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Inventory Methods
Distribution and Inventory Methods
| Term | Definition |
|---|---|
| Inventory | the raw materials, work-in-progress goods and completed (ready-to-sell) goods that are considered to be part of a business' assets |
| Raw Material | materials and resources used in the production of a product |
| Work-In-Progress Goods | products that are not finished yet, but are in the process of being created for selling |
| Distribution | the process of moving a product from the source of manufacturing to the end user or consumer |
| Periodic Inventory | a method of inventory evaluation where a physical count of inventory is performed at specific time intervals |
| LIFO Method | last in first out inventory method and is used as a method to evaluate and manage inventory; assumes that assets (inventory) produced or acquired last are the ones that are used, sold or disposed of first |
| Asset | item of ownership having an exchange value |
| Capital Loss | the decrease in the value of an investment or asset |
| Capital Gain | an investment or asset that has been sold for a profit |
| FIFO Method | first in first out inventory method and states that assets (inventory) produced or purchased first, are then sold used or disposed of first |
| HIFO Method | highest in first out inventory method and refers to the idea that the inventory that costs the highest amount will be the first one to be used or taken out of stock |
| Taxable Income | the amount of income subject to taxes (such as social security and Medicare) |
| FISH Situation | first in still here and means that companies still have inventory on hand that is not being sold because of several reasons such as the products are not being demanded by consumers, or the product's value is decreasing |
| JIC Inventory | just in case method and is an inventory strategy where companies keep large amounts of inventory on hand in order to minimize the probability of selling out of a stock of product |
| JIT Inventory | just in time method is an inventory strategy that companies use in an attempt to increase efficiency and decrease waste by receiving goods only as they are needed in the production process |
| Perpetual Inventory Systems | continual day-to-day upkeep and counting of additions and removals of materials, work-in-process products and the COGS |
| Perpetual Manual System | use of paper records from sales transactions to enter data into the system |
| Perpetual Computer Based System | automated system which keeps track of all figures so that it does not have to be done manually |
| Physical Inventory Systems | the physical tracking of inventory by employees within the organization |
| Visual Inventory Control | used to monitor inventory just by taking notice and looking to see what is remaining on the store shelves at the end of the day |
| Tickler Inventory Control | involves small portions of inventory being accounted for per day so that it does not build up and have to be done all at one time |
| Annual Inventory Count | performed at the end of every year by companies to determine the inventory they are going to begin the new year with |
| Equilibrium | when supply and demand are balanced |
| Surplus | when supply exceeds demand |
| Shortage | when demand exceeds supply |
| Inventory Carrying Costs | refer to the cost of maintaining inventory in a company's warehouse; includes costs such as; rent, utilities, insurance, taxes, employee costs, opportunity costs of having your capital used, etc. |
| Opportunity Cost | the cost of an opportunity that must be given up in order to follow another choice |
| Inventory Turnover | refers to the number of times a company's inventory is sold and replaced over a certain period of time |
| Cost of Goods Sold (COGS) | direct costs related to the production of goods produced and sold by a company |
| Average Inventory | the past amounts from each period added up, divided by the number of periods |
| Marketing Mix | the four main factors a marketing manager has control of: product, price, promotion, and place |
| Product | tangible (touchable, unlike a service) physical products |
| Price | setting the price on the good or service depends on factors such as strategies, discounts, seasonal pricing, etc. |
| Promotion | the communication of information about a product or service to the target market or potential customers, with the goal of generating a positive customer response |
| Place | where the distribution process comes into play in terms of how to get the product to the customer |
| Information | the gathering of market research |
| Market Research | a collection and analysis of data about consumers, competition and the environment |
| Contact | locating and communicating to target market or potential buyers |
| Matching | making adjustments to fit with the needs of the buyer (includes things like assembly and packaging of product) |
| Negotiation | reaching agreement with buyer on price of product along with other needs (matching) |
| Physical Distribution | the storing and transportation of products from manufacturer to retailer |
| Financing | obtaining and using funds to cover the costs of the distribution channel and keep it flowing |
| Risk Taking | assuming certain risks (such as holding stock) in order to operate the channel |
| Direct Marketing Channel | no intermediaries are used, the product goes straight from the manufacturer to the consumer |
| Indirect Marketing Channel | use intermediaries, which means the product goes through a series of stages before it reaches the consumer |
| Intermediatries | a third party who controls or assists in the process of a deal between two other parties (the manufacturer and the consumer); direct mail, telemarketing, Internet, agents, wholesalers, retailers |
| Carrying Costs | costs associated with maintaining inventory, such as storing it in a warehouse |
| Cross-docking | the practice of re-routing inventory through a warehouse; indicates that merchandise is not actually stored in the warehouse for a significant amount of time, but only a few hours at most before it is shipped out. |
Created by:
mrs.harrell
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