Basic

Inventory Management and Inventory Control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many changes in market demand, new opportunities due to worldwide marketing, global sourcing of materials, and new manufacturing technology, means many companies need to change their Inventory Management approach and change the process for Inventory Control.

Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.

The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control activities are:

Sales Forecasting or Demand Management

Sales and Operations Planning

Production Planning

Material Requirements Planning

Inventory Reduction

The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory Management and Inventory Control.

Interest Inventory

Interest Inventory

1. What is your favorite activity or subject? Why? Your least favorite? Why?

I think that my favorite subject is math because I like solving math problems at high speed. In the other hand my least favorite subject is chemical because I hate working with the periodic table.

2. What are your best subjects? What makes them easiest for you?

I would say that my best subject is math. I love math problems and everything that takes over numbers.

3. What subjects are difficult for you? What makes them the hardest?

Chemical is the most difficult subject that I have. It material is very difficult to understand and causes an explosion in my mind.

4. What subjects make you think and work the hardest? Why is it the most challenging?

I know that it going sound a little strange but the subject that make me think and work the hardest is English. I’ve always had trouble with this class. I think it’s because It make me to use the maximum of my mind to create unique and impeccable writings.

5. Rate the following topics according to your interests (1=very interested, 2=somewhat interested, 3=not interested):

Dance-1, Music-1, Drama-2, Sports-1, Writing-1, Math-1, Computers-1, Science- 2, Social Studies-1, Business- 2, World Languages-1, Politics/Law-3, Other(Reading)-1

6. What are your favorite games or sports?

My favorite sport since childhood is basketball. As games I love video games.

7. If you could learn about annything you wanted to, what would you choose to learn about? Be specific.

If I have the oportunity to learn about someone or something, I would choose the pacifist Mahad Magandi. A person who preach during his life the responding to violence with peace.

8. What are three things you like to when you have free time (besides seeing your friends)?

Three things that I like to do when I have free time are listen to music, read a lot and watch TV.

9. What clubs, groups, organizations do you belong to?

At the moment I dont belong to any organisation but if I have the opportunity to belong to one I would not let it pass.

10. What things have you collected in the past? What, if anything, are you currently collecting?

In the past I used to collect coins of every year, but at the moment I collect coins of each country.

11. Have you ever taught yourself to do something without the help of another person? If so, what?

If I ever thought about doing something without the help from anyone, it has been on helping poor people to leave their status.

12. If you were going to start a book club, what kinds of books would your club read?

If I were going to start a book club, my members would read fiction and horror books.

13. If people were to come to you for information about something you know a lot about, what would the topic be?

If someone come to me to find information about something, that something would be about computers and technology.

14.If you could plan a field trip for learning, where would you go? Why would you choose that place?

If I could plan a field trip for learnig, I would choose the country of Africa to analize how its population survive in that enviroment without food and without a safe place to live.

15. When you’re using the computer, what are you usually doing? Why?

When I using the computer, I’m usually doing research, visiting web sites and doing homework. I do all these things to learn and also to be updated on all issues.

16. If you could interview an expert on any subject, what subject would you like to talk to someone about? Who would you like to interview about that subject if you could?

If I could interview an expert on any subject, that subject would be the history of Puerto Rico. And I would choose to interview my mom, a History of P.R teacher.

17. If you could interview one significant person from the past and one from the present, who would you interview? Why would you choose these 2 people?

If I could interview one significant person from the present, I would choose a brother that I have never known or meet in person and from the past I will choose my grandfather who died a year before my birth.

18. What careers are you currently interested in?

I’m currently interested in a electrical engineering carreer.

19. In my classes I prefer to work:

Whit one other person.

20. In school I learn best:

Alone.

21. What helps you learn?

Reading, taking notes, silence and visual materials(PowerPoints) help me a lot to learn.

22. What makes learning more difficult for you?

A lot of work, loud sounds and a bad professor makes my learning more difficult.

23. Think of a great teacher you had. What made this teacher so terrific?

Armando Rivera my teacher of Latin American History, was a great teacher in my life. His type of teaching was very special. He had a great sense of humor and taugh us to be a optimistic person in our lifes.

24. What past school assignment or project are you proudest of? Why?

I’m very proud of the project that I made in high school about the disease of asthma. This project make me proud because a lot of students learned about the causes and effects of this disease.

25. What project done outside of school are you proudest about? Why?

I’m very proud of a project that I made with my friends to help eldery people in an asylum. And I like a lot making this project because we help them to complete their routine actions.

26. What else would you like me to know about you as a learner?

Google chrome browser

At Google, we have a saying: “launch early and iterate.” While this approach is usually limited to our engineers, it apparently applies to our mailroom as well! As you may have read in the blogosphere, we hit "send" a bit early on a comic book introducing our new open source browser, Google Chrome. As we believe in access to information for everyone, we've now made the comic publicly available -- you can find it here. We will be launching the beta version of Google Chrome tomorrow in more than 100 countries.

So why are we launching Google Chrome? Because we believe we can add value for users and, at the same time, help drive innovation on the web.

All of us at Google spend much of our time working inside a browser. We search, chat, email and collaborate in a browser. And in our spare time, we shop, bank, read news and keep in touch with friends -- all using a browser. Because we spend so much time online, we began seriously thinking about what kind of browser could exist if we started from scratch and built on the best elements out there. We realized that the web had evolved from mainly simple text pages to rich, interactive applications and that we needed to completely rethink the browser. What we really needed was not just a browser, but also a modern platform for web pages and applications, and that's what we set out to build.

On the surface, we designed a browser window that is streamlined and simple. To most people, it isn't the browser that matters. It's only a tool to run the important stuff -- the pages, sites and applications that make up the web. Like the classic Google homepage, Google Chrome is clean and fast. It gets out of your way and gets you where you want to go.

Under the hood, we were able to build the foundation of a browser that runs today's complex web applications much better. By keeping each tab in an isolated "sandbox", we were able to prevent one tab from crashing another and provide improved protection from rogue sites. We improved speed and responsiveness across the board. We also built a more powerful JavaScript engine, V8, to power the next generation of web applications that aren't even possible in today's browsers.

