified as follows:
demand – deterministic or random;
replenishment - instant, continuous, delayed, random;
stocks – identical goods, long-lasting goods, perishable goods;
supply system - with one warehouse (single-stage), with several warehouses (multi-stage), with a central warehouse, etc.
Costs (expenses) of inventory management are:
delivery costs (order costs);
cost of goods;
storage costs (costs of maintaining inventories);
costs of fines;
expenses for unplanned acquisition of goods;
expenses (losses) associated with the sale of excess goods, etc.
The cost of purchasing a unit of goods can be a constant value, independent of the batch size, or decrease with increasing order volume if discounts are taken into account.
Carrying costs can be a linear or nonlinear function (convex or concave) of average inventory levels.
In the general case, inventory management problems are reduced to nonlinear programming problems, for the solution of which various private methods are used.
Below we consider a number of simplified mathematical models of inventory management. The models are described by algebraic equations and allow one to obtain analytical dependencies for optimal solutions. Despite their simplification, models of this type are widely used in practice.
For a more detailed and complete study, simulation models are used - deterministic or stochastic. In the latter case, a statistical test method is used to obtain a solution.
Model 1. Basic inventory management model.
This model is called the “economic order size” model or determining the optimal lot size. In English, the EOQ (EconomicOrderQuantity) model.
The basic model meets the following conditions:
demand - deterministic, constant, continuous;
supply system - with one warehouse, with one product, without changing the properties of the stored product over time;
inventory replenishment strategy is periodic, the delivery period is not fixed;
replenishment of stocks - a batch is delivered without delay as soon as the stock level reaches zero;
There are three types of costs:
Costs for the purchase of goods (cost of goods) - characterized by the fact that the cost of a unit of goods is a constant value.
Supply costs i.e. related to the processing and delivery of goods is a constant value.
Carrying costs are a linear function of average inventory levels.
Let us introduce the following notation:
y – stock size;
Y – maximum stock size;
Y* – optimal stock size;
T – time period;
C – total costs;
c – cost of a unit of goods;
– intensity of supplies;
– intensity of demand;
s – costs of storing a unit of goods (costs of maintaining a unit of stock);
g – delivery costs;
p – fines per unit of production per unit of time.
The situation is presented graphically in Fig. 6.5.
Rice. 6.5. Inventory change chart
Cost equation:
C t = C t1 + C t2 + C t3,
where C t1 – fixed (organizational) costs;
C t2 – cost of goods;
C t3 – storage costs.
Carrying costs are considered to be proportional to the average inventory level, so
With t3 =sT .
Taking into account the relationship Y=μT, we have that the cost of the goods
With t2 =cY=cμT.
The amount of organizational costs C t1 =g.
Costs per unit of time are determined by dividing by T
C = C 1 + C 2 + C 3 =
.
Substituting T= , we obtain the equation of total costs in the form
.
In this equation, two components depend on the batch size Y.
Storage costs
- grow linearly with changes in batch size Y.
Organizational costs
- varies inversely with the size of the batch Y.
Cost of goods
- does not depend on Y.
Let's find the value Y=Y*, at which C =min.
The optimality condition has the form
.
Solving the equation for Y, we find
Thus, the optimal batch size is
;
Substituting the value Y* into the formula
, we get
.
Formulas for Y*, T*, C* are called Wilson's formulas. The formulas were first obtained in 1915.
Graphically, the changes in individual components of the value C depending on y are presented in Fig. 6.6.
Rice. 6.6. Graphs of changes in cost components
Notes on the optimal batch size formula.
The optimal value of the inventory level Y* is proportional to the square root of the demand. If the demand increases by 4 times, then the optimal order quantity increases by 2 times.
The value of Y* is proportional to the ratio of overhead costs to storage costs.
Example 1.
Demand intensity = 2000 units/month, monetary indicators in monetary units g= 20; с = 1;s= 0.1;
Determine the optimal batch size:
According to Wilson's formulas, we have the optimal batch size:
units goods in the lot.
Cycle duration in days
Number of deliveries per month:
Total costs:
Example 2.
The company purchases products at a price of c = 40 USD. per piece, annual requirement = 6400 units/year. It is believed that maintenance costs include 16% of its cost.
In addition, taxes, insurance, etc. for each product is 1.6 USD. Costs for ordering – 100 USD
That. we have:
Unit maintenance costs stock s= 1.6 + 0.1640 = 8;
Order costs g= 100;
Demand (annual need) = 6400 units / year.
Optimal batch size:
Number of orders n* = 6400/400 = 16.
There are approximately tn = 50 weeks in a year. Then the delivery period
where t n is the number of weeks in a year.
Total inventory value (excluding item cost)
units
Model 2. Model with renewal of the stock until it is exhausted.
In the basic model, it is assumed that the stock is renewed at the moment when the stock level is equal to zero. A more realistic situation is when the stock is renewed some certain time before it is exhausted, corresponding to the minimum acceptable level of stock.
The replenishment point is calculated as follows:
Y min =
,
where Y min is the minimum stock level;
t n – number of weeks in a year.
t cool - waiting time, i.e. time remaining until the stock is completely exhausted;
- average consumption per unit of time.
Let's do the calculation using the previous example:
In this example, the demand for the year was = 6400 units. There are n = 50 weeks in a year.
Average consumption
Let's take the waiting time to be one week, i.e. t cool = 1.
The replenishment point is calculated as follows:
Y min = 16400/50 = 128 units.
The situation is presented graphically in Fig. 6.7.
Rice. 6.7. Schedule of changes in stock with renewal until it is exhausted
If stocks drop to a level equal to 128 units, the stock should be renewed.
The inventory renewal period in the original example was T* = 3 weeks.
Taking into account the earlier resumption of reserves T= T* -t cool = 3 - 1= 2 weeks.
Model 3. Model for determining the optimal batch size taking into account discounts.
In the basic model, it is assumed that the price of a product is a constant value that does not depend on the order volume.
In reality, there are discounts, i.e. The larger the purchase volume (order quantity), the lower the unit price.
A typical discount scale looks like:
Order quantity: Price for 1 unit.
