Logistics is an increasingly complex industry, especially due to the growing number of references to be managed, often from different origins and suppliers. Therefore, among the many functions and tasks that are carried out, inventory is essential for the logistics process to be carried out efficiently and without errors.
What is a logistics inventory?
An inventory is, in a very simplified form, a list or list of the stock in a warehouse, which facilitates the entry and exit of products, their classification and correct placement in the facilities. Who is not familiar with the phrase “closed for inventory”? Before advances in technology and the introduction of logistics programs, it consisted of reviewing the list of products in stock and seeing if they coincided with the physical stock stored, and is known as physical inventory. Today, that could be the nightmare of any logistics company, with thousands and thousands of references to check.
Fortunately, technology allows inventories to be kept up to date in an automated way, which minimizes errors, or makes them quickly detected and corrected. This prevents mismatches in SKUs or errors in order picking. Thus, proper inventory management enables the company:
- Reduce or avoid losses due to non-existent products, either due to theft or disappearance, or due to errors in the entry register.
- Reduce or avoid losses due to lack of stock rotation, especially in the case of perishable products or products with rapid obsolescence or fashion.
- Correct errors in stock, to ensure product availability for the end customer.
Proper inventory control allows us to keep it at adequate levels, i.e., to have a minimum stock that avoids stock ruptures in the event of an increase in demand, but also to avoid overstocks that produce losses and/or lack of storage space.
What types of logistics inventory are there?
Inventories can be defined under different criteria, depending on the type of product that the company distributes or stores. Today, the great advantage of having technological tools to manage inventory, such as logistics management software, is that we can have different criteria or fields of information, and have a “hybrid” inventory.
Inventory by type of product
Es el principal condicionante de un inventario, el tipo de producto o material que tengamos que gestionar o almacenar, o el punto del proceso de producción en el que estén.
1. Inventories of perishable goods
Perishable goods inventories are those products that have an expiration date. Their management is crucial to avoid economic losses and health problems. These inventories require rigorous control and precise planning to ensure that the products are consumed before their expiration date.
2. Inventories of seasonal goods
Inventories of seasonal items are those products that are in demand at specific times of the year. Managing this type of inventory is essential to anticipate seasonal demand and ensure product availability at the right time. Accurate planning and demand assessment are critical to maintaining effective stock control.
3. Work in process inventories
Work-in-process inventories refer to products that are in different stages of production, such as raw materials, components or semi-finished products. Keeping a detailed control of the production stages through this type of inventory is essential to ensure the availability of the necessary resources and to optimize manufacturing times. Efficient planning and proper coordination are key to managing these inventories.
4. Finished product inventories
Finished goods inventories encompass those products that are ready to be distributed or sold. These inventories provide a clear view of the products available for marketing, which is essential to meet delivery schedules and satisfy customer demand effectively. Thorough control and proper management of these inventories are essential to ensure the smooth functioning of the supply chain.
Inventory according to function or purpose
There are types of inventory that have less to do with the type of product itself or the point in the manufacturing process where it is located than with the function of the stock itself or its purpose.
1. Inventarios de seguridad
Safety or reserve inventories play a critical role in inventory management in a warehouse. These additional inventories are maintained to cover possible unforeseen events or variations in demand that may occur due to external or internal factors.
The purpose of this type of inventory is to act as a buffer to ensure supply and avoid stock problems. By maintaining a safety inventory, companies can be prepared for unexpected situations, such as delays in supplier deliveries, changes in demand or fluctuations in production processes.
2. Cycle inventories
Cycle inventories are those that are needed to cover the complete production or distribution cycle of a product. From the receipt of raw materials to the delivery of the final product to the customer, this type of inventory ensures that all stages of the process are covered.
Cycle inventory is essential to maintain a constant and continuous flow in the supply chain. By ensuring the availability of products at each stage, delays are avoided and the delivery times required by customers are met.
3. Anticipation inventories
Forward inventories are carried out when an increase in demand or production costs is expected. In these cases, a decision is made to stock the product in larger quantities to ensure its availability and avoid interruptions in the supply chain.
This type of inventory relies on forecasting and trend analysis to anticipate future needs. By having a forward-looking inventory, companies can meet growing demand without having to rely entirely on real-time production, which can result in significant cost and time savings.
4. Speculation inventories
Speculative inventories are conducted under special circumstances, such as changes in product prices or market conditions. In these cases, inventory is used as a strategy to speculate and obtain economic benefits.
The idea behind this type of inventory is to take advantage of market opportunities. By holding additional inventory when prices are expected to rise, for example, a company can sell its products at a higher price and make considerable profits. However, this approach also carries certain risks, as prices can fluctuate and may not always result in profits.
Inventory according to periodicity
This criterion defines how often the inventory is carried out. Depending on the sector in which the logistics company operates, its size and the type of product, it may need to carry out an inventory more or less frequently.
1. Cycle inventories
Cyclic inventories are carried out periodically following an established plan. This methodology allows for regular stock checks to detect any deviations that may have occurred. The main objective of cycle counting is to maintain accurate stock control and correct any discrepancies or inventory errors in a timely manner.
These periodic inventories allow you to identify problems such as theft, losses, errors in recording transactions or unexpected variations in the quantity of products. By performing a detailed and systematic review of the inventory at regular intervals, you can minimize the risk of errors in the inventory and ensure that it conforms to the accounting records.
2. Periodic inventories
Periodic inventories are carried out according to a predetermined schedule, allowing for a complete inventory review and count at specific times. This type of inventory is especially useful when more precise stock control is needed.
The purpose of periodic inventories is to evaluate and update information about the stock held in the warehouse. By performing regular counts, it is possible to determine the exact quantity of products on hand, identify any discrepancies with records and adjust stock control accordingly. This contributes to more efficient stock management and helps to avoid problems such as stock-outs or overstocking.
Inventory according to fiscal period
This classification is much simpler, it takes into account the time at which the inventory is taken with respect to the company’s fiscal year, and can be initial inventory (at the beginning of the accounting period and before making additions or deletions to it), or final (at the close of the fiscal year, to see the state after business operations).
1. Annual inventories and their relevance to tax and accounting compliance
Annual inventories are carried out at the end of the fiscal year and play a crucial role in fulfilling a company’s tax and accounting obligations. During this process, the exact amount of inventory and its value is determined, which provides insight into the company’s financial status. In addition, annual inventories help to evaluate profitability and identify possible deviations in stock control.
2. Quarterly inventories and their usefulness in financial follow-up
Quarterly inventories are carried out every three months and are very useful for the financial follow-up of a company. These inventories allow more frequent analysis of stock status, as well as evaluating performance and making necessary adjustments in inventory management. They also facilitate early detection of potential problems and strategic decision making to optimize logistics and stock control.
Inventory of obsolete, dead or lost inventories
This type of inventory may seem less necessary, but it is important to keep track of references that can no longer be marketed and prevent them from taking up unnecessary space in the warehouse. If the company has implemented a reverse logistics system, these references can be recycled or reused in some way.
As we have seen, physical inventory is practically a thing of the past, and it is almost impossible to do so without the support of a logistics management software or WMS.
