Ias 2 inventories pdf

It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials. In the context of a manufacturing production system, inventory refers ias 2 inventories pdf all work that has occurred – raw materials, partially finished products, finished products prior to sale and departure from the manufacturing system. In the context of services, inventory refers to all work done prior to sale, including partially process information.

The scope of inventory management concerns the balance between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space, quality management, replenishment, returns and defective goods, and demand forecasting. Balancing these competing requirements leads to optimal inventory levels, which is an ongoing process as the business needs shift and react to the wider environment. Inventory management involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling and related costs are kept in check. It also involves systems and processes that identify inventory requirements, set targets, provide replenishment techniques, report actual and projected inventory status and handle all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. However, in practice, inventory is to be maintained for consumption during ‘variations in lead time’.

Lead time itself can be addressed by ordering that many days in advance. This can lead to stock accumulation, consider for example how goods consumed only in holidays can lead to accumulation of large stocks on the anticipation of future consumption. Uncertainty – Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. Ideal condition of “one unit at a time at a place where a user needs it, when he needs it” principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.

Appreciation in Value – In some situations, some stock gains the required value when it is kept for some time to allow it reach the desired standard for consumption, or for production. All these stock reasons can apply to any owner or product. SKUs are clear, internal identification numbers assigned to each of the products and their variants. SKUs can be any combination of letters and numbers chosen, just as long as the system is consistent and used for all the products in the inventory. Such merchandise may not be produced anymore, and the new old stock may represent the only market source of a particular item at the present time. Building up extra stock for periods of increased demand – e. Stock ties up cash and, if uncontrolled, it will be impossible to know the actual level of stocks and therefore impossible to control them.

WIP – materials and components that have begun their transformation to finished goods. Goods for resale – returned goods that are salable. The firm’s work in process includes those materials from the time of release to the work floor until they become complete and ready for sale to wholesale or retail customers. This may be vats of prepared food, filled cans not yet labeled or sub-assemblies of food components. It may also include finished cans that are not yet packaged into cartons or pallets. Inventory proportionality is the goal of demand-driven inventory management.