We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What are the Best Tips for Manufacturing Inventory Management?

By Osmand Vitez
Updated: May 16, 2024
Views: 10,855
Share

Manufacturing inventory management is often a detailed process for production companies. These organizations can have numerous parts and pieces that make up the products they produce and sell to consumers and other businesses. The best tips for manufacturing inventory management are to separate materials by product, institute internal controls for managing the physical items, select a cost accounting method, implement a perpetual inventory method, and create an inventory reconciliation process. These tasks will help control both the physical inventory in the firm and the accounting processes.

Most production firms use a large variety of materials to produce goods. These can range from large items like steel or fiberglass sheets to small, indirect items like screws, glue or sealant. Companies will need to separate these items by product to ensure that each production line has adequate levels of materials to produce goods. This also prevents other divisions from using incorrect materials when producing goods.

Internal controls are an essential piece of manufacturing inventory management. These controls prevent the abuse or misuse of inventory by employees and other individuals working in the company. For example, basic internal controls will limit the number of individuals who can order inventory, where the company stores inventory (locked or unlocked facilities), how often the company counts inventory and other controls for the entire inventory process. Most internal controls are specific to companies and depend on the types or number of inventory items.

Cost accounting methods will depend on how a company produces products. Manufacturing inventory management needs this process set so managers will understand how to report inventory used in the production process. Job costing tracks inventory materials for each item produced. This works well for custom items like buildings, movies or other items built to specific specifications. Process costing tracks inventory by the production steps needed to produce goods. Food products, computer chips and carbonated beverages are a few common examples of this costing method.

In manufacturing inventory management, companies should attempt to implement a perpetual inventory system that includes a reconciliation process. A perpetual inventory system updates the company’s accounting books every time someone order materials, allocates inventory to production process or sells finished goods. Though more timely to set up and control, perpetual inventory allows for more detailed information. Inventory reconciliations — counting all physical inventory goods and matching them to the accounting books — are necessary to ensure accurate numbers are always available. Inventory counts can be done quarterly or annually to limit the operational downtime for this administrative process.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
Share
https://www.smartcapitalmind.com/what-are-the-best-tips-for-manufacturing-inventory-management.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.