Inventory_Summary

Inventory Systems Summary Jana LeBeau, Mike McDonald, Diane Mendes, Erica Richardson, and Connor Shaw QRB501 May 9, 2011 Paul Hermis Inventory Systems Summary There are a variety of different inventory systems.  The main systems are manual count, radio frequency identification system (RFID), universal product code system (UPC), and newer models to include internet software.  Choosing an inventory system is based on the type of business that one is running. It is crucial to select a system that works the best for the type of business, which would be using the system.  By looking at the different systems a company can decide what will work best for their specific needs. To make an informed decision, a comparison of the different systems should be undertaken.  Below are the different types of systems and the advantages and disadvantages of each. Manual entry system. The first system we looked at was the manual entry system. A system, which falls into this category, would be the inventory system. According to Bragg (2011) the inventory system is a windows based and networkable system and is usually compatible with accounting software such as Quickbooks and programs such as Excel. This type of system is used to track and manage inventory, purchasing, manufacturing, packing and shipping, sales of products, and statistical data.  The system is used for inventory control as well as the other items mentioned, which some companies like to keep track of depending on the type of company. The inventory control portion of this system keeps and filters a master list of items as well as the details of each unit.  the system can track inventory at multiple warehouse locations and can act as a movement log (moving the inventory item from one warehouse to another or a warehouse to a point of  sale location). The system can be used using serial numbers, lot numbers or the bar code system.  The inventory can be categorized as well as accounting whether or not the items are in stock, on hold, committed or on order.  The company is able to generate reports and export as PDFs, word or excel files or email the reports directly. This type of inventory system could also be used alongside a universal product code system (UPC) or even a radio frequency identification system (RFID) depending on what the initial system is used for. If it is used for actual physical inventory then it can be bar coded or radio frequenced and linked to a software program such as Quickbooks, but if it is used for historical data the information would have to be manually entered and then exported to excel to generate a report unless a report feature has been written into the program thus allowing the program to generate an excel based report. UPC system. The UPC system was created to assist retailers, manufacturers, and shipping companies in keeping track of sales, inventory, increase checkout processing, and tracking packages. The UPC originated from the Uniform Code Council (UCC), which allowed manufacturer access to the UPC system. The UCC issues the manufacturer a six digit number identification number with directions included on how to use the system. The ID number first six digits is the UPC code and the last five digits is the specific item number. Each item has its own number for identification purposes so that the sale of the item can be recorded on how many has been sold at a given time as well as determine how much is left in inventory (electronics.howstuffworks.com). The last digit is he check digit, which assist the scanner or infrared device in determining if the scanned number is correct or not. If the number is incorrect, the system will flag the item so that the user will know to research and provide the correct number. The scanner is valuable in reference to encountering incorrect pricing issues, lack of stock, and product identification methods. Companies such as the airlines, United Parcel Services, grocery stores, retail stores, manufacturing, and energy plants use the UPC method to regulate their cost, measure the cost of product use, and in determining how much product is needed in a given season to ensure that the company can meet the demands of the consumer. Although there are some companies that choose to use other methods of maintaining inventory and cost, the UPC system has been proven to be the most cost-effective in regulating inventory control and manpower. Inventory management program. The system H&R Block uses is an Inventory Management Program called an Inventory Management System (IMS). This is an Internet based program that gives access to managers through the World Wide Web. One needs to be an authorized user, and at the beginning of the program start-up all parts, products, and customers must be manually entered. IMS uses Electronic Data Interchange Software (EDI). This allows information to be exchanged electronically between businesses, government, and within a company. For example, the system is linked to the IRS, so when a tax return is complete it can be submitted straight to the government. The system tracks each customer by location, how many customers return each year and which ones, price of the return, complexity of the return, office supplies, and gives up- to-the-minute statistical information on how you are doing as an employee, by counting how many customers one had last year compared to how many one had this year. H&R Block has physical