| Inventory management is important for any business | | | | doesn't have the items in stock, the transport is on |
| - small or big. Because if you don't have the goods | | | | strike, there is an accident, etc. |
| customers are looking for, why did you start the | | | | Depending on the average sales per period and the |
| business in the first pace and if you have too many | | | | maximum expected sales you can calculate the |
| of goods that no one wants to buy you will end up | | | | variance. The safety margin can be taken as twice |
| making a huge loss. So how do we ensure that we | | | | the variance as a thumb rule. The sum of the safety |
| have the goods that the customer is looking for and | | | | margin and the time taken to deliver the goods gives |
| avoid storing too much of the products. The magic | | | | us a good approximation of our re-order level. Now |
| word is inventory management and a few experts | | | | based on the quantity in hand and the calculated |
| believe in 'just in time' inventory management. There | | | | re-order we can easily calculate the re-order quantity. |
| are many software programs that have been | | | | You can use the Excel worksheet cells with the |
| created for the sole purpose of inventory | | | | following headers to create an inventory |
| management and they are either 'over kill' or very | | | | management for each of your items: Item ID, Item |
| expensive. Small business can easily use Excel to | | | | Name, Description, Unit Price, Quantity in Stock, |
| manage their inventory and since most people use | | | | Reorder Level, Quantity on Reorder, Max sales per |
| either MS-Office or Open Office in their offices, there | | | | day, Average sales per day, Variance, Time to |
| are no additional investments required. | | | | deliver goods. Based on the above discussion and |
| Let's assume for a moment that you have a store | | | | using standard Excel formulas, you can calculate the |
| and one of the items you sell or have been selling is | | | | variance, safety margin, reorder level and finally the |
| red silk skirts. How many have you sold on an | | | | reorder quantity! |
| average in a period (day, week or month)? What is | | | | With time and with a better understanding of your |
| the maximum sales of this item that you can expect | | | | business including seasonal variations in sales you can |
| realistically? What is the time lag between placing the | | | | tweak this simple inventory system to achieve a |
| order and receipt of the goods? You also need to | | | | more comfortable handle on your inventory! |
| take into account a safety margin: the supplier | | | | |