500 Discounts are included in the model as follows: Total costs , where C 1 – costs for the order - , WITH 2 – cost of stock - C 3 – storage costs (maintenance) – c y is the cost of a unit of goods taking into account discounts. The optimal order size Y* is found in three stages using a numerical method, i.e. by enumerating options: calculated Y* without discounts; the value of total costs is calculated for values Y>Y*, i.e. when order volume increases; the value Y=Y* c is selected, corresponding to the lowest total costs. Let's carry out these calculations. Above, in example 2, it was found that Y*= 400. Let us consider the costs at Y*, as well as at Y>400, for example, at Y= 500 and Y=1000. The calculation results are presented in Table 6.3. Table 6.3. Order quantity, Y Costs for ordering, Costs of maintaining stock, Inventory cost, with i ∙ Total costs At Y= 500 we have: Costs per order Inventory maintenance costs Cost of stock with 500 ∙= 39.9 ∙ 6400 = 255360. Total costs ++ from 500 ∙= 2586400. Analysis of the data presented in the table shows that we have the minimum total costs, taking into account discounts, at Y = 500. According to the schedule, the optimal batch size, taking into account discounts, is Y ∙ c = 500. The situation is presented graphically in Fig. 6.9. Rice. 6.9. Schedule for determining the optimal batch size taking into account discounts Inventories, like any other resources in an enterprise, require competent management. The goal of a professional inventory management system is to provide you with sufficiently accurate information to ensure that the optimal inventory is always available, maintained under the right conditions and in the right location, i.e. this means that storage costs are kept to a minimum. What is the essence of inventory management? The approach to inventory management presupposes the need to first solve a number of problems of great practical importance. These include: What is the importance of inventory detail? Often the number of items of resources passing through the warehouse is so large that it makes no sense to control the inventory of each item separately: this is too labor-intensive and expensive. Therefore, stocks of different resources are combined into groups according to one or another characteristic. However, the less detail you take into account your inventory, the less accurate the control. You need to choose the optimal level of inventory detail that minimizes costs and storage losses. If it is impossible to perform satisfactory detailing, the number of inventory items still remains too large and does not provide convenient and economical control, then try to resort to another way to simplify your work. This is a classification of inventories in order to highlight the most and least important items for control. For this classification, a method called ABC analysis is usually used. What is ABC analysis? The first step in ABC analysis is to determine the “annual requirement cost” (ACR) for each inventory item. It is calculated by multiplying the annual consumption of inventory for a given item by the unit cost of this type of inventory. You must then rank all items according to their EGP. The position with the highest GPV is recorded first, the one with the second highest GPV is written second, etc. This method of interpreting data is known as Pareto analysis. Let's call the positions with the highest GPP group "A", those with the lowest GPP - group "B" and those with the lowest GPP - group "C". The stock of group "A" is only 5-10% of the total number of items, but it contributes 70-80% of the total GPA. Group "B" stock is the stock that accounts for the average annual storage volume. These items can make up about 20% of their total number and 15-20% of the total storage volume. Group "C" stocks account for approximately 5% of the annual storage volume, but 70-80% of the items of their total number. The Pareto principle expresses the so-called 80:20 rule (see module “Time Management”). When applied to inventories, this rule states that in most firms, 80% of the total AGL is represented by only 20% of the inventory items. The key to effective inventory control is to focus your efforts on the 20% of your inventory that represents 80% of your EGR. These are Group A reserves. The policy based on the results of the ABC analysis is as follows: ABC analysis provides more thorough forecasting, physical control, reliability of supplies and maximum reliability of accounting and safety of the most significant (critical for the organization) resources. How to organize an inventory accounting system? To effectively account for inventory, you need to obtain the following information: Based on this information, you should maintain two types of inventory records: There are 2 systems for maintaining inventory records: manual and computerized. What is a manual inventory record keeping system? The basis of any manual system is a series of stock cards that contain the information necessary for your business. Such cards are stored vertically in drawers. Only after looking at them all, you can find the card you need and read what is written on it. Inventory cards must be numbered and filed according to their numbers. These cards can be used in two ways: The first system is applicable for both current and periodic inventory recording. The second system is applicable only to current records. If you have 200-300 cards, then it takes a lot of time to find the one you need. You can speed up the search for cards in two ways - use index cards and colored marks: What is a computerized inventory record keeping system? With the accelerating progress of computer systems, many small and medium-sized firms have begun to use computers to perform a full range of tasks, including inventory management. Computerized inventory control offers many benefits: With this system, instead of stock cards, you use a display and keyboard to view and enter data, and reports will be printed periodically on printers. What information do stock cards contain? Regardless of the inventory recording system you use, the cards must contain the following information: What are the main methods for valuing reserves? There are two main methods for valuing inventories (raw materials and supplies) in monetary terms: The average price method is rarely used. Here it is assumed that inventories are valued at the average price of all supplies. It should be noted that these methods help to estimate stocks, but do not reflect their actual movement. Why is inventory taken? Even if you make significant efforts to accurately record inventory movements, the accuracy of the records must be periodically confirmed by physical inventory. Historically, many organizations took inventory of their physical inventory once a year. During the inventory procedure, the number of resource units of each item is calculated, the results are compared with current accounting data, which are confirmed or not, and the identified inaccuracies are documented. The reasons for the identified deviations are then analyzed, and the corresponding adjustment is entered into the accounting data. To carry out such work, a lot of highly qualified personnel and necessary equipment are involved, which during this period cannot be used for their intended purpose. Another organization for conducting inventories is more appropriate, based on the classification of inventories obtained as a result of ABC analysis. According to this approach: Group "C" resources may be reviewed every 6-12 months. Such an inventory provides the following advantages: Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you. Posted on http://