inventory, but their main focus is their customer base, so customers are their main inventory. This program will keep data from all customers and helps the company track trends, client-billing profiles, and has the ability to forecast recurring revenue by cycle and by customer. This helps the company sort data to see what needs to be changed in the following year to keep clients, get new clients, and get back clients the company has lost. Surveys are given to customers and the data is added to the program. This will track customer satisfaction and forecast what needs to be done differently in the future. The program tracks by office ID, and employee ID to show how many customers one has completed, the start to finish conversion rate, goals, and if goals have met or exceeded. When data is combined with the rest of the company the inventory would be complete. RFID system. The Radio Frequency ID (RFID) System is the latest in inventory control systems. They allow for use with a variety of items. According to the Association for Automobile Identification and Mobility, “Radio frequency identification (RFID) is a generic term that is used to describe a system that transmits the identity (in the form of a unique serial number) of an object or person wirelessly, using radio waves. It's grouped under the broad category of automatic identification technologies” (Association for Automobile Identification and Mobility, 2011). Perpetual inventory system. The system titled the “Perpetual Inventory System, which is an inventory system that keeps continual track of any and all additions or deletions in materials, work-in-progress and cost of goods sold on a day-to-day basis” (Charles Atkinson, 2005). The specific method of counting is demand driven such as the demand of each student studying at the University of Phoenix in the Summer and Winter months over a four year period. Instead of counting the items leaving the inventory, this specific type of inventory will be tracking the attendance of students at the University of Phoenix in any given month over a four year period. In using the Perpetual Inventory System, the demand of new students attending UoP is entered once upon attendance and updated with new applicants each month and as graduates become Alumni. Advantages and disadvantages. The advantage to the manual entry system is that it is easy to use and is compatible with accounting software, which allows for generated reports as well as excel based reports for those who are not using accounting software programs. The system is good for both statistical data as well as physical inventory data. A plus to this type of system is that it can be combined with the UPC or RFID to help to inventory and keep track of inventory type items on a daily basis whether or not the inventory is in a warehouse, office building or retail store. A disadvantage would be the initial time it would take to enter in all the initial data to begin tracking. Also, unless the system is designed to automatically update the information initially entered, one would have to update the information or inventory physically. If using with accounting software the system information should technically update automatically but if one is using the system for statistical purposes then the information must be updated by hand. The pros to using the UPC system are that it provides the highest level of data collection application and prevents costly errors inventory, products scanned into the system lessens the possibilities of key punch errors, and it provides prices and adjustments to the inventory with the given ability to generate a purchase order to replenish inventory automatically (Jason Norman, 2006). The UPC scanners have assisted Smart companies to attain goals in unprecedented efficiency and profitability because of their ability to exhibit better marketing strategies and inventory management. Keeping accurate records in usage of products and tracking items allows the organization to be able continual assess their usage practices, flow of delivery, reduce cost, and address manpower needs. The cons to using this system is that if the proper information is not input into the system, the calculation will be accurate, which would lead to a loss of business and  higher operating expenses. If the proper information such as the item product number, number of products on hand, forecasting measurements, and delivery time and methods are not properly entered the system, the system will only calculate the data entered, which can cause the inventory count to be incorrect and lead to shortages or overages in inventory and lack of manpower and resources needed to ensure operations running smoothly. Flaws in the operation method will lead to financial pitfalls and unsatisfied customers that could jeopardize the organization’s ability to be competitive in their market. Although the scanner operation is efficient, the UPC scanner is still subject to technical malfunctions that can also manipulate the date within the system. Just like any other technical device, the UPC scanner has to be updated to meet the growing demands of technological advances in a growing market. Inventory management systems (IMS) provides a variety of inventory reports, it can be upgraded with new options, and it can be customized to the business. IMS provides real time data using the Internet to share information over offices, districts, regions, and