This is just the beginning -- Google Chrome is far from done. We're releasing this beta for Windows to start the broader discussion and hear from you as quickly as possible. We're hard at work building versions for Mac and Linux too, and will continue to make it even faster and more robust.

We owe a great debt to many open source projects, and we're committed to continuing on their path. We've used components from Apple's WebKit and Mozilla's Firefox, among others -- and in that spirit, we are making all of our code open source as well. We hope to collaborate with the entire community to help drive the web forward.

The web gets better with more options and innovation. Google Chrome is another option, and we hope it contributes to making the web even better.

So check in again tomorrow to try Google Chrome for yourself. We'll post an update here as soon as it's ready.

Chrome - faster and better than IE

People don't realise that Google has been a thorn in Microsoft's side for at least the last couple of years.

You may know that Microsoft tried to buy Yahoo, who turned down the offer of obscene amounts of money to keep doing whatever it is they do at Yahoo. And Microsoft already has a search engine, the underwhelming MSN.

My guess is Microsoft wanted to leverage Yahoo as well so they could go head to head with Google and try for a slice of the billion-dollar search engine scene.

The thing is that Microsoft, while generally acknowledged as being adequate at building operating systems, servers and office suites, is totally naff at everything else.

It seems to think that with enough brains, brawn and money, everything it does will turn to gold.

Microsoft is wrong as anyone who has tried to use Microsoft's website will attest. It is, and always has been, an absolute horror to navigate.

This is because Microsoft have a way of doing things that is almost deliberately at odds with the way everyone else does things, their philosophy being that we should change to conform to their standards. This "wag the dog" approach is what sends some people into tailspins.

Imagine heavy-hitters from all the big organisations meeting over skim-milk lattes and creating standards that everyone agrees to adhere to.

Microsoft flatly refuses to accept this standard because they have their own way of doing the same thing. Um, no.

The problem is that with money and clout, Microsoft can call the shots to a large extent.

Take office documents for example. The default formats are now Word and Excel, no matter how hard the opposition tries to make it otherwise. Every new office suite on the market has, at the top of their feature list, Microsoft Office Compatible. If they aren't compatible, they won't sell.

Microsoft make millions from Windows, but Office is the real plum, with retail versions costing upwards of two arms and two legs.

Google took notice and, a few years back, launched an online suite of excellent office tools, including email, word processing, spread-sheeting, document storage and scheduling in a direct attempt at gaining some of that market share.

It worked. Many companies looked at their horrendous software bills (one copy of Office for every employee soon adds up in a company with thousands on the payroll) and decided to take the Google route, robbing market share from Microsoft that thorn I was talking about.

Now the team at Google have developed a web browser. They seem to have borrowed the best bits from Safari, Firefox and Opera and have then released it to the open source community, collectively firing a shot directly at Internet Explorer.

And Google has done well. Chrome is minimalistic, standards compliant, breathtakingly fast, featured yet lightweight and easy on the eyes. I love it, though with reservations.

Those who have Google products installed know that they phone home a lot. Chrome is sending all kinds of data back to base for whatever purposes Google has in mind for it.

I don't love that. If it was just usage statistics to make a better browser, then I might be cool with it, but monitoring my surfing so they can show targeted ads is too Big Brother for me.

Here's the thing: Google, with the hearty support of the open source community (motto: taking Microsoft down one line of code at a time) is in danger of becoming the very thing it despises, monopolising everything it touches and crushing smaller players along the way. Conspiracy theorists are already having heart palpitations over the possibilities.

I also hear whispers of a Google operating system. Web watchers are claiming that by 2010 a Google OS will be competing directly with Windows. That could make things interesting. Google Chrome is free, faster and better than Internet Explorer, but I bet I know which one people will still use.

Negative inventory

Negative inventory effects on planning systems.

In addition to understanding the sources of negative inventory balances, it's also very important to understand their effects on planning and execution systems. In most planning systems, a negative item-level balance is treated the same as positive demand. Basically your system will tell you to make or buy more to offset the negative balance. Obviously this is a problem when a large negative balance occurs but can also create serious problems with small negative balances under certain conditions. For example, if you have an item that is set up as an "order as needed" item, meaning that you do not want to order or stock any unless you have actual demand (orders), an errant adjustment that drives the balance to   -5 will result in a recommended buy of 5 pieces. Since "order as needed" is often associated with very slow moving or obsolete items, you may have just added to an obsolescence problem. In a manufacturing environment using MRP, a negative balance of a single end-item, will result in demand cascading throughout the bill of material structure, potentially resulting in unnecessary orders for hundreds of lower-level items. This is what occurs if your system handles negative balances as would normally be expected. Some programs, either purposely or due to poor programming practices, may not execute properly if they encounter a negative balance. They may ignore the records with negative balances or simply "blow up" because they weren't designed to incorporate negative balances into their calculations. Though there are valid reasons for not wanting a program to execute if it encounters a negative balance, there are also potential problems with this logic. You may actually need to take action, but because the calculations were suspended due to a negative balance, you did not get the information needed to initiate an action. Due to the complexities of demand-planning systems, especially MRP/DRP systems, there is no "best" way to handle negative balances within the programming. Execution systems such as warehouse management systems and manufacturing execution systems can also have problems with negative balances. While you may not be willing to modify your systems to handle negative balances in a specific way, you should at least understand what your systems are doing when they encounter negative balances. Ultimately, avoidance of negative balances in the first place is the best solution. However, since perfection is pretty tough to achieve, you should have a backup plan. Since most planning systems still operate in batch mode (run nightly or on weekends) you can eliminate conflicts by resolving all negative balances prior to running these programs. With execution systems that are more likely to run real-time, you don't have this same luxury. Fortunately, the impact on execution systems is generally less dramatic than on planning systems. I'd once more like to emphasize the importance of thinking through your actions when trying to "fix" negative balances. A "run the report and adjust them all up" mentality will most certainly cause problems. Remember, you should not make adjustments to timing-related negative balances, you should only correct location-level problems with a location transfer program, and you should try to correct other negative balances by entering an offsetting transaction in the same program that created the problem.   Item-level negative balances Item-level negative balances, on the other hand, may be affecting planning system. These can occur from a variety of transactional mistakes. Over-reporting scrap quantities, cycle count adjustment errors, over-reporting production when using backflushing, overissuing materials to production, duplicate transactions, and overissuing inventory to shipping orders are just some examples of errors that can create item-level negative balances.   Correcting negative balances The reason it's so important to make the distinction as to the type of negative balance (timing, location-level, or item-level) is to ensure that your subsequent actions to "correct" the negative balance don't result in more serious inventory problems. If you were to adjust up a negative balance caused by a timing issue, you would create an inventory problem since, once the other transaction goes through, you will now be overstating your inventory by the amount of the adjustment. The same is true if you were to adjust up a negative location-level balance. Where your item-level balance was previously accurate, your adjustment would now result in overstatement of your item-level inventory. Item-level negative balances not related to timing issues should also be carefully investigated before taking any actions. Usually you will want to identify the transaction that caused the negative balance and use the same transaction program to enter an offsetting transaction. This is especially true in manufacturing environments since the incorrectly executed transaction may have also created errors with other items (such as with backflushing transactions). Despite the seemingly complex aspects of negative inventory balances, they are actually very easy to manage. They are easy to identify since all you need is a report that shows any items with a quantity on hand less than zero. In addition, it is usually very easy to track down the source of the error since the errant transaction is usually the transaction that brought the inventory balance below zero (if not, it very likely occurred within a very short timeframe prior to the negative balance being created).