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Ministry of General and Vocational Education Sverdlovsk region Control system optimizationinventory management at Agratek LLC Specialty 38.02.03 “Operational activities in logistics” Standards inspector L.P. Timoshinova Supervisor: O.A. Terentyeva Increasing the competitiveness of domestic enterprises largely depends on the ability and quality of managing competitive advantages. In conditions of constantly changing market conditions, it is necessary to develop adequate competitive, and sometimes anti-crisis, strategies, which, in turn, should cause changes in the internal environment of the organization, contributing to increasing its competitiveness. Systematic consideration of various aspects of analysis, assessment and management of the process of growing the competitiveness of companies is especially important in those industries that directly compete with imported products. Competitive strategies determine how to provide an enterprise with advantages in the market in terms of greater attraction of potential consumers and what policy to choose in relation to competitors. Inventories are the main financial investment for businesses, the main source of profit, the main problem of daily control. Currently, domestic companies, in the face of tougher competition, are forced to reduce the percentage of the established markup. Therefore, in order to ensure the necessary return on funds invested in the business, to ensure the necessary growth rates of the company, it is relevant to optimize the required amount of inventory. The need to study these problems indicates the relevance of the research topic of this work. The purpose of the study is to develop a project for optimizing inventory management using the example of a specific enterprise. Object of study - inventory management system at Agratek LLC The subject of the study is to conduct a situational analysis of the organization of inventory management at Agratek LLC and develop a project for optimizing the enterprise's inventory management. To achieve this goal, the following tasks must be solved during the work: study the Theoretical and methodological foundations of inventory management; explore the inventory management systems of Agratek LLC analyze the operation of the inventory management system of Agratek LLC; analyze the performance indicators of the inventory management system; carry out an assessment of the effectiveness of the functioning of the inventory management system; develop proposals for optimizing the inventory management system; carry out an economic assessment of the implementation of the proposal for optimizing the inventory management system at Agratek LLC. The novelty of the work lies in the fact that inventory management in Agratek LLC has not previously been analyzed. The hypothesis put forward is that the existing inventory management system at Agratek LLC is imperfect and can be optimized During the research process, general and special methods of scientific knowledge were used: dialectical logic, systemic, structural and functional analysis, synthesis, comparison, methods of collecting marketing information (field, desk), graphic presentation of the results of the thesis research. The structure of the work is determined by its purpose and objectives and consists of the following sections: Introduction, where the relevance of the research topic is substantiated; the purpose, object and subject of the research are determined; specific tasks are set; the information base and methods used in the study are presented. The main part, consisting of three chapters, divided into paragraphs, where the main research of the topic of the work was carried out. Conclusions, which summarize the results of the study and draw the main conclusions. Logistics processes, taking place either within an enterprise or between enterprises, cover the movement of material flows and are accompanied by the constant creation of inventories. The reason for creating reserves is the need to smooth out the different intensities of interacting flows. The randomness factor influences logistics processes and is the reason for the formation of inventories; it makes accurate forecasting impossible, and therefore logistics decisions are made under conditions of uncertainty. If it is impossible to achieve synchrony between incoming and outgoing flows, safety stocks are created, the creation of which is justified by the following reasons: 1) the need to insure yourself if your own needs or market demand turn out to be greater than planned; 2) the desire to compensate for possible uncertainty of supplies or their delay. In order to be able to make purchases at lower prices, stocks are often formed. In case of favorable market conditions or due to the seasonal nature of purchased assets, reserves are also created. Technological progress is considered a significant factor in the formation of reserves. Its impact on stocks is complex and varied. In the field of materials supply, technological progress has a particularly strong impact. It promotes the miniaturization of products, the emergence of new materials, types of raw materials and technologies. All this entails a reduction in the physical volume of the final product, which leads to a decrease in the need for materials. This affects inventory levels, but such changes are not necessarily proportional to changes in the volume and composition of materials used. When creating a stock, you need to take into account that an increase in the range of goods on the market leads to a decrease in the product life cycle and affects the behavior of partners, customers and competitors. Production efficiency directly depends on the amount of inventory; inventories act as working capital. The fewer there are, the more efficient the production. The continuity of logistics processes at an enterprise is characterized by the number of maintained inventories, as well as their productivity. Purchasing processes have a significant impact on the materials inventory of the production process and on the inventory of goods of the trading enterprise. The sales process affects the inventory of finished goods and goods. At a manufacturing enterprise, the following inventories are created: materials, unfinished products, finished goods. At a trading enterprise, inventories of goods are created. Industrial enterprises with a distribution network also create inventories of goods. The dynamics of inventories is associated with the dynamics of turnover, which makes it possible to reduce the stock capacity of economic processes. The inventory structure should be varied and should allow its compliance with needs to be assessed. Assessing the economic suitability of reserves is also of great importance. Optimally meeting production needs for materials at minimal cost is the main goal of purchasing logistics. We are all familiar with this picture. A buyer comes to our store to buy fertilizer, but now is the “peak” season, and the fertilizer is out of stock, although delivery is expected next week. The buyer decides not to wait and goes to another store, where he can immediately buy the same fertilizers at about the same price. Because we were unable to provide the product immediately, the customer may have become critical of our store. In this example, our store has low inventory levels, which is reflected in trade, while the other store has more inventory and can meet customer demands. And now we understand what supplies are needed for. In order to understand how long these reserves will last us, we are clearing them. If we are talking about INVENTORY, then these are considered to be goods in transit, goods in warehouse and goods in accounts receivable (since the ownership of it remains with you until it is paid by the buyer, and theoretically you can return it to to your warehouse for subsequent sale), but to calculate turnover, goods in transit and goods in accounts receivable are not taken into account - only the goods present in our warehouse are important to us. Inventories are formed from various goods. The concept of “product” in logistics includes the actual product. It can be expressed in a specific characteristic form of the product. A group of goods related to each other by at least one characteristic is a product assortment, where the common characteristic is: a common distribution channel, a similar price range, etc. The totality of all assortment groups of goods and product units offered for sale is a product nomenclature. A number of positions determine decisions made within the framework of product policy: product range, depth and width of assortment groups, range of sizes of each product, product quality, release of new products, product standardization. Logistics considers the company's inventory management policy, and commodity policy forms the company's inventory of goods. “Just in time” is a method that is applied in logistics to all components of business, including production, shipping and purchasing of goods. The idea behind this method is that all unwanted inventory should be kept to a minimum. A non-logistics policy assumes that products are kept in stock “just in case” so that unexpected demand can be met. This