countries. The program allows one to set up a cycle count program where it will count certain items monthly, quarterly, and annually. Using electronic data interchange (EDI) software, increases efficiency, and has cost savings by going paperless. When using this program the data can be exchanged between locations anywhere in the world within minutes. IMS is expensive and a large investment of the company’s money is required. This system is not for a small to medium sized business because it is unaffordable. A company must also invest in training employees on the new system. Accuracy could become a problem if the beginning data entry is done incorrectly. This could become time consuming when trying to find inaccuracies in a large global corporation. The servers or computers could malfunction and cause time consuming delays. Technical support is another ongoing fee charged to the company. This technology has many advantages over other comparable systems. The system that RFID is frequently compared to is the bar code. The RFID tag is a durable transmitter that is affixed to a single piece of merchandise or an entire pallet. Bar-codes come in a one or two dimensional variety. The RFID tag does not require a direct line of sight to read the information. All of the RFID tag on a single pallet of merchandise can be read in one read operation. This also is indicative of a pallet of mixed items where each RFID is associated with a different product. A bar-code system uses a line-of-sight system for scanning. Each barcode must be scanned and interpreted individually to be effective. The bar-code system cannot read an entire pallet of merchandise let alone a pallet of mixed products. There are two flavors of RFID tags a read only version and a read and write version. The read-only version is more cost effective then the read and write version. The bar-code also comes in many different flavors. The RFID system also come with a few disadvantages or drawbacks to it technical advantage over bar-codes. The major factor in the disadvantages of RFID tags is the cost. The RFID tags and the related equipment are expensive to purchase and maintain. The bar-codes are printed once on an items and it lasts as long as it is not destroyed. The RFID system can read an entire pallet of merchandise of information in one operation. This advantage is also a major disadvantage if one wants to selectively target a single piece of merchandise. A bar-code reader can select a single box on a pallet and read that single item only if that item can be visually acquired. Another disadvantage of an RFID system is the technology lacks an official standard. The lack of an official standard on RFID means that each vendor can separately develop their own proprietary standard. Separate proprietary standards means the equipment is not compatible with other vendors. The means that RFID tags from vendor X cannot be read by RFID readers by vendor Y. The vast majority of bar-codes have established standards that govern their use. To compare the inventory systems the Perpetual Inventory system is good for counting the number of students attending the University of Phoenix in the summer and winter sessions over a four year period as it keeps a running inventory updated monthly. Attached to this paper is the actual data from the winter and summer sessions at the University of Phoenix over a four year period according to myresources.phoenix.edu, (2011). Conclusion Many different types of inventory systems exist. Each company should evaluated the needs for an inventory system and review the different types to determine the best one for the company. UPC and RFID are upcoming technologies which comparatively are in infancy compared to others inventory systems. They too will go through the same growing pains that the others have had and resolved. Once the technology community get together and develop a comprehensive standard, RFID will grow and become the norm even more so than UPC. Manual inventory systems will still continue due to different data, which must be entered into a computer manually. Reference Atkinson, Charles. Different Inventory Systems. 2005. Retrieved from http://inventorymanagementreview.org/2005/10/different_inven.htm Bragg, S. (May 2011). How to create an inventory system. Retrieved from http://www.inventory-system.com/ Datex. (2010). Electronic Data Interchange: EDI Software Solution. Retrieved from https://www.datexcorp.com/solutions/EDIsolution.html Drive Your Success. (May 2011). Small Business Inventory Management: You’re your Inventory Moving!. Retrieved from http://driveyoursuccess.typepad.com EDABOARD. (2008). RFID Advantage and disadvantage. Retrieved from http://forum.rficdesign.com/YaBB.pl'num=1228841512/8 H&R Block. (2011). MyBlock for the Tax Office. Retrieved from https://taxoffice.myblock.hrblock.com/pps/tibco/mbo/Pages/Performance/Reports/DAR/MyDAR. Spotlight on: RFID. (2011). Association for Automatic Identification and Mobility. Retrieved from http://www.aimglobal.org/technologies/RFID/what_is_rfid.asp UsingRFID.com. (2008). RFID's advantages & disadvantages explained. Retrieved from http://www.usingrfid.com/news/read.asp'lc=s44325nx1433zg University of _Phoenix_Material_winterhistorical_inventorydata.doc 2011. Retrieved from http://myresource.phoenix.edu University of _Phoenix_Material_winter_historicalinventory_data.doc 2011. Retrieved from http://myresource.phoenix.edu.