Types of Inventory

 Four Types of Inventory?

Before obtaining information about the types of inventory control systems, it is important to understand the different types of inventory.

In general, inventory can be classified into four primary classifications:

Raw Materials - Raw materials are inventory materials used to make finished goods in the manufacturing process. One company is considered a raw material, another can be considered as finished goods. For example, a company that makes parts or components for machinery or equipment considers those components to be finished goods. A manufacturer that purchases those components for use in its manufacturing process will consider the same component raw materials. Raw materials may include paper or steel, nuts and bolts, chemicals, wheels and other items.

Work-in-progress - Work-in-progress (WIP) list includes items that are currently being processed. The WIP inventory may include raw materials and components that are undergoing the manufacturing process as well as finished goods, awaiting final inspection or quality control. After the completion of those last steps, these finished items will be considered finished goods.

Finished Goods - Finished goods include all completed items that are ready for sale to the end customer.

MRO Consignment - MRO stands for Maintenance, Repair and Operating Supplies. MRO inventories contain the necessary equipment to operate, such as equipment and machinery and the items needed to maintain equipment and infrastructure. This means that MRO inventories can also include items that are sometimes considered raw materials but are essentially spare parts in this case. Nuts and bolts are a good example. When nuts and bolts are on hand to assemble finished products, they will not be classified as raw materials. The extra nuts and bolts a company keeps in storage for repair equipment, on the other hand, are classified as MROs. Other examples of MRO inventory include cleaning solutions, mops, and brooms, tools, packaging materials, uniforms and gloves, and office supplies such as paper, pens, calculators, printer inks, and other items.

The list can be classified in many ways based on the type of industry, company operations and management of the company. Companies that buy finished goods and sell them to customers in markup have only one type of inventory known as merchandising inventory.

How Do Inventory Control Systems Work?

Inventory control systems, such as inventory control apps, provide a variety of functions that help companies manage different types of inventory. Inventory control systems typically include inventory management apps, which are combined with barcode tagging to identify inventory assets, and each item's information is stored in a central database. Barcode labels serve as inventory trackers, allowing users to get information about items on a computer system, such as the price of an item, the number of items in stock, the storage  location of an item within a warehouse, and more.

The best inventory control apps are mobile-compatible, with companion apps that allow users to track and manage inventory when moving from one facility to another or from site to site. There are several inventory tracking apps for smartphones, some of which are mobile-exclusive, while others have desktop applications that allow users to track inventory from any device. There are also a number of inventory tracking apps specifically designed to meet the needs of warehouse managers. When looking for an inventory management app, look for features that accommodate your company's needs, such as analysis and reporting for support functions such as inventory level reaching pre-defined thresholds, the ability to trigger-order, and forecasting Trigger alert as.

The 2 Types of Inventory Control Systems

Now that we have covered the basics of inventory and how inventory control systems work in general, let us discuss two main types of inventory control systems.

Perpetual Inventory System

When you use a continuous inventory system, it continuously updates inventory records and accounts for inventory and subtraction, when inventory items are received, sold from stock, moved from one location to another. , Is picked up from inventory, and scraped. Some organizations prefer permanent inventory systems because they deliver up-to-date inventory information and better handle physical inventory count. Perpetual inventory systems are also preferred for inventory tracking as they give accurate results on a regular basis if managed properly. This type of inventory control system works best when used in conjunction with a warehouse inventory database of updated bin locations in inventory quantities and bin locations by warehouse workers using a barcode scanner. Inventory management applications are continuous inventory systems.

There are some challenges associated with continuous inventory systems. First, these systems cannot be maintained manually and require specialized equipment and software, resulting in high costs of implementation, especially for businesses with multiple locations or warehouses. Periodic maintenance and upgrades are essential for continuous inventory systems, which can also be expensive. Another challenge of using a continuous inventory system is that the recorded inventory may not reflect the actual inventory as time passes because they do not operate periodic physical inventory count, even when using inventory trackers An essential activity. The result is that errors, stolen items, and improperly scanned items affect the recorded inventory records and do not match the actual inventory count.

Periodic Inventory System

Periodic inventory systems do not track inventory on a daily basis; Rather, they allow organizations to know the beginning and end of inventory levels over a given period of time. These types of inventory control systems track inventory using physical inventory count. When the physical inventory is completed, the balance in the purchase account is transferred to the inventory account and adjusted to match the cost of the end inventory. Organizations can choose whether to calculate the cost of ending inventory using LIFO or FIFO inventory accounting methods or any other method; Keep in mind that the beginning of the inventory is the ending list of the previous period.

There are some disadvantages of using periodic inventory systems. First, when the physical inventory count is being completed, normal business activities are almost suspended. As a result, due to time constraints, workers can hurry through their physical calculations. Periodic inventory systems typically do not use inventory trackers, so error and fraud may be more prevalent as there is no continuous control over the inventory. It becomes even more difficult to identify where discrepancies occur in an inventory count when using an inventory control system from time to time because so much time passes between the count. The amount of labor required for periodic inventory control systems makes them better suited for small businesses.

Barcode Inventory Systems

Inventory management systems use barcode technology are more accurate and efficient than those who using manual processes. When used as part of an overall inventory control system, barcode systems automatically update inventory levels when workers scan them with a barcode scanner or mobile device. The benefits of using barcoding in your list management processes are barcode scannerum and include:

• Accurate record of all inventory transactions
• Removing repeated data errors with manual or paper systems
• Eliminating manual data entry mistakes
• Ease and speed of scanning
• Automatically updates the hand list
• Record transaction history and easily set minimum levels and limit amounts
• Streamline Documentation and Reporting
• Rapid Return on Investment (ROI)
• Facilitating freight transportation within the warehouse and between multiple locations and receiving for picking, packing and shipping

Radio Frequency Identification (RFID) Inventory Systems

The Radio Frequency Identification (RFID) inventory system uses active and passive technology to manage inventory movements. Active RFID technology uses fixed tag readers throughout the warehouse; RFID tags pass to the reader, and movement is recorded in the

inventory management software. For this, active systems work best for organizations that require real-time inventory tracking or where inventory security has been an issue. On the other hand, passive RFID technology requires the use of handheld readers to monitor the inventory movement. Where a tag is read, the data is recorded by the inventory management software. RFID technology has a reading range of about 40 feet with passive technology and 300 feet with active technology.

There are some associated challenges in RFID inventory management systems. First, RFID tags are much more expensive than barcode labels; Thus, they are generally used for high value goods. RFID tags are also known to have interference issues, especially when the tag is used in environments with lots of metals or liquids. It is also a big deal to transition to RFID equipment, and your suppliers, customers and transportation companies should also have the necessary equipment. Additionally, RFID tags carry more data than barcode labels, meaning that your system and server may collide with too much information.

When selecting an inventory control system for your organization, you should first decide whether a continuous inventory system or a periodic inventory system is best suited for your needs. Then, choose a barcode system or RFID system to use in conjunction with your inventory control system for a complete solution that gives you visibility into your inventory for improved accuracy in scanning inventory, recording, and reporting inventory movements. Will enable