policy is expensive as it requires maintaining a large warehouse area to store inventory. In the course of the company's activities, a dilemma constantly arises: to build additional warehouse space on the existing space or to use funds to expand production capacity and, consequently, to increase product output. Businesses more often choose the second approach, the just-in-time method covers all activities during production and distribution. The purpose of this method is to produce and ship products within a certain period of time for their further use. Another optimization method is the rapid response method. This method represents close interaction between a trading enterprise and its suppliers in order to improve the promotion of goods in distribution networks. Its essence lies in planning and regulating deliveries to retail and wholesale trade organizations and distribution centers. In retail trade, monitoring and control over a certain type of sales is carried out, information is generated and transmitted about the scale of sales according to the list and assortment through wholesalers to product manufacturers. The rapid response method involves optimizing the inventories of retail enterprises. Using this method reduces inventories of finished products to a certain amount, but not below a level that helps quickly satisfy the demand of the majority of customers. The response time of the logistics system to changes in demand is reduced, inventories are concentrated and replenished at specific points of sale, there is flexible interaction between partners in the integrated logistics network, and inventory turnover is significantly increased. The minimum stock is the level of stock that ensures the continuity of meeting demand for the entire period of fulfillment of your own request to replenish this stock. The maximum stock is the stock level up to which replenishment requests can be issued and the stock level at the time the delivery is received. Solving an economic and mathematical problem involves finding an option that meets many requirements. On the one hand, these requirements are expressed by task constraints that describe the features of the object’s functioning. On the other hand, along with the operating features of the object, it is necessary to write down the general requirements for the solution, which are expressed through the optimality criterion. The optimality criterion is a qualitative category that expresses the requirements of society as a whole and the team, in relation to whose conditions the problem is being solved, to the level of efficiency in the use of resources. From the foregoing it follows that if at the level of the national economy the criterion of optimality directly determines the requirements of society for solving a national economic problem, then when reducing the economic object, along with the requirements of society as a whole, the specific requirements of the collective, in relation to whose conditions the problem is being solved, should be taken into account. This means that, along with the general national economic or global criterion, a particular or local optimality criterion operates. The general or global criterion of optimality expresses the interest of the entire society in the efficient use of resources. Since the optimal plan is the most effective, therefore, the principle of optimality directly expresses the requirements of society for the development of the national economy. Since any particular problem is a component of the national economy, therefore, when solving a particular problem, the requirements of both global and local optimality criteria should be taken into account. In this case, the local optimality criterion, on the one hand, should not contradict the requirements of the global one, and, on the other hand, should more fully take into account the peculiarities of the problem being solved. Such an approach is legitimate due to the fact that within the framework of the general system, i.e. national economy, there are complexes (agro-industrial complex, etc.), industries (agriculture, industry, etc.), economic formations (research and production associations, agricultural firms, etc.) and enterprises, cooperatives that have their own specific goals and problems. In order to express them more fully, appropriate partial or local optimality criteria are needed. It should be noted that the nature of the interaction between global and local optimality criteria has changed historically. At the same time, the more the socio-economic system of society is focused on satisfying the material and spiritual needs of man, the less possible a contradiction in the requirements of global and local optimality criteria is possible. Since finding the best option requires solving a problem, there is a need to quantify the optimality criterion. The quantitative expression of the optimality criterion is the objective function. The objective function is expressed through a performance indicator or by combining them. Since agriculture and the agro-industrial complex are multi-criteria, i.e. have several development goals, there is a need to select one performance indicator from several that best expresses these goals. In a market economic system, the main feature in the development of the economy of enterprises of any form of ownership is full responsibility for the results of their activities. This means that the operation of the enterprise must be carried out in conditions of self-sufficiency and self-financing. This is possible when enterprises operate profitably, and this assumes that the content of the most preferred optimality criterion is focused on maximizing profits. A prerequisite for using this optimality criterion is the availability of optimal prices, i.e. based on taking into account the action of market mechanisms and socially necessary production costs. When solving economic and mathematical problems in the agro-industrial complex, as a subsystem of the national economy, local optimality criteria must take into account the general direction of economic development, i.e. content of the global criterion. Coordination of local and global optimality criteria can be carried out both through the use of the criterion - maximum profit when solving particular problems and through the use of other criteria directly or indirectly focused on profit maximization. There are the following ways to increase profits: 1. By increasing sales volume in rubles: ѕ selling more goods in kind; * price management and price increases (in this matter, it is important to develop price matrices and set prices in inverse relation to “ruble activity”); * optimization of the level of service included in the plan. 2. By reducing the cost of goods sold: ѕ reduction in the cost of goods (for example, the possibility of organizing groups of buyers to provide discounts for the volume of the purchased batch is being considered); ѕ analysis of the possibility of reducing the cost of transportation and net prices. 3. Through the release and additional use of capital; 4. By optimizing the assortment. 5. By reducing other business expenses (not directly considered for logisticians). For optimal inventory management, an enterprise needs to: * estimate the total need for materials for the planned period; * periodically clarify the optimal order batch and the moment of ordering raw materials; * periodically clarify and compare costs for ordering raw materials and storage costs. * regularly monitor the storage conditions of reserves; * have a good accounting system. To determine the required level of inventory, it should be rationed. The working capital norm is a value corresponding to the minimum, economically justified volume of reserves. It is usually set in days. The object of study of logistics is material and corresponding financial and information flows. On their way from the primary source of raw materials to the final consumer, these flows pass through various production, transport, and warehouse links. With the traditional approach, the tasks of managing material flows in each link are solved largely separately. Individual links represent so-called closed systems, isolated from the systems of their partners technically, technologically, economically and methodologically. Management of economic processes within closed systems is carried out using well-known methods of planning and management of production and economic systems. These methods