Optimizing Safety Stock

Optimizing Safety Stock
Optimizing Safety Stock levels by calculating the magical balance of minimal inventory while meeting variable customer demand is sometimes described as the Holy Grail of inventory management (ok, forecasting is probably the true holy grail but I thought this sounded good). Many companies look at their own demand fluctuations and assume that there is not enough consistency to predict future variability. They then fall back on the trial and error best guess weeks supply method or the over simplified 1/2 lead time usage method to manage their safety stock. Unfortunately, these methods prove to be less than effective in determining optimal inventory levels for many operations. If your goal is to reduce inventory levels while maintaining or increasing service levels you will need to investigate more complex calculations.
One of the most widely accepted methods of calculating safety stock uses the statistical model of Standard Deviations of a Normal Distribution of numbers to determine probability. This statistical tool has proven to be very effective in determining optimal safety stock levels in a variety of environments. The basis for this calculation is standardized, however, its successful implementation generally requires customization of the formula and inputs to meet the specific characteristics of your operation. Understanding the statistical theory behind the formula is necessary in correctly adapting it to meet your needs. Errors in implementation are usually the result of not factoring in variables which are not part of original statistical model

Terminology and calculations

The following is a list of the variables and the terminology used in this safety stock model:
Normal distribution. Term used in statistical analysis to describe a distribution of numbers in which the probability of an occurrence, if graphed, would follow the form of a bell shaped curve. This is the most popular distribution model for determining probability and has been found to work well in predicting demand variability based upon historical data.
Standard deviation. Used to describe the spread of the distribution of numbers. Standard deviation is calculated by the following steps:
determine the mean (average) of a set of numbers.
determine the difference of each number and the mean
square each difference
calculate the average of the squares
calculate the square root of the average.
You can also use Excel function STDEVPA to calculate standard deviation. In safety stock calculations, the forecast quantity is often used instead of the mean in determining standard deviation.
Lead time. Highly accurate lead times are essential in the safety stock/reorder point calculation. Lead time is the amount of time from the point at which you determine the need to order to the point at which the inventory is on hand and available for use. It should include supplier or manufacturing lead time, time to initiate the purchase order or work order including approval steps, time to notify the supplier, and the time to process through receiving and any inspection operations.
Lead-time demand. Forecasted demand during the lead-time period. For example, if your forecasted demand is 3 units per day and your lead time is 12 days your lead time demand would be 36 units.
Forecast. Consistent forecasts are also an essential part of the safety stock calculation. If you don't use a formal forecast, you can use average demand instead.
Forecast period. The period of time over which a forecast is based. The forecast period used in the safety stock calculation may differ from your formal forecast periods. For example, you may have a formal forecast period of four weeks while the forecast period you use for the safety stock calculation may be one week.
Demand history. A history of demand broken down into forecast periods. The amount of history needed depends on the nature of your business. Businesses with a lot of slower moving items will need to use more demand history to get an accurate model of the demand. Generally, the more history the better, as long as sales pattern remains the same.
Order cycle. Also called replenishment cycle, order cycle refers to the time between orders of a specific item. Most easily calculated by dividing the order quantity by the annual demand and multiplying by the number of days in the year.
Reorder point. Inventory level which initiates an order. Reorder Point = Lead Time Demand + Safety Stock.
Service level. Desired service level expressed as a percentage.
Service factor. Factor used as a multiplier with the Standard Deviation to calculate a specific quantity to meet the specified service level. I have included a service factor table below or you can use Excel function NORMSINV to convert service level percentage to service factor.
By Dave Piasecki

Optimizing Economic Order Quantity (EOQ)

