12 requirements for effective inventory management

periodic system
physical count of items in inventory made at periodic intervals (weekly, monthly)
perpetual inventory system
system that keeps track of removals from inventory continuously, thus monitoring current levels of each item
two-bin system
two containers of inventory; reorder when first is empty
batch systems
inventory records are collected periodically and entered into the system
online systems
the transactions are recorded immediately
computerized checkout systems
uses a laser scanning device
universal product code
bar code printed on a label that has information about the item to which it is attached
radio frequency identification tags
used to keep track of inventory in some applications
lead time
time interval between ordering and receiving the order
point-of-sale systems
electronically records items at time of sale
holding cost
cost to carry an item in inventory for a length of time, usually a year
ordering cost
costs of ordering and receiving inventory
shortage cost
costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit
a-b-c approach
classifying inventory according to some measure of importance, and allocating control efforts accordingly
annual dollar value
annual demand x unit cost
cycle counting
a physical count of items in inventory