Inventory

Picking a Vendor

• Introduction to Suppliers

  • Importance of choosing a high-quality vendor to save time and money.

• Key Factors for Choosing a Vendor

  • Reliability:

  • Ability to deliver ordered merchandise without mistakes.

  • Responsiveness:

  • Supplier's promptness in responding to needs.

  • Agility:

  • Flexibility of the supplier to accommodate changes in orders.

  • Costs:

  • Evaluation of fair pricing along with shipping, handling, and return fees.

  • Assets:

  • Supplier practices that enhance operational efficiency.

• Getting References

  • Asking for references from established suppliers to verify quality.

• Supplier Incentives

  • Options like trade credit or technical assistance may be available.

  • Certain vendors, especially casket companies, may offer additional services if exclusive agreements are made.

  • Caution is advised:

  • Beware of overly tempting deals or restrictive contracts that may limit future options.

• Buyer's Responsibilities

  • Importance of timely payment and treating sales representatives respectfully.

  • Don'ts for Buyers:

  • Avoid ordering excess product with intentions to return most.

  • Do not pressure sales reps for unfair pricing.

  • Avoid actions that could lead to a bad reputation within the funeral service community.

Inventory Control

• Time-Sensitivity of Funerals

  • The urgency surrounding the services requires efficient inventory management.

• Definition of Inventory

  • Inventory includes goods or stock held for resale at a profit (merchandise).

• Importance of Inventory Management

  • Critical for meeting the needs of families swiftly.

  • Examples of potential issues:

  • The unavailability of essential items (e.g., register books) at crucial times.

• Challenges with Inventory Management

  • High costs associated with carrying inventory include:

  • Purchase expenses, taxes on assets, storage costs, insurance, and possible losses from theft or damage.

• Determining Inventory Levels

  • Understanding how much inventory to retain is an ongoing challenge.

  • Traditional Method: Economic Order Quantity (EOQ)

  • Definition: A formula that combines the number of items sold annually with shipping and storage costs to optimize stock levels.

  • Trade-offs:

    • Large orders reduce shipping costs but increase storage costs and liabilities.

    • Small orders increase shipping costs but reduce storage expenses.

  • Limitations of EOQ:

  • It assumes static conditions; does not adapt to changes in shipping, storage, or demand.

  • Statistical Inventory Control:

  • A more complex method accounting for variability in supply and demand to maintain accurate stock levels.

Keeping Track

• Methods of Tracking Inventory

  • Physical Inventory System:

  • Requires manual counting of stock.

  • Time-consuming and disruptive if done frequently.

  • Cycle Counting:

  • Method of counting selected items throughout the year instead of all at once.

  • Example: Count cremation urns one month and register books the next.

  • Perpetual Inventory System:

  • Real-time updates of inventory with sales transactions, similar to systems used in retail.

  • Accuracy is essential to prevent discrepancies from repeated scans of the same item.

  • Two-Bin Inventory System:

  • Basic approach where double the desired stock quantity is ordered (e.g., buy two cases of sympathy cards).

  • When one case is depleted, the second bin is used while reordering.

Review Questions

• Example of Cycle Counting:

  • Departments count inventory at different times (e.g., Housewares in March, Shoes in June, Appliances in September).

• ABC Method of Inventory Management:

  • Prioritizes inventory based on value or criticality to operations rather than just minimizing costs.

• Example of Perpetual Inventory System:

  • A point-of-sale system that updates inventory in real time with every purchased item.