What is inventory?
As you know, Inventory is a collection of all the items, goods, merchandise, and materials held by a company or business for selling in the market to earn a profit. Inventory is not used the produce things or promote a brand or business.
Its sole purpose is to sell to the customer and earn profit but only for this, it is not called Inventory. Inventory must be part of the business or company.
For eg, a t-shirt shop’s delivery truck is not considered inventory because it is not directly or part of a product but in the vehicle business the delivery truck is a part considered inventory because they are in the business of selling vehicles.
Inventory is a major asset on the balance sheet for almost every company and it's depending on what goods or services your business provides.
As you know, working with a huge amount of inventory is quite complicated and required lots of time but Konigle's Shopify Inventory Management helps you to save time and increase profits.
What are the 4 types of inventory?
There are many different type of inventory but the major type are most follows are:
1. Raw Materials
Materials that are needed to turn your product into a finished product are raw materials inventory. The raw material is pieces of component parts (eg, batteries, boxes, etc.) that are currently not ready or in progress.
2. Work in Progress
Materials that are direct or indirect (eg, phone cover, circuit, etc.)use to create products are work in progress(WIP) Inventory.
3. Finished Goods
This is a finished ready-to-sell product (eg, Mobile phone, Perfume bottle, etc.) that can be sold to wholesalers, retailers, or even end users also.
4. MRO Inventory
It is inventory that is required to assemble, maintain, repair, and operating supplies (eg, folders, printer toner, gloves, etc.) and sell the finished product but is not built into the product itself.
How do I calculate inventory turnover?
This the formula to calculate turnover of the number of times a company sells (inventory).
Average inventory = Beginning Inventory + Ending Inventory / 2
Inventory turnover = Sales + Average Inventory
What are the benefits of inventory in a business?
There are so many benefits that can result from managing inventory properly. Some of them are:
- Identify and reorder items you sell
- Prevent Dead Stock
- Improve Pricing
- Reduce out of stocks
- Improved Warehouse Organization
- Improved Accuracy of Inventory Orders
- Save Time and Money
- Improved Customer Retention