continue to be used in the logistics approach to materials management. However, the transition from the isolated development of largely independent systems to integrated logistics systems requires expanding the methodological basis for managing material flows. The main methods used to solve scientific and practical problems in the field of logistics include: * methods of system analysis; * methods of operations research theory; * cybernetic approach; * prognostication. The use of these methods makes it possible to predict material flows, create integrated systems for managing and monitoring their movement, develop logistics service systems, optimize inventories and solve a number of other problems. Decision-making on the management of material flows before the widespread use of logistics was largely based on the intuition of qualified suppliers, marketers, production workers, and transport workers. By developing a methodological apparatus, modern logistics, along with the development and use of formalized decision-making methods, is seeking opportunities for the widespread use of the experience of this category of professionals. For this purpose, so-called expert computer support systems are being developed, allowing personnel who do not have extensive training in logistics to make quick and fairly effective decisions. Various modeling methods are widely used in logistics, i.e., studying logistics systems and processes by constructing and studying their models. In this case, a logistics model is understood as any image, abstract or material, of a logistics process or logistics system, used as their substitute. The object of the study is the inventory management system at Agratek LLC. The commercial organization Agratek LLC is located at the address: Sverdlovsk region, Yekaterinburg, Krasny lane, 5, building 1, office 204. The size of the authorized capital of the company is made up of the nominal value of the shares of its participants and, according to the Foundation Agreement, is equal to 10,000 rubles. The property of the company is formed from the contributions of its participants, income received and other legal sources. The company is liable for its obligations with all its property. In its activities, the Company is guided by the Charter, the Civil Code of the Russian Federation, and the Federal Law “On Limited Liability Companies.” The Company is a legal entity and has separate property; own balance; seal and stamp with your name; current and other accounts in bank institutions and created for an indefinite period. The Company is an independent economic entity operating on the basis of self-financing and self-sufficiency. The main goals of the company's activities are to further saturate the consumer market with products, works and services, expand competition, introduce achievements of scientific and technological progress and make a profit. Accounting is carried out by the accounting department headed by the chief accountant. The chief accountant in his work is guided by current laws, regulations and guidelines, in accordance with the adopted accounting policy of Agratek LLC. The tax policy of an organization represents a model of tax accounting, the main purpose of which is to determine the amount of tax liabilities. The tax accounting model is implemented by selecting elements of accounting policy and setting up analytical accounting in such a way as to ensure the generation of ready-made data for taxation within the framework of system accounting. Tax accounting is carried out by the accounting department. The tax accounting system is organized independently in the Company and is applied consistently from one tax period to another. The main activity of Agratek LLC is wholesale trade in agricultural raw materials and mineral fertilizers. Agratek LLC cooperates with a small number of suppliers. The supplier of the product - mineral and organic fertilizers - is AgroKhimTrans LLC - one of the largest Russian suppliers of fertilizers. The supplier of the product - mineral and organic fertilizers is AgroKhimTrans LLC, located at Ekaterinburg, Moskovskaya St., 195, apt. 806, 620144. Agratek LLC makes purchases to suppliers only when the stock of goods begins to run out. The stock volume of Agratek LLC is somewhere around 50,000 rubles. The range of mineral and organic fertilizers used in agriculture is important for managing soil fertility, increasing the yield and nutritional value of crops. The supplier provides the goods to Agratek LLC in packaged form. The product is supplied annually. The inventory management system at Agratek LLC is represented by a set of measures for creating and replenishing inventories in the warehouse, organizing continuous monitoring in the warehouse, in the production of agricultural products and in the retail store, as well as operational planning of deliveries from the supplier, who is a manufacturer of fertilizers. The basis of the inventory management system at Agratek LLC is the technology for analyzing the state of inventories and the external environment, as well as the rules for making decisions on the formation of inventories. The rules themselves are implemented in the form of a specialized software module 1C-warehouse and 1C-store and instructions for staff. The company operates a “Minimum-Maximum” inventory management system, which is focused on situations with significant costs for maintaining inventories and replenishing them. In this system, the costs associated with inventory management can be commensurate with losses from inventory shortages, and orders are fulfilled provided that the inventory in the warehouse at a certain point in time is equal to or less than the established minimum level. The order size is calculated so that the delivery replenishes the inventory to the maximum level. Thus, inventory management is carried out at two levels: minimum and maximum. The minimum level is 20 bags; the maximum level is 90 bags. If at the time of placing an order there is less stock remaining than the specified minimum level, then a situation with a resource shortage may arise. This circumstance is taken into account at the time of writing off part of the resource as an expense based on a requirement or a limit card. In other words, at the time the resource is written off, the remaining stock must be no less than what is provided for by the program. Necessary inventory management parameters in the “Minimum-Maximum” system: * the need for material resources and the average daily consumption have been determined; * established: minimum and maximum reserves; order fulfillment time and possible delivery delays; * guaranteed stock is represented by the sum of preparatory and safety stocks; * the minimum stock level is the difference between the maximum and guaranteed stocks. The “Minimum-Maximum” system is preferred because it allows you to quickly respond to changes in sales. At Agratek LLC, restocking is carried out from a minimum of 50 bags to a maximum of 200 bags. Limited Liability Company "Agratek" is a trading company. The company's field of activity is wholesale trade in agricultural raw materials and fertilizers. Agratek LLC sells products at average prices in the region. The company's main emphasis is on the sale of high-quality and certified products: AgroKhimTrans LLC. The need for inventories is oriented by managers in accordance with sales. The main aspect of choosing more profitable suppliers is their inviolability, product properties, prices, and possible monetary benefits. Particular attention is paid to the terms of delivery and forms of payment for purchased products. The regular supplier is AgroKhimTrans LLC. Let's calculate the average inventory (TZav ) -
according to the following formula for the average chronological: TZsr = (TZ1 / 2 + TZ2 + TZ3 + TZ4 + … + TZn / 2) / (n - 1), where TZ1, TZ2, … TZn is the amount of inventory for individual dates of the analyzed period (in rubles) n - number of dates in the period. TZ av = 32914 +
52677 +
42787 +
35556+
52778 +
74110 +
55613 +
58977 +
41400 +
36577 +
69854 +
25951 +50159
