Managing Inventory

When managing inventory there are two main types of storing goods. The most common method is First in, First Out (FIFO). The next most common is Last in, Last Out (LIFO). Each strategy has it's own advantages when selling products; however, FIFO is better for perishables, while LIFO is better for trend products. These are accounting processes for mass volume.

FIFO is selling the oldest product in stock when a Customer wants to buy something. Restaurants and grocery stores have time limits on how long they can sell food; ergo, they want the older products to be sold before becoming rotten. Canned foods are labeled with dates received and newer inventory is placed towards the back. Fresh foods are also organized in this mannerism. Farmers provide fruits and vegetables to stores. A person might want fruits and vegetables at the back of the bin after noticing the Produce Manager moving existing oranges to the front and loading new shipments in the back, yet the older produce is ripe and ready to eat. If it isn't it is removed from the bins.

LIFO is selling new inventory when it arrives at the store. Department stores find it easier to sell new inventory at a fair price. Sometimes they are able to sell it at higher price for zealous Customers who want to show they are Buyers. They are willing to pay higher prices. New clothing announces to everyone they can afford paying full price and are not likely to buy clothing at sale prices. With this function, older (unsold) inventory is moved to a back room and rearranged for sale. The last options is sending garments back to Manufactures for a partial refund.

This is how to plan inventory in real life. It should logically appeal to Consumer needs. Accounting is different. In mass volume it is difficult to know if a particular item is older or newer. Everything sells when it was sold, yet counted as oldest inventory sold or newest inventory sold. The only people actually keeping track of what is actually in inventory are Managers and Sales Staff.

With bar codes and electronic tags, stores attempt to improve methods of knowing what is actually in inventory; however, most scan the product not individual items. Unless dealing with unique items; such as, antique or one-of-a-kind merchandise it is probably better to prefer FIFO or LIFO for accounting.

Several stores check for quantity of a product and whether it was sold or damaged. LIFO is an accounting practice only utilized in the United States, because there is an easier method of understanding storage. Products were sold or are in inventory. The functionality of running a business is frequently different than accounting methods.

The best method for inventory control is actual people keeping an accurate count on items bought and sold. Some people dismiss general rules of counting inventory upon delivery or quickly look over inventory because it is a massive undertaking. Larger stores hire people to count inventory to compare with sales and other reports to make sure numbers match. This is called an audit. If you buy this many and sold or disposed of this many, there should be this many in storage.

It is difficult letting other people perform important tasks. The advantages of smaller stores is being able to count and take care of everything yourself. The larger a business becomes, there is more emphasis on trusting people to do their job. It is also a good time to begin making lists and training guides so Employees know about their job. Most inventory forms do not include waste; however, that is an import itemization. Lost, stolen and damaged goods should be reported to avoid worry, accusation and ensure matching numbers are found after inspection or an audit.