Optimizing Economic Order Quantity (EOQ)
Inventory models for calculating optimal order quantities and reorder points have been in existence long before the arrival of the computer. When the first Model T Fords were rolling off the assembly line, manufacturers were already reaping the financial benefits of inventory management by determining the most cost effective answers to the questions of When? and How much?. Yes long before JIT, TQM, TOC, and MRP, companies were using these same (then unnamed) concepts in managing their production and inventory. I recently read Purchasing and Storing, a textbook that was part of a “Modern Business Course” at the Alexander Hamilton Institute in New York. The textbook published in 1931 (that’s right 1931) was essentially a how to book on inventory management in a manufacturing environment. If you’re wondering why I would want to read a 70-year-old business text, my answer would be that the fundamental concepts of managing a business change very little with time, and reading about these concepts in a vintage text is a great way to reinforce the value of the fundamentals. The occasional reference to “The War” (referring to WWI) also keeps it interesting and the complete absence of acronyms is refreshing. As you may have guessed, this 70-year-old book contained a section on Minimum Cost Quantity, which is what we now refer to as Economic Order Quantity (EOQ). I can imagine that in the 1930’s an accountant (or more likely a room full of accountants) would have calculated EOQ or other inventory related formulas one item at a time in a dimly lit office using the inventory books, a mechanical adding machine and a slide rule. Time consuming as this was, some manufacturers of the time recognized the financial benefits of taking a scientific approach to making these inventory decisions. So why is it that, in these days of advanced information technology, many companies are still not taking advantage of these fundamental inventory models? Part of the answer lies in poor results received due to inaccurate data inputs. Accurate product costs, activity costs, forecasts, history, and lead times are crucial in making inventory models work. Ironically, software advancements may also in part to blame. Many ERP packages come with built in calculations for EOQ which calculate automatically. Often the users do not understand how it is calculated and therefore do not understand the data inputs and system setup which controls the output. When the output appears to be "out of whack" it is simply ignored. This sometimes creates a situation in which the executives who had purchased the software incorrectly assume the material planners and purchasing clerks are ordering based upon the systems recommendations. I should also note that many operations will find these built-in EOQ calculations inadequate and in need of modifications to deal with the diversity of their product groups and processes. Corporate goals and strategies may sometimes conflict with EOQ. Measuring performance solely by inventory turns is one of the most prolific mistakes made in the name of inventory management. Many companies have achieved aggressive goals in increasing inventory turns only to find their bottom line has shrunk due to increased operational costs. EOQ is essentially an accounting formula that determines the point at which the combination of order costs and inventory carrying costs are the least. The result is the most cost effective quantity to order. In purchasing this is known as the order quantity, in manufacturing it is known as the production lot size. While EOQ may not apply to every inventory situation, most organizations will find it beneficial in at least some aspect of their operation. Anytime you have repetitive purchasing or planning of an item, EOQ should be considered. Obvious applications for EOQ are purchase-to-stock distributors and make-to-stock manufacturers, however, make-to-order manufacturers should also consider EOQ when they have multiple orders or release dates for the same items and when planning components and sub-assemblies. Repetitive buy maintenance, repair, and operating (MRO) inventory is also a good application for EOQ. Though EOQ is generally recommended in operations where demand is relatively steady, items with demand variability such as seasonality can still use the model by going to shorter time periods for the EOQ calculation. Just make sure your usage and carrying costs are based on the same time period. Doesn’t EOQ conflict with Just-In-Time? While I don’t want to get into a long discussion on the misconceptions of what Just-In-Time (JIT) is, I will address the most common misunderstanding in which JIT is assumed to mean all components should arrive in the exact run quantities “just in time” for the production run. JIT is actually a quality initiative with the goal of eliminating wasted steps, wasted labor, and wasted cost. EOQ should be one of the tools used to achieve this. EOQ is used to determine which components fit into this JIT model and what level of JIT is economically advantageous for your operation. As an example, let us assume you are a lawn equipment manufacturer and you produce 100 units per day of a specific model of lawn mower. While it may be cost effective to have 100 engines arrive on your dock each day, it would certainly not be cost effective to have 500 screws (1 days supply) used to mount a plastic housing on the lawn mower shipped to you daily. To determine the most cost effective quantities of screws or other components you will need to use the EOQ formula. The basic Economic Order Quantity (EOQ) formula is as follows:

By Dave Piasecki

Cycle Counting and Physical Inventories

Cycle Counting and Physical Inventories

So it's the end of the year and the warehouse workers and all the salaried employees are gathered together on a Saturday morning to perform the annual physical inventory. The coffee and donuts help to put color into the faces and cover up the odors enveloping those who had overindulged themselves the night before. People are wandering around not sure what they should be doing, when the boss walks in with stacks of reports, cards, and colored stickers and says "OK here's how this is going to work." By noon it's obvious that less than half the warehouse has been counted and the pizza lunch has left everyone with an enthusiasm deficit. At two o'clock, one by one, people start approaching the boss with the reasons as to why they have to leave. Suddenly the pressure increases on those remaining to get finished. Five o'clock and the last of the counters are abandoning ship, there's an enormous pile of paperwork marked "discrepancies" and several piles of product marked "unknown," "what's this?" and "needs to be identified." The boss surveys the scene and instructs the people in charge of investigating the overwhelming pile of discrepancies to "just make the adjustments, we need to get out of here." With some variations, this is how annual physical inventories are performed year after year. So what’s wrong with this process? Everything!!! You’ve just had a group of people with inadequate training and experience — most of them forced into being there on their day off — count your inventory, and have then made adjustments to your on-hand balances based on those counts without having the time to adequately investigate the variances. The final result likely being that half of the adjustments corrected previous inventory problems while the other half created new inventory problems on items that were correct prior to the inventory. In case it’s not obvious to you, I don’t like annual physical inventories. Counting inventories on a regular basis throughout the year (cycle counting) combined with a process for continuous improvement in inventory accuracy will prove a far better method for achieving accurate inventories. My definition of cycle counting tends to differ slightly from the generally accepted one. Most people think of cycle counting as regularly scheduled (usually daily) counting of product where you randomly count items based upon some type of predefined parameters. For example, inventory is broken down by ABC classifications and frequencies assigned such as A items counted 10 times/year, B items 5 times/year, and son on. I prefer to define cycle counting as any count program using regularly scheduled counts where you count less than the entire facility's inventory during each count. This includes a system that I’ve found to be highly effective, that is a hybrid of a physical inventory and a cycle count, where you’re counting all inventory within a physical area like a physical inventory, however, you are not counting the entire facility at one time. The next day you simply start where you left off the day before. Regularly scheduled physical inventories can be an effective way of counting inventory in smaller operations provided you are using trained counters and have adequate time to investigate the discrepancies prior to making adjustments. If your inventory is so extensive that you cannot adequately investigate the count discrepancies, you must break it down into some sort of a cycle count program. If you are running a successful and comprehensive cycle counting program, there is little benefit to performing an annual physical inventory. Unfortunately, many in the financial establishment still live in the Dark Ages when it comes to inventory counting and will try to tell you that “you must perform an annual physical”. Once again I’ll state that if you can count and adequately investigate count discrepancies in a single day, then go ahead and perform the physical. However, if your inventory is too extensive or if you are in a 24/7 operation, do not want to shut down operations, and feel confident in the accuracy of your cycle count program, you can pressure them into accepting some type of on-site audit instead. They generally don’t like it but they will do it.

