SESSION 7

INVENTORY
MANAGEMENT
Rianne Karisa Lumabao
Inventory Management

Purpose and Types of Inventory

Inventory Control System

Inventory Management System

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Inventory
Management

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 Inventory Management

Definition

▰ The act of keeping track of a company’s

stocked goods and monitoring their weight,
dimensions, amounts, and location.

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 Inventory Management

Goal

▰ To minimize the cost of holding inventory by

helping business owners.

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 Inventory Management

Why Inventory Management is Important?

▰ It is essential for ensuring a business has

enough stock on hand to meet customer
demand.

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Purpose and Types
of Inventory

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Purpose and Types of Inventory

Type\ of Inventory
Raw Purpose

● To get favorable
prices from the
Raw Materials supplier
Inventory ● To run the factory
independently of
sales
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Purpose and Types of Inventory

Raw
Type\ of Inventory Purpose

Goods-in-Process ● To run production

effectively

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Purpose and Types of Inventory

Raw
Type\ of Inventory Purpose

Finished Goods ● To support sales

operations

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Purpose and Types of Inventory

Raw
Type\ of Inventory Purpose

Maintenance, repair, ● To support and

and operations (MRO) facilitate the
goods production of
finished goods

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Inventory
Control System

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 Inventory Control System

Definition

▰ Methods for planning and monitoring inventory

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 Inventory Control System

The cost of missing out on sales opportunities are:

a.) FINANCIAL COST OF PROCESSING PURCHASE

ORDERS
b.) ECONOMIC OPPORTUNITY COST OR FORGONE
MARGINS

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 Inventory Control System

The cost of keeping inventory are:

a.) COST OF HOLDING INVENTORY

b.) ECONOMIC OPPORTUNITY COST OF FUNDS

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 Inventory Management System

Definition

▰ Consist of the administrative system for planning and

control of physical inventory and the decision
analysis system that support management decisions.

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 Inventory Management System

“ABC” System

▰ Classifies inventory items into categories

according to relative value.

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 Inventory Management System

JIT Inventory

▰ Just-in-time (JIT) inventory system calls for

close coordination between manufacturers
and suppliers to ensure that parts and
materials used in manufacturing process
arrive just in time to be used.
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THANKS!

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 Reference

▰ Saldaña, Ceasar G.: Principles of Managerial Finance (A financial

Analysis)
▰ Gallagher, Timothy J., Andrew, Joseph D.: Financial Management
(Principles and Practices 2nd ed)
▰ Block, Stanley B., Hirt, Geoffrey A.: Foundation of Financial
Management 9th ed
▰ Brealy, Myers, Marcus: Fundamentals of Corporate Finance 3rd ed

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