= 13-1 = 579194 / 12 = 48266 rub. Analysis of the table allows us to conclude that the maximum level of reserves occurs in November, when the “field” season is over and soil fertilization activities are completed, i.e. demand for fertilizers is falling. The minimum inventory occurs in June - the most active month for agricultural production in the Urals. When fertilizers are purchased not only by agro-industrial firms, but also by private individuals to meet the needs of their plots, that is, the demand for fertilizers is the highest. The Theory of Constraints uses certain inventory management indicators to assess the performance of a supply chain link (company). Because The main goal of the product distribution system is to ensure the availability of goods with minimal inventories in the system; the following should be controlled: availability, surplus and obsolescence of goods. 1. Availability level Availability of goods is achieved when there is sufficient stock of a product item (SKU) in a link in the supply chain. A simple way to measure the level of product availability is to record Out-of-stock, i.e. those product items whose stock is completely depleted. Out-of-stock level =Tonumber of item items (SKU), Nothaving stock / total number of product items The indicator allows you to track the level of availability and shortage of inventory in the system and control the level of lost sales that arise due to the lack of the desired product. To calculate the indicator, the following data is required: * Total number of product items (SKU) in the product portfolio (in assortment) * Number of Product Items (SKU) having zero stock (items in). Table 2. Number of product items (SKU) in the product portfolio (in assortment). Name of fertilizer Number of SKUs Ammonium nitrate Urea Ammonium sulfate Sodium nitrate Calcium nitrate Superphosphate Double superphosphate Precipitate Bone meal Phosphorite flour Potassium sulfate Nitrogen phosphate LevelOut-of-stock= 840/12= 70 pieces. 2. No excess inventory indicator The absence of excess inventory can be expressed by the efficiency with which money invested in inventory is used. The primary indicator is the speed at which the stock moves. The higher the speed, the more effective the investment. A common measure of speed is the inventory turnover ratio. Table 2. Data on sales and reserves of mineral fertilizers. Image = Turnover for the period / Avg. inventory for the period The average stock of mineral fertilizers was: 328 pieces. Sales of the same mineral fertilizers for the month amounted to 1,701 units. logistics stock profit cost Image = 1701 pcs. / 328 pcs. = 5.19 times The average supply of mineral fertilizers turns over in 5-6 days. By analyzing this indicator in dynamics, both the overall efficiency of inventory management (acceleration of turnover) is assessed, and excess goods in the system are controlled, which freeze working capital and lead to losses. In TOC terminology, “stock” is the money that a company invests in purchasing something it intends to sell. Therefore, the turnover ratio should be based on the purchasing prices of the inventory. Inventory turnover should be measured monthly at the end of the month. The issue of inventory management of a trading enterprise is one of the basic ones for increasing the efficiency of its work. The term is typically associated with the complex analytical models that are part of large computer-based enterprise planning (ERP) systems. It’s easy to imagine abstruse analysts working with gigabytes of accumulated statistics with some distant goal of “increasing efficiency.” In fact, this is true. But this is not the whole truth. First you need to realize that the difficulty in this matter depends on the theoretical training of the person who wants to engage in analysis. On the other hand, for small trading enterprises a complex model is not needed, and the basic concepts of a simplified model can be easily explained “on your fingers”. Further we will talk about just such a simple and easy-to-understand analytical model. The analytical system, which we will talk about next, was developed as an additional inventory management module for a small online store. For its work, statistical calculations are used - that is, the accumulated information on sales should be sufficient for statistically correct conclusions. We can recommend using this model with sales information for at least 10-15 periods between orders. Efficient inventory management What does the word “efficiency” mean in inventory management? What state of affairs would be considered ideally efficient? Let's answer this question this way. In the process of transferring goods from the manufacturer through the store to the buyer, the ideal case is when the store markup for the product remains in the store, but the goods do not enter the store’s warehouse at all - they are immediately transported to the buyer. As they say, “trade on wheels.” A completely feasible option. However, in ordinary business this rarely happens. Here are, for example, possible problems: * The manufacturer sells goods only in bulk. It will not be possible to come for every unit of goods ordered. * The manufacturer requires advance payment for the goods received. You will have to take an advance payment from the buyer, after which quickly receiving the goods from the manufacturer is risky. * Delivery of goods from the manufacturer is complex and time-consuming (through customs, for example). Most often, the buyer wants to pay money and receive the goods now. He won't wait. * Seasonal demand. At the peak of the season, the manufacturer cannot cope with supplies and there is simply nothing to sell. Etc. Therefore, efficiency in our case is a balance between the funds frozen in the form of goods and the speed of its delivery to the buyer. There are few goods in stock (and there is free money) - with a sharp increase in demand, there will be nothing to trade. Time passes, profits are not earned, and through overhead expenses (salaries, rent, communications, etc.) money begins to flow away. There is a lot of goods in the warehouse (and there is no free money) - demand may change, the product will become outdated, and the store will not be able to get money for it in the required quantity. The most convenient and effective way to work in such a situation is to individually calculate the required volumes and costs depending on the type of product. In our case, we use a method called “ABC-XYZ analysis”. ABC-XYZ analysis This method assumes that all products presented in the store will be divided (independently) into ABC and XYZ groups according to certain characteristics. To divide into groups use: * The contribution of each product to the total sales for all time * Average number of sales of each product for each period between orders * Deviation from the average number of sales in each period The division into groups A, B and C is done based on the contribution of the product to total sales. It is based on the “Pareto Principle” - 80% of sales are made from 20% of goods. Accordingly, group A products are items that contributed 80% to total sales. For group B - another 15%, for group C - the rest. Dividing into groups X, Y and Z allows you to classify goods depending on the nature of their consumption and the accuracy of forecasting changes in their needs. For analysis, the concept of coefficient of variation is used, which shows what proportion of the average value of this value (arithmetic mean) is its average spread (average deviation from the arithmetic mean). The smaller the coefficient of variation, the more accurately you can predict the value. * Group X - goods are characterized by a stable level of consumption, minor fluctuations in their consumption and high forecast accuracy. * Group Y - products are characterized by known trends in determining the need for them (for example, seasonal fluctuations) and average capabilities for forecasting them. * Group Z - resource consumption is irregular, there are no trends, the forecasting accuracy is low. Products of groups AX and BX are characterized by high turnover and stability. It is necessary to ensure their constant availability, but for this there is no need to create excess safety stock. The consumption of goods in these groups is stable and well predicted. Products of groups AY and BY, with high turnover, have insufficient stability of consumption, and, as a result, in order to ensure constant availability, it is necessary to increase the safety stock. Products of groups AZ and BZ, with high turnover, are characterized by low predictability of consumption. An attempt to ensure the guaranteed availability of all goods of these groups only through excess safety inventory will lead to the fact that the company's average inventory will increase significantly. The