Inventories

Introduction

Where an Item details the specifications, description and perhaps the sales related information of a Raw Material or Product, the Inventory is pertinent to the specific quantities of that Item that are being stored. Inventory is closely tied to the Warehouses that provide the storage space for the Items in inventory. Keeping a detailed and accurate inventory is crucial to manufacturers to ensure that they have the material on hand, or enough time to purchase or manufacture additional material in order to avoid creating bottlenecks for production.

Key Concepts

On-Hand Quantity: This is the amount of a particular item that is readily available and already exists  in inventory. This is generally the initial source for materials being consumed in production.

Safety Stock Quantity: This is the amount of an item that represents what is a "safe" buffer. Falling below the Safety Stock will trigger a warning on the Inventory Plan to inform the material planner and/or scheduler that additional quantity for the material in question should either be manufactured or purchased, depending on the type of item. This quantity serves as a buffer for planners and schedulers to avoid material shortage bottlenecks.

Max Inventory: This is the quantity level where an item is considered over-stocked and now represents a cost in the sense that the overage is wasteful.