By Dave Piasecki

Material Requirements PlanningInvatol

Material Requirements PlanningInvatol

Material Requirements Planning MRP for small to mid size companies. Material Requirements Planning MRP covers a wide range of activities which include some of the following:
- Time Phased Orders -- Requirements sorted by Vendor -- Incorporate In House and Vendor Lead Times -- Focus on On Time Delivery -- Reduce Inventory Levels -
Material requirements planning or MRP involves getting material on hand when needed for production or sales. The Material requirements planning document should provide four basic items of information, when to place order, how much to order, who to order from and when the items need to be on hand. While some companies don't use MRP, but rely on expediting to accomplish this, other companies use the min max stock level. Both these methods are costly and often fail to meet production or sales needs that a good Material Requirements Planning process can provide. The only practical way to provide Material Requirements Planning is by using some type of computerized MRP program. Material Requirements Planning can plan, schedule and reschedule materials as far into the future as required.
Each company has an overall goal and a strategy for achieving that goal, but within the company there are groups whose focus may seem to be in contradiction to the Materials Requirements Planning process. The marketing group wants to make sure there is enough inventory on hand to supply all customer request, the accounting group is charged with keeping cost down, which includes keeping inventory levels low. In the middle is the inventory control group. If the accounting group is quiet, the marketing group is demanding you increase inventory, if the marketing group is quiet the accounting group wants to know why you have so much inventory. A good Material Requirements Planning system will help the inventory group balance both requirements, provide product for customer requirements and keep inventory levels low.
The goal of the MRP or Material Requirements Planning document is to supply information that will enable the company to have enough inventory on hand to fulfill demand, (and no more) available only when needed, (and no sooner) at a quality level that meets specification, (but does not have to exceed it) and at the lowest price. A good MRP or Material Requirements Planning program can provide the basic needs of keeping inventory levels low and fulfilling customer expectatons for on time delivery.

Role within organizations

Role within organizations
SAM can serve many different functions within organizations, depending on their software portfolios, IT infrastructures, resource availability, and business goals.
For many organizations, the goal of implementing a SAM program is very tactical in nature, focused specifically on balancing the number of software licenses purchased with the number of actual copies installed. In doing so, organizations can minimize liabilities associated with software piracy in the event of an audit by a software vendor or a third party such as the Business Software Alliance (BSA). SAM, according to this interpretation, involves conducting detailed software inventories on a periodic basis to determine the exact number of software installations, comparing this information with the number of licenses purchased, and establishing controls to ensure that proper licensing practices are maintained on an ongoing basis. This can be accomplished through a combination of IT processes, purchasing policies and procedures, and technology solutions such as software inventory tools.[3]
More broadly defined, the strategic goals of SAM often include (but are not limited to) the following:
Reduce software and support costs by negotiating volume contract agreements and eliminating or reallocating underutilized software licenses[2]
Enforce compliance with corporate security policies and desktop standards[4]
Improve worker productivity by deploying the right kinds of technology more quickly and reliably[2]
Limit overhead associated with managing and supporting software by streamlining and/or automating IT processes (such as inventory tracking, software deployment, issue tracking, and patch (computing) management)[5]
Establish ongoing policies and procedures surrounding the acquisition, documentation, deployment, usage and retirement of software in an effort to recognize long-term benefits of SAM

CYCLE COUNTING CAN IMPROVE YOUR BOTTOM LINE

CYCLE COUNTING CAN IMPROVE YOUR BOTTOM LINE
An accurate inventory is necessary for maintaining customer satisfaction as well as a company's bottom line. An effective means to attaining inventory accuracy is cycle counting. Many companies that employ this method have had success in maintaining an error-free inventory throughout the year. This year-round success can result in inventory accuracy of 95% or greater! However, some companies have tried cycle counting only to find it has taken more time and energy than they have to spare because it was not implemented properly. The following discussion highlights what can be gained from cycle counting and when it should be applied.
What can be gained? One advantage to cycle counting is error-free records. This can result in greater customer satisfaction and the ability to lower inventory levels. To get to this point, though, one must understand what cycle counting is and what it can achieve. The definition of cycle counting is to count a small percentage of pre-selected inventory on a regular cycle. A regular cycle can be every day or every week depending on the amount of inventory and labor resources. Samples counted can then be compared to inventory records to determine accuracy.
The overall objective of this procedure is to achieve an accurate inventory. The following must be done in order for the desired results to be achieved:

1) Keep the system up to date so the cycle count is accurate.
2) Ensure inventory records have a high level of accuracy.
3) Determine the reasons for errors.
4) Correct the situation that is causing these errors.

Best free inventory control softwares

1) http://www.freedownloadmanager.org/downloads/inventory_control_software/
2) http://ezinearticles.com/?Free-Inventory-Control-Software&id=254704
3) http://www.findapp.com/fMgmt/products.aspx?C=390%7CST-2
4) http://www.inventorysoft.com/
5) http://www.download.com/Basic-Inventory-Control/3000-2067_4-10060417.html?cdlPid=10641808

Inventory Management Made EasyBy

Inventory Management Made EasyBy:

Kingston J. Amadan
Depending on the organizational structure of a business, inventory management can be a complicated endeavor. Many businesses require updated inventory figures to be available to not only sales and ordering personnel, but accounting, management and logistics departments as well. When inventory can’t be reconciled companywide, it makes keeping accurate accounts of sales figures, stock levels and availability extremely difficult.Thankfully, there are several software applications on the market that make keeping track of inventory easy, though not all inventory management solutions are created equally. More recent offerings are designed to allow real time automated adjustment of stock levels to reach multiple departments, providing up to the minute information everywhere it’s needed. Accounting personnel require company-wide inventory statistics so that the type of accounting systems they utilize can be reconciled, be it first in/first out (FIFO) or last in/first out (LIFO). Contrary to what many outside of the accounting profession assume, inventory reconciliation is more then just an end of year process and should be managed day to day for proper accuracy and accountability. Software solutions such as SAP Business One or Sage MAS 90 and 200 help accounting personnel manage inventory reconciliation through the input of other departments or preferably, through an automated system that adjusts data as changes occur.For sales personnel, being aware of inventory levels is a crucial part of providing superior customer service, as orders should be based on existing stock levels. Without the ability to see stock quantities, providing accurate shipping information is next to impossible. Of course, not all businesses are of the nature that puts a premium on efficient distribution, but for those that are, inventory management software applications can help ensure that orders can be filled in a timely manner.

