1. Inventory Management Terms Shrink Perpetual Cost inventory Methods POS Retail inventory Method Model Inventory LIFO Book Inventory FIFO Physical Averaging Turnover rate Obsolescence Costs Safety Stock Warehouse Costs COGS GAAP Lead-time JIT

2. Why create an inventory? What is the most important reason to create an inventory? In case of disaster

3. Shrink is the Enemy 2% for most retailers (Supermarkets have less than 1%)

4. Shrinkage costs can be: Theft, breakage, damage, cashier errors, bookkeeping errors, or spoilage

5. Obsolescence Costs This is the money lost when products are ” falling into disuse or becoming out of date” while in inventory.

6. Shrink is an inherently negative number So if your inventory shrink comes out to be a negative number?

7. The Retail Inventory Method was developed by the grocery industry to inflate the value of their inventories, making their businesses look more valuable.

8. Retail Inventory Method Not recognized by (GAAP) GAAP is an acronym for Generally Accepted Accounting Principles. Cost inventories are the only methods appropriate for GAAP

9. There are three types of Cost Inventory Methods LIFO FIFO Averaging

10. Last In First Out, (LIFO) Not for Perishables Stock clerks do not rotate products Savings on inventory taxation

11. First In First Out (FIFO) For perishable products Clerks rotate products Loss on inventory taxation

12. Averaging An inventory for products that pour.

13. Inventory methods keep track of products at: the Cost Of Goods Sold (COGS)

14. Point of Sale Inventory (POS) Is a computerized system that keeps track of inventories as products are sold. POS inventories are generated from cash register receipts.

15. Just In Time (JIT) inventories Take the use of computers one step further. Products are ordered as they are purchased by customers

16. Lead-time is the time is takes after placing an order before receiving the product

17. Book Inventory is generated from Book-Keeping. This is sometimes called the Perpetual This is generated from the sale of products. (POS) Point Of Sale

18. Perpetual Inventories Is the amount of product that you think you have on hand

19. Physical Inventory is: when all the products are counted and valued (Done periodically)

20. If you subtract the Book/Perpetual Inventory, what you think you have, from- Physical Inventory, what was just counted, you get shrink.

21. The equation for shrink is: Book inventory ( -) Physical inventory = shrink

22. Turnover Rate How often, on average, is the product inventory is sold? (By dollar volume)

23. The determination of a turnover rate can help a retailer decide how much self space to allocate or even where the product should be placed in the store. Turnover rates are not only determined for individual products, but for categories, departments as well the entire store.

24. Model Inventory Is what you think you will need to Warehouse

25. Model inventories are: used when you know you need to warehouse some product. An example of this would be stocking up on bathing suits before Summer. If you run out of the product, due to seasonality, the retailer loses out on sales. Historical data is often used to make this determination.

26. The costs associated with keeping back stock inventory is know as: Warehouse costs

27. Safety Stock The least amount of inventory “that keeps you from running out of stock” and staying in business.

28. Safety Stock Safety Stock is a calculation that factors in lead-time and shelf space of the product. Some products need always be in stock or at least have back-stock to stay in business.