The 5 ways of managing inventory and stocks

Kinds of inventory: In general Inventory management may be divided into  various categories. This  categorization  helps  companies to tag and manage their inventory. Inventory is divided into broadly 6 categories

Cycle  Inventory
Safety Inventory
Pipeline Stock
Decoupling inventory
anticipation inventory
Dead Stocks

1)Cycle Inventory: As most firms work on the model of economies of scale, they need constant replenishment to their raw material and stocks. Mostly goods and raw material comes in batches.This inventory resulting from the production or purchase in batches is called as cycle stock . This is so called as the “ material and goods comes in a cyclical process and keeps repeating one after another

2) Safety Stock : As the name suggests , safety stock is m, Decouaintained due to emergency or as a contingency plan in case supplies are affected .In an ideal case of constant supply and demand safety stocks need not be maintained . However safety stocks are kept “ in case production is impacted due to political changes, uncertainty against nature, or disruption or natural calamities

3) Pipeline Stock:     In the pipeline inventory management " the pipeline" are the material and goods  that are already being worked on ( work in progress inventory) As production and transportation activities are constantly in progress , carrying in transit stock or pipeline inventory is required .Pipeline inventory is impacted by choosing alternative modes of  transportation

4)Decoupling stocks : Inventory that is accumulated between two interdependent  operations, as a buffer against the breakdown , disruption of machines/production . Thus it is not unusual for organization to hold large inventories across organization level as well as departmental level. This decoupling gives flexibility to decision making unit to manage its operation independently across their respective spheres of the supply chain

5)Anticipation Inventory: Anticipatory stocks consists of stocks accumulated or collected in advance, riding on back of expected higher or peak sales. This is done specially during the holiday season, when consumers are expected to purchase more. Anticipatory stocks” are stocks and raw materials that are kept “ to meet higher sales. There are two kinds of anticipatory stocks. a) Seasonal stock and b)speculative stock

6)  Dead Stock : Dead inventory is that part of the non moving inventory that is unlikely to be further used across supply chains or markets.These dead stocks are accumulated  either due to changes in customer, demand and tastes ( due to changing  demographics) or products that have become obsolete in the market.Ideally firms should dispose of dead stocks on a periodic basis, however they choose to show them under assets in their balance sheet, as disposing off would these reflect a financial loss in the accounts book.