Inventory examples

Inventory examples
While accountants often discuss inventory in terms of goods for sale, organizations - manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture, supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a shop or store accessible to customers. Inventories not intended for sale to customers or to clients may be held in any premises an organization uses. Stock ties up cash and if uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to control them.
Whilst the reasons for holding stock are covered earlier, most manufacturing organizations usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have begun their transformation to finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
Spare parts

Theory of Constraints cost accounting

Theory of Constraints cost accounting
Eliyahu M. Goldratt developed the Theory of Constraints in part to address the cost-accounting problems in what he calls the "cost world". He offers a substitute, called throughput accounting, that uses throughput (money for goods sold to customers) in place of output (goods produced that may sell or may boost inventory) and considers labor as a fixed rather than as a variable cost. He defines inventory simply as everything the organization owns that it plans to sell, including buildings, machinery, and many other things in addition to the categories listed here. Throughput accounting recognizes only one class of variable costs: the operating expenses like materials and components that vary directly with the quantity produced.
Finished goods inventories remain balance-sheet assets, but labor efficiency ratios no longer evaluate managers and workers. Instead of an incentive to reduce labor cost, throughput accounting focuses attention on the relationships between throughput (revenue or income) on one hand and controllable operating expenses and changes in inventory on the other. Those relationships direct attention to the constraints or bottlenecks that prevent the system from producing more throughput, rather than to people - who have little or no control over their situations.

FIFO vs. LIFO accounting

FIFO vs. LIFO accounting
Main article: FIFO and LIFO accounting
When a dealer sells goods from inventory, the value of the inventory is reduced by the cost of goods sold (CoG sold). This is simple where the CoG has not varied across those held in stock; but where it has, then an agreed method must be derived to evaluate it. For commodity items that one cannot track individually, accountants must choose a method that fits the nature of the sale. Two popular methods exist: FIFO and LIFO accounting (first in - first out, last in - first out). FIFO regards the first unit that arrived in inventory as the first one sold. LIFO considers the last unit arriving in inventory as the first one sold. Which method an accountant selects can have a significant effect on net income and book value and, in turn, on taxation. Using LIFO accounting for inventory, a company generally reports lower net income and lower book value, due to the effects of inflation. This generally results in lower taxation. Due to LIFO's potential to skew inventory value, UK GAAP and IAS have effectively banned LIFO inventory accounting.
In computer science, FIFO and LIFO correspond to the queue and stack data structures, respectively. In fact, the acronyms are commonly used to denote the corresponding data structures.

[edit] Standard cost accounting
Standard cost accounting uses ratios called efficiencies that compare the labour and materials actually used to produce a good with those that the same goods would have required under "standard" conditions. As long as similar actual and standard conditions obtain, few problems arise. Unfortunately, standard cost accounting methods developed about 100 years ago, when labor comprised the most important cost in manufactured goods. Standard methods continue to emphasize labor efficiency even though that resource now constitutes a (very) small part of cost in most cases.
Standard cost accounting can hurt managers, workers, and firms in several ways. For example, a policy decision to increase inventory can harm a manufacturing managers' performance evaluation. Increasing inventory requires increased production, which means that processes must operate at higher rates. When (not if) something goes wrong, the process takes longer and uses more than the standard labor time. The manager appears responsible for the excess, even though s/he has no control over the production requirement or the problem.
In adverse economic times, firms use the same efficiencies to downsize, rightsize, or otherwise reduce their labor force. Workers laid off under those circumstances have even less control over excess inventory and cost efficiencies than their managers.
Many financial and cost accountants have agreed for many years on the desirability of replacing standard cost accounting. They have not, however, found a successor

Simple Inventory Management

Are you having trouble finding an Inventory System that meets your needs and your budget?

• CoreIMS© addresses all of your warehouse needs, cost effectively.
• CoreIMS© will manage single or multiple warehouses.
• CoreIMS© is easy to install, easy to use and inexpensive to operate.
• CoreIMS© delivers savings typically associated with much more expensive warehouse management software through improved inventory accuracy and increased labor productivity.
• CoreIMS© delivers real-time inventory information to help you better manage your business and improve customer service.
• CoreIMS© is RF/Batch Barcode Scanning and Printing capable.
• CoreIMS© has web access capabilities. CoreIMS could work on your local PC or through the Internet.
• CoreIMS© is integrated with accounting software (QuickBooks, MAS90/200).

An affordable and feature-rich Inventory System!

Designed for small to medium warehouses, CoreIMS© inventory control software addresses all of your warehouse needs, from Purchasing through Receiving, Inventory Management, Sales Orders and Shipping. CoreIMS© delivers Barcode scanning and Barcode label printing capability to improve inventory control and order fulfillment accuracy. Maintain and manage Vendor and Customer contact information in one system, including multiple ship-to addresses. Customizable reports deliver useful information in a timely manner to corporate management. Integration with standard accounting (QuickBooks, MAS 90/200), shipping and ERP software further extends the capabilities of our inventory management software.

Hundreds of companies have chosen CoreIMS© Inventory as their inventory control system because of its incredible quality and value.

More Info

The more information you have about your inventory, the less inventory you need to have. Zebra has bar code and RFID labeling solutions you can use to accurately identify inventory throughout your storage, handling, and distribution processes. Whether you want simple serial numbers or advanced identification solutions to provide customer, configuration, and traceability data, Zebra has printer, label, bar code, RFID, and software solutions to bring accuracy and visibility to your inventory control operations.

