ASSIGNMENT 1

Inventory Management

Submitted to: Dr. Najam Akber

Submitted by: Badee uz zaman
Registration no: 01-122132-013

1: Pipeline Inventory
Pipeline inventory consists of items that are in the transit "pipeline" between locations, such as those en
route from the warehouse to the retail outlet.
Pipeline inventory refers to those products that are in the company's shipping chain that have yet to reach
their ultimate destination. While the items are in transit, they are still considered to be part of the shipper's
inventory if the recipient has yet to pay for them. When the recipient pays for the items, even if that recipient
has not taken physical custody of the items that pipeline inventory goes on the recipient's inventory list.
Examples of Pipeline Inventory:
In many instances, especially with overseas shipments, inventory can remain in the transit pipeline for days
or weeks at a time. For instance, a shipment of video game consoles made in Japan can take several days
to arrive by container ship to an American port. If the wholesaler has already purchased the consoles, they
are part of that wholesaler's inventory until he sells them to his retail store customers. When the retail store
purchases the consoles from the wholesaler, the pipeline inventory goes on their records.
2: Cycle Stock
Companies that are in the business of selling goods, whether they resell them as retailers or produce them,
need to find ways to manage their inventory levels. The process of inventory management subdivides
inventory into a number of categories. Cycle stock inventory is among the most important parts of an overall
inventory since it's the first place customer purchases will come from.
Cycle stock inventory is the portion of an inventory that the seller cycles through to satisfy regular sales
orders. It is part of on-hand inventory, which includes all of the items that a seller has in its possession. For
example, a retailer's on-hand inventory would include the items on store shelves as well as most of those in
a store room or stock area. Over time, cycle stock inventory refreshes itself, or turns over, as new items
replace older ones that are sold.
3: Decoupling Inventory
Decoupling inventory involves separating inventory within a manufacturing process. This is done so that
the inventory associated with one part of a manufacturing process does not slow down the other part of the
process one portion of a process is not contingent upon the other. The automobile company decouples its
inventory so engine assembly, seat assembly and final assembly are separate from one another. This way,
if there is any problem or shortage in seat inventory, the final assembly can continue on without any hiccup.

4: Stock Keeping Unit

An SKU or Stock Keeping Unit is an identifier that is used by merchants to permit the systematic tracking
of products and services offered to customers. SKUs are assigned and serialized at the merchant level. Each
SKU is attached to an item, variant, product line, bundle, service, fee or attachment.

SKUs are not always associated with actual physical items, but are more appropriately billable entities.
Extended warranties, delivery fees, and installation fees are not physical, but have SKUs because they are
billable. All merchants using the SKU method will have their own personal approach to assigning the
numbers, based on regional or national corporate data storage and retrieval policies. SKU tracking varies
from other product tracking methods which are controlled by a wider body of regulations stemming from
manufacturers or possibly third-party regulations.

Consider this: a ball has a part number of 1234, it is packed 20 to a box, and the box is marked with the
same part number 1234. The box is then placed in the warehouse. The box of balls is the stock keeping unit
(SKU), because it is the stocked item. Even though the part numbers are interchangeable to mean either a
ball or a box of balls, the box of balls is the stocked unit. There may be three different colors of balls; each
of these colours will be a separate SKU. When the product is shipped, there may be 50 boxes of the blue
balls, 100 boxes of the red balls, and 70 boxes of the yellow balls shipped. That shipment would be said to
have been a shipment of 220 boxes, across three SKUs.

5: Safety stock

Safety stock is an additional quantity of an item held in inventory in order to reduce the risk that the item
will be out of stock. Safety stock acts as a buffer in case the sales of an item are greater than planned and/or
the supplier is unable to deliver additional units at the expected time.

There are additional holding costs associated with safety stock. However, the holding costs could be less
than the cost of losing a customer if the customer's order cannot be filled.

6: Obsolescence
Inventory obsolescence is when inventory is no longer salable. Possibly due to too much inventory on hand,
out of fashion or demand. The true value of the inventory is seldom exactly what is shown on the balance
sheet. Often, there is unrecognized obsolescence.