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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.[link widoczny dla zalogowanych] 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. Its finished good inventory consists of all the filled and labeled cans of food in its warehouse that it has manufactured and wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers through arrangements like factory stores and outlet centers.
Examples of case studies are very revealing, and consistently show that the improvement of inventory management has two parts: the capability of the organisation to manage inventory, and the way in which it chooses to do so. For example, a company may wish to install a complex inventory system, but unless there is a good understanding of the role of inventory and its parameters, and an effective business process to support that, the system cannot bring the necessary benefits to the organisation in isolation.
Typical Inventory Management techniques include Pareto Curve ABC Classification[2] and Economic Order Quantity Management.[link widoczny dla zalogowanych] A more sophisticated method takes these two techniques further,[link widoczny dla zalogowanych], combining certain aspects of each to create The K Curve Methodology.[3] A case study of k-curve[4] benefits to one company shows a successful implementation.
Inventory proportionality is the goal of demand-driven inventory management. The primary optimal outcome is to have the same number of days' (or hours', etc.) worth of inventory on hand across all products so that the time of runout of all products would be simultaneous. In such a case, there is no "excess inventory," that is, inventory that would be left over of another product when the first product runs out. Excess inventory is sub-optimal because the money spent to obtain it could have been utilized better elsewhere, i.e.[link widoczny dla zalogowanych] to the product that just ran out.