• Start by selecting the right printer and material combination for your inventory labeling needs from Zebra's unsurpassed options.
• Print and apply labels right at receiving and processing areas with wireless, mobile, and cart-mounted printers to eliminate mistakes and unidentified items.
• Prevent shipping errors by matching inventory ID labels with packing lists.
• Use Zebra's networking, connectivity, and software solutions to link inventory identification systems with enterprise applications to eliminate data latency and to gain real-time visibility and control.
• Track and protect inventory efficiently with RFID and secure media solutions.
• Give your enterprise real-time inventory visibility by linking printing operations to enterprise systems with Zebra networking and ERP integration solutions.

Effective Inventory Management

What Is Effective Inventory Management?

"Effective inventory management allows a distributor
to meet or exceed his (or her) customers' expectations
of product availability with the amount of each item
that will maximize the distributor's net profits."

Inventory is usually a distributor's largest asset. But many distributors aren't satisfied with the contribution inventory makes towards the overall success of their business:

• The wrong quantities of the wrong items are often found on warehouse shelves. Even though there maybe a lot of surplus inventory and dead stock in their warehouse(s), backorders and customer lost sales are common. The material a distributor has committed to stock isn't available when customers request it.

• Computer inventory records are not accurate. Inventory balance information in the distributor's expensive computer system does not accurately reflect what is available for sale in the warehouse.

• The return on investment is not satisfactory. The company's profits, considering its substantial investment in inventory, is far less than what could be earned if the money were invested elsewhere.

Effective Inventory Management, Inc. is dedicated to helping distributors provide outstanding customer service while maximizing the return on their inventory investment. All of our products, classroom instruction, and consulting services are designed to lead your company through the practical implementation of a successful inventory management system. Just as important, you will gain the knowledge necessary to enhance and modify your inventory system to meet your company's changing needs.

---

Who

Inventory Control

Inventory control is concerned with minimizing the total cost of inventory. In the U.K. the term often used is stock control. The three main factors in inventory control decision making process are:

• The cost of holding the stock (e.g., based on the interest rate).
• The cost of placing an order (e.g., for row material stocks) or the set-up cost of production.
• The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand.

The third element is the most difficult to measure and is often handled by establishing a "service level" policy, e. g, certain percentage of demand will be met from stock without delay.

The ABC Classification The ABC classification system is to grouping items according to annual sales volume, in an attempt to identify the small number of items that will account for most of the sales volume and that are the most important ones to control for effective inventory management.

Reorder Point: The inventory level R in which an order is placed where R = D.L, D = demand rate (demand rate period (day, week, etc), and L = lead time.

Safety Stock: Remaining inventory between the times that an order is placed and when new stock is received. If there are not enough inventories then a shortage may occur.

Safety stock is a hedge against running out of inventory. It is an extra inventory to take care on unexpected events. It is often called buffer stock. The absence of inventory is called a shortage.

Quantity Discount Model Calculation Steps:

• Compute EOQ for each quantity discount price.
• Is computed EOQ in the discount range?
• If not, use lowest cost quantity in the discount range.
• Compute Total Cost for EOQ or lowest cost quantity in discount range.
• Select quantity with the lowest Total Cost, including the cost of the items purchased.

The following This JavaScript compute the optimal values for the decision variables based on currently available information about the above factors.

Enter the needed information, and then click the Calculate button.

In entering your data to move from cell to cell in the data-matrix use the Tab key not arrow or enter keys.

References

Reference books

• Rudolf Kalman, 1960 .
• L. S. Pontryagin, 1962. The Mathematical Theory of Optimal Processes.
• Bryson, A. E., 1969. Applied Optimal Control: Optimization, Estimation, & Control.
• Kirk, D. E., 2004. Optimal Control Theory: An Introduction.
• Lebedev, L. P., and Cloud, M. J., 2003. The Calculus of Variations and Functional Analysis with Optimal Control and Applications in Mechanics. World Scientific. Especially chpt. 2.
• Lewis, F. L., and Syrmos, V. L., 19nn. Optimal Control, 2nd ed. John Wiley & Sons.
• Stengel, R. F., 1994. Optimal Control and Estimation. Dover.
• Sethi, S. P., and Thompson, G. L., 2000. Optimal Control Theory: Applications to Management Science and Economics, 2nd ed. Springer (ISBN 0-7923-8608-6)
• Sontag, Eduardo D. Mathematical Control Theory: Deterministic Finite Dimensional Systems. Second Edition. Springer. (ISBN 0-387-984895) (available free online)
• Brogan, William L. 1990. Modern Control Theory. ISBN 0135897637

Inventory Control General method

A generalization of the calculus of variations, is a mathematical optimization method for deriving control policies. The method is largely due to the work of Lev Pontryagin and his collaborators, summarized in English in Pontryagin (1962).

General method

Optimal control deals with the problem of finding a control law for a given system such that a certain optimality criterion is achieved. A control problem includes a cost functional that is a function of state and control variables. An optimal control is a set of differential equations describing the paths of the control variables that minimize the cost functional. The optimal control can be derived using Pontryagin's maximum principle (a necessary condition), or by solving the Hamilton-Jacobi-Bellman equation (a sufficient condition).

We begin with a simple example. Consider a car traveling on a straight line through a hilly road. The question is, how should the driver press the accelerator pedal in order to minimize the total traveling time? Clearly in this example, the term control law refers specifically to the way in which the driver presses the accelerator and shifts the gears. The "system" consists of both the car and the road, and the optimality criterion is the minimization of the total traveling time. Control problems usually include ancillary constraints. For example the amount of available fuel might be limited, the accelerator pedal cannot be pushed through the floor of the car, speed limits, etc.

A proper cost functional is a mathematical expression giving the traveling time as a function of the speed, geometrical considerations, and initial conditions of the system. It is often the case that the constraints are interchangeable with the cost functional.

Another optimal control problem is to find the way to drive the car so as to minimize its fuel consumption, given that it must complete a given course in a time not exceeding some amount. Yet another control problem is to minimize the total monetary cost of completing the trip, given assumed monetary prices for time and fuel.