ordering system for these groups should be revised. For goods in the CX group, you can use an order system with constant frequency and reduce the safety inventory. For goods of the CY group, you can use an order system with a constant order amount (volume), but at the same time create a safety stock based on the financial capabilities of the company. The CZ group of goods includes all new goods, goods of variable demand, supplied to order, etc. Some of them can be painlessly removed from the assortment, while the other part must be regularly monitored, since it is from the goods of this group that illiquid or hard-to-sell stocks arise, due to which the company suffers losses. Products of groups A and B constitute the main turnover of the company. Therefore, it is necessary to ensure their constant availability. Typically, excess safety stock is created for products of group A, and sufficient safety stock is created for products of group B. Using XYZ analysis allows you to develop a more accurate assortment policy and thereby reduce the total inventory. In the inventory management module, group boundaries can be changed. The description of the model is given according to the source. Non-performing inventory Non-performing inventories are products that have no sales for a long time or have more stock than necessary. Typically, this class includes products that have not had any sales for the last six months, or whose inventory corresponds to more than twelve months of sales (based on average sales per month and their statistical deviation) - low-used inventory and low -turning stocks. In the inventory management module, the period size can be changed - week, month, quarter, year. Service level After dividing the goods into groups, a goal is set that corresponds to effective inventory management. In our case, let's call this goal “Service Level” - the probability that the product will be in stock when there is a demand for it; probability of working without deficit. In the inventory management module, the target service level can be set individually for each of the nine resulting groups. The final indicator of inventory management efficiency is calculated - the average level of service for the store, and the average levels of service for each of the groups. In the reports, you can clarify the level of service down to each product item. Order planning The result of each inventory management cycle will be an order (a list of goods and their quantity), which will bring the level of service for each product to the target value. In the inventory management module, an order is generated in this way. * Set ABC and XYZ group sizes and service level targets for each group. * The frequency of orders (the length of the period between orders) and the forecast of sales growth for the next period are established. * Sales statistics are calculated * Select parameters for the products for which the next order will be made: * A decision is made whether to take into account non-performing inventory for the order. * Information about the next order is generated - a list of goods, data on their groups and sales statistics and quantity for the next order. Flaws As already mentioned, a simplified inventory management model for small trading companies is described here. What is simplified in it? 1. There is no accounting of goods in transit. 2. It is assumed that orders are made once per period. 3. There is no individual sales forecast for each product. 4. Planning is carried out on the basis of data on previous sales, taking into account the general increase or decrease in demand for the entire range. Commodity inventories are fundamental elements of trading activity management; the results of trading activities, turnover and profitability indicators directly depend on the effectiveness of inventory management. The task of inventory management is to find, in relation to a specific economic situation, the optimal solution for the volume and timing of inventories in order to satisfy existing needs in a timely manner and in the required amount and at the same time ensure minimal costs for storage and supply of resources. The solution to this problem is facilitated, first of all, by an integrated approach to supply and procurement processes, consistent with implementation plans, through various tools depending on the competence and professionalism of the personnel, the information technology used, software, the degree of automation of the supply and sales process, the organization of document flow and speed processing of all documentation. Success can be achieved by those who have built the ordering system in the most rational way. This goal is achieved, among other measures, by: * reducing costs associated with the creation and storage of inventories; * reduction of delivery time; ѕ stricter adherence to delivery deadlines; * improving the sales system. In order to secure its financial position, the company needs to pay attention to the possibility of increasing assets using internal resources. The best way to find such funds would be to release reserves by selling “stuck” products in the warehouse, increasing sales volumes, retraining personnel, redistributing areas for using profits, and others. Equally important is competent forecasting of reserves and finding their optimal level. This will allow the company to sell the delivered batches of goods on time, rather than storing illiquid goods. An in-depth study of the market will allow you to optimize the structure of inventory as much as possible. It is necessary to reduce the range of products, since some products and product groups have a very slow turnover rate To formulate an inventory management policy, it is very important to understand the role of inventory in production and marketing. Excess inventories allow many enterprises not to “load” their management with such “excessive” functions as conducting marketing research to assess consumer demand for products, forecasting sales of the enterprise’s products, planning and budgeting activities, a constantly functioning marketing system, calculating the economic efficiency of all enterprise activities, of its individual operations or by types of products. The main goal of inventory management is to achieve the fastest inventory turnover in the process of satisfying customer demands. To formulate an inventory management policy, it is very important to understand the role of inventory in a wholesale warehouse. Typically, enterprises have significant funds tied up in inventories. When communicating with executives, accountants and financial managers of enterprises, the most pressing “problem” topic is inventory management - how to reduce it, how to calculate the optimal amount, etc. It would be advisable to use a classification approach to inventory management (ABC - system). His idea is to use the classification of inventories and distinguish three groups - A, B, and C, depending on the degree of influence of this type of inventory on the increase in the turnover of the enterprise. Thus, it is necessary to increase the profitability of the enterprise by searching for favorable supply conditions and increasing trade margins, minimizing transport, insurance, warehouse and other costs. Since the low level of profitability, although it is due to the conquest of the market, will not allow maintaining accumulated achievements in the future. It is also necessary to reduce inventory and increase its turnover ratio. As a result of the measures proposed above, the following quantitative and qualitative changes are expected in the inventory management system at Agratek LLC: 1. Qualitative changes: · a unified inventory management concept will be formed at the enterprise; · ABC/XYZ analysis will allow you to effectively manage inventory, exercise control over it, and accurately predict the purchase of the required volume of goods; · a system of personnel motivation will be developed to increase the efficiency of supplies at the enterprise, updated job descriptions, regulations and regulations will be prepared, which will increase the level of management of the enterprise; · requirements for suppliers of WMS and CRM systems will be determined. 