Glossary

Inventory Turnover

A successful business has an efficient inventory management policy. It means that it timely meets customer demand while controlling costs. This helps in improving the profitability of the business. Inventory turnover is an indicator of the efficiency of inventory management. What is inventory turnover? Inventory turnover is a financial ratio. It indicates the number of […]

Lean Warehousing

Managing a warehouse efficiently is the key to a successful business. It helps in timely meeting customer demand while reducing investments. With the growth in a company, inventory/warehouse management becomes more challenging. Businesses follow many established practices for the same. Lean warehousing is one such practice. It aims at efficient warehouse management, which benefits the […]

Reorder Point

Every business aims to grow its sales. For this, management of the inventory levels is crucial. One aspect of inventory management is maintaining an adequate stock level. It is essential to timely meet customer demand. To maintain the desired inventory level, one needs to timely reorder the sold goods. But what is the correct time […]

Raw materials

Raw materials are primary products from which one makes the final product. Everything we use is made up of a combination of basic materials. These are called its raw materials. They are available in the unprocessed form or semi-processed form. Businesses use these to produce finished products. We can understand this through various examples. The […]

Cycle Count

For any business, inventory management is crucial. It affects the costs and hence the profitability of a business. Cycle count is a concept which helps in the optimal management of the inventory.   What is a cycle count? Cycle count is an inventory counting technique using sampling. It refers to counting a few items in […]

Distributed Inventory

What is a distributed inventory? A successful business must deliver the right products at the right time. Distributed inventory helps achieve this. Distributed inventory means storing the inventory across many distribution centers. A supplier chooses these centers close to the customers. This process helps in reducing the delivery time to the customers. It also makes […]

Forecasting

Forecasting means making estimates about the future. Based on these estimates, one carries out the required planning. Forecasting is based on data, opinions, and experience. In business, a company generally forecasts demand. Based on this demand forecasting, they plan the other business functions. This includes planning for the purchase of material, production, marketing, distribution, and […]

Economic Order Quantity

Holding an optimum inventory level is vital for any business because there are disadvantages to overholding and underholding inventory. Holding excessive inventory results in increased costs. However, with a shortage of inventory, one cannot meet the customer demand on time. Thus, any business aims to have just the right quantity of inventory. But the question […]

FIFO Inventory Valuation

What is inventory valuation, and why is it important? Inventory valuation is to assign a monetary value to the inventory. Based on this, a company records costs against its sales and calculates its year-end stock. This helps determine its profits and tax outflow. There are various inventory valuation methods. The three major ones are FIFO […]

Backflush

What is backflush? Backflush is an accounting system for product costing. Under this system, a company records costs only after production is complete. At the end of the production process, the company assigns costs to the produced goods. It does this in a single entry.¬†This system is contrary to the standard approach, where the company […]