A more abstract framework goes as follows. Given a dynamical system with time-varying input u(t), time-varying output y(t) and time-varying state x(t), define a cost functional to be minimized. The cost functional is the sum of the path costs, which usually take the form of an integral over time, and the terminal costs, which is a function only of the terminal (i.e., final) state, x(T). Thus, this cost functional typically takes the form

where T is the terminal time of the system. It is common, but not required, to have the initial (i.e., starting) time of the system be 0 as shown. The minimization of a functional of this nature is related to the minimization of action in Lagrangian mechanics, in which case L(x,u,t) is called the Lagrangian

High level inventory management

High level inventory management

It seems that around about 1880 there was a change in manufacturing practise from companies with relatively homogeneous lines of products to vertically integrated companies with unprecedented diversity in processes and products. Those companies (especially in metalworking) attempted to achieve success through economies of scale - the gains of jointly producing two or more products in one facility. The managers now needed information on the effect of product mix decisions on overall profits and therefore needed accurate product cost information. A variety of attempts to achieve this were unsuccessful due to the huge overhead of the information processing of the time. However, the burgeoning need for financial reporting after 1900 created unavoidable pressure for financial accounting of stock and the management need to cost manage products became overshadowed. In particular it was the need for audited accounts that sealed the fate of managerial cost accounting. The dominance of financial reporting accounting over management accounting remains to this day with few exceptions and the financial reporting definitions of 'cost' have distorted effective management 'cost' accounting since that time. This is particularly true of inventory.
Hence high level financial inventory has these two basic formulas which relate to the accounting period:
Cost of beginning inventory at the start of the period + inventory purchases within the period + cost of production within the period = cost of goods sold
Cost of goods - cost of ending inventory at the end of the period = cost of goods sold
The benefit of these formulae is that the first absorbs all overheads of production and raw material costs in to a value of inventory for reporting. The second formula then creates the new start point for the next period and gives a figure to be subtracted from sales price to determine some form of sales margin figure.
Manufacturing management is more interested in inventory turnover ratio or average days to sell inventory since it tells them something about relative inventory levels.
Inventory turn over ratio (also known as inventory turns) = cost of goods sold/Average Inventory=Cost of Goods Sold/((Beginning Inventory+Ending Inventory)/2)
and its inverse
Average Days to Sell Inventory=Number of Days a Year/Inventory Turn Over Ratio=365 days a year/Inventory Turn Over Ratio
This ratio estimates how many times the inventory turns over a year. This number tells us how much cash/goods are tied up waiting for the process and is a critical measure of process reliability and effectiveness. So a factory with two inventory turns has six months stock on hand which generally not a good figure (depending upon industry) whereas a factory that moves from six turns to twelve turns has probably improved effectiveness by 100%. This improvement will have some negative results in the financial reporting since the 'value' now stored in the factory as inventory is reduced.
Whilst the simplicity of these accounting measures of inventory are very useful they are in the end fraught with the danger of their own assumptions. There are in fact so many things which can vary hidden under this appearance of simplicity that a variety of 'adjusting' assumptions may be used. These include:
Specific Identification
Weighted Average Cost
Moving-Average Cost
FIFO, and LIFO.

Logistics

Logistics or distribution

The logistics chain includes the owners (wholesalers and retailers), manufacturers' agents, and transportation channels that an item passes through between initial manufacture and final purchase by a consumer. At each stage, goods belong (as assets) to the seller until the buyer accepts them. Distribution includes four components:
Manufacturers' agents: Distributors who hold and transport a consignment of finished goods for manufacturers without ever owning it. Accountants refer to manufacturers' agents' inventory as "matériel" in order to differentiate it from goods for sale.
Transportation: The movement of goods between owners, or between locations of a given owner. The seller owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but most transportation providers act as the agent of the owner of the goods.
Wholesaling: Distributors who buy goods from manufacturers and other suppliers (farmers, fishermen, etc.) for re-sale work in the wholesale industry. A wholesaler's inventory consists of all the products in its warehouse that it has purchased from manufacturers or other suppliers. A produce-wholesaler (or distributor) may buy from distributors in other parts of the world or from local farmers. Food distributors wish to sell their inventory to grocery stores, other distributors, or possibly to consumers.
Retailing: A retailer's inventory of goods for sale consists of all the products on its shelves that it has purchased from manufacturers or wholesalers. The store attempts to sell its inventory (soup, bolts, sweaters, or other goods) to consumers

Inventory examples

While accountants often discuss inventory in terms of goods for sale, organizations - manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture, supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a shop or store accessible to customers. Inventories not intended for sale to customers or to clients may be held in any premises an organization uses. Stock ties up cash and if uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to control them.
Whilst the reasons for holding stock are covered earlier, most Manufacturing organizations usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have begun their transformation to finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
Spare parts

Business

Business inventory

The reasons for keeping stock

There are three basic reasons for keeping an inventory:

Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amount of inventory to use in this "lead time"
Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods.
Economies of scale - Ideal condition of "one unit at a time at a place where 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.
All these stock reasons can apply to any owner or product stage.

Buffer stock is held in individual workstations against the possibility that the upstream workstation may be a little delayed in long setup or change-over time. This stock is then used while that change-over is happening. This stock can be eliminated by tools like SMED.
These classifications apply along the whole Supply chain not just within a facility or plant.

Where these stocks contain the same or similar items it is often the work practice to hold all these stocks mixed together before or after the sub-process to which they relate. This 'reduces' costs. Because they are mixed-up together there is no visual reminder to operators of the adjacent sub-processes or line management of the stock which is due to a particular cause and should be a particular individual's responsibility with inevitable consequences. Some plants have centralized stock holding across sub-processes which makes the situation even more acute.

Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are assembled into the purchasable item. Therefore any change in the packaging or product is a new SKU. This level of detailed specification assists in managing inventory.
Stockout means running out of the inventory of an SKU.
"New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise being offered for sale which was manufactured long ago but that has never been used. Such merchandise may not be produced any more, and the new old stock may represent the only market source of a particular item at the present time