2. Quantitative changes: b By eliminating goods of low demand at prices with a minimum markup of 5%, an enterprise can reduce inventory levels by 560 thousand rubles; replacing a similar warranty product with goods of high demand and their timely sale will reduce inventory levels by 726 thousand rubles. Donating a portion of similar goods to non-profit organizations will allow you to get rid of another 80 thousand rubles worth of goods; using these goods as gifts for employees and contractors of the enterprise will reduce the level of these stocks by another 120 thousand rubles. and improve the image of the enterprise. In general, the level of inventories will decrease from 33,026 thousand rubles. up to 31,540 thousand rubles. or by 4.5%; b by carrying out additional work with debtors, intensifying the work of the legal service with the judiciary in terms of debt collection, and tightening penalties in supply contracts, the company will be able to collect an additional 2,251 thousand rubles. accounts receivable, and its level will decrease from 18,759 thousand rubles. up to 16508 thousand rubles. or by 12%; b the emergence of additional free liquid funds (sale of inventory for 1,286 thousand rubles and collection of accounts receivable for 2,251 thousand rubles) will increase the volume of the enterprise’s funds by 3,537 thousand rubles, which will allow the company to reduce the level of accounts payable by 18.3 % (from 19,302 thousand rubles to 15,765 thousand rubles); Taking into account these measures, as well as the use of the inventory management method with a fixed order size, the structure of the enterprise's current assets will change for the better. Changes in the structure of current assets are presented in the table Table - Structure of current assets before and after the implementation of measures Changes in turnover indicators and efficiency of use of inventory are reflected in the table Table - Efficiency of use of inventory From the calculations we can see that the inventory turnover ratio increased by 0.4 times, and the turnover duration, on the contrary, decreased from 40 to 39 days. Thus, it can be noted that the proposed measures will improve the use of inventory at Agratek LLC In firms in various sectors of the economy, the creation of inventories is determined by the specific role they play in the production process. Typically, more than half of the working capital of trading enterprises is accounted for by inventories. This requires large investments and, accordingly, attention from the financial managers of enterprises. Inventory is the amount of goods in monetary or physical terms located in trading establishments, warehouses, or in transit on a certain date. The existence of inventory as a phenomenon is due to the need to ensure the normal process of circulation of goods, its reliability and continuity. Inventory management covers a number of sequentially performed works: analysis of inventories; determining the goals of stock formation; optimization of the size of the main groups of current inventories; optimization of the total amount of inventory inventories included in current assets; ensuring high turnover and efficient forms of inventory movement; justification of inventory accounting policy; building effective systems for monitoring the movement of inventories at the enterprise. Inventory management methods are a set of rules that determine the moment and volume of purchases for their replenishment. The following systems are distinguished: Inventory management system with fixed order quantity Inventory management system with a fixed period of time between orders. Inventory level management systems at enterprises leave no doubt about the need for strict operational and at the same time flexible, according to market conditions, inventory rationing. Among the standardization methods there are: the experimental-statistical method, the method of technical and economic calculations and economic-mathematical methods. The inventory decision-making process uses an integrated just-in-time methodology. Control over inventory levels plays an important role. Among inventory control systems, the ABC method is the most widely used. The work included an analysis of the financial activities and inventory analysis of the company Agratek LLC. An analysis of the financial activities of Agratek LLC showed that the company’s revenue during the reporting period increased and did not decrease for 3 years, which indicates that the demand for the company’s products has increased. However, net profit had a trend of both decline and growth, and in 2016 amounted to 4,485 thousand rubles, which is 889 thousand rubles. more than in 2015 Essence, models and management system for inventory optimization. Inventory management strategies and ABC and XYZ analyses. Brief description of the enterprise Stroyplus LLC. Recommendations for improving the inventory management system at the enterprise under study. course work, added 12/13/2013 Analysis of the marketing and quality management system at the Ulyanovsk Sugar Plant OJSC. Study of the financial condition of the organization. Identification of the main directions for increasing the efficiency of using reserves of a modern enterprise. course work, added 06/05/2014 Development of an information system for automating food inventory accounting at the Svetlana LLC enterprise. Mathematical models of inventory management, software for implementing the algorithm. Calculation of costs for the development and implementation of the system. thesis, added 07/26/2011 Theoretical aspects of inventory management, the need for materials MRP (Material Requirements Planning). The main stages of the operation of the MRP system. Analysis of inventory management at the JSC TopMechSystems enterprise, optimization based on the MRP system. course work, added 04/29/2010 Analysis of production and economic activities and the use of inventories of material and technical resources at the LLC Stroyburo SK enterprise. Development of recommendations to improve the efficiency of the inventory management system in the field of supply management. thesis, added 12/25/2013 Structure of the enterprise's reserves. Analysis of the operation of an inventory management system with a fixed time interval between orders under parameters defined by the enterprise. Optimization of the inventory management system with a fixed order size. course work, added 02/01/2014 Theoretical foundations of inventory management models and types of inventories. Assessing the effectiveness of managing current financial needs and own working capital of Krepezh LLC. Analysis of inventory management at the enterprise, ways to improve it. course work, added 10/23/2014 The concept of reserves, their classification. Characteristics of production and economic activities and financial condition of Zheshartsky LPK LLC. Calculation and analysis of liquidity ratios. Analysis of the efficiency of use and inventory management at the enterprise. thesis, added 08/12/2017 Concept and types of reserves, models of their management. Inventory control systems. Analysis of the composition and structure of inventory, material resources and finished products using the example of Energomera spare parts and accessories. Ways of rational inventory management. course work, added 12/11/2010 Study of the essence, concept and classification of inventories. Analysis of economic indicators of the production and economic activities of the organization. Study of the condition and efficiency of use of reserves at Latta Food LLC.
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Introduction
Conclusion
List of sources used
Introduction
1. Theoretical and methodological foundations of inventory management
1.1 The concept and essence of inventory logistics and optimization of the inventory management system
1.2 Criteria for optimal functioning
1.3 Ways to optimize the inventory management system
1.4 Research methods used in inventory logistics
2. Analysis of the inventory management system in the trade of agricultural products using the example of Agratek LLC
2.1 Brief economic characteristics of the research object
2.2 Study of inventory management system
2.3 Analysis of the operation of the inventory management system
2.4 Analysis of performance indicators of the inventory management system
2.5 Assessing the effectiveness of the inventory management system
3. Optimization of the inventory management system at Agratek LLC
3.1 Proposals for optimizing the inventory management system
3.2 Economic assessment of the implementation of the proposal to optimize the inventory management system
Conclusion
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