This should be done to verify that actual production and the production records show the same quantitates. It is essential to take into consideration scrap, batch tracking, byproducts, and production statistics in the process of manufacturing. This can be easily fixed, as you can make the requisite adjustments once production is completed. So here, you will get a negative inventory. You make a sales order for the product, even though inventory shows zero. You are expecting a fresh batch of the product to complete production and be rolled out from the floor to your warehouse soon, and hence you open a backorder for the product. Let’s say that a customer places an order for product A. Timing is quite likely to be the most common reason for the occurrence of negative inventory. Let us look in some detail at the reasons for negative inventory: Reasons for Negative Inventory 1. Timing, warehouse location, unclear invoices, multiple warehouses, erroneous recording – and more.ĪLSO READ: ERP Software to Enhance your Purchase Management There are many factors that can cause negative inventory – these factors may not only differ from industry to industry but also from company to company in the same industry. Of course, it’s not impossible to fix this problem – and unfortunately, this gives many companies the excuse to overlook the messy method or system of inventory management however, it is always better to be proactive and ensure that you don’t find yourself in this situation in the first place. It shows up like this in your system because you have a poor system to manage your inventory. Obviously, you cannot actually, in physical terms, have less than zero of an item. Without a proper system to record the inventory of each item, you may get stocked out and production may be hampered, leading to delayed deliveries and dissatisfied customers.Īnother huge problem you may face without a proper system for managing your inventory is negative inventory.ĪLSO READ: ERP software in Warehouse & Fixed Asset Management What Do We Mean by Negative Inventory?Īs the name suggests, the term negative inventory means having less than zero stock of that particular item. With real-time information about your inventory, you will be able to ensure smooth and uninterrupted production and on-time delivery of products to your customers. It goes without saying that proper inventory management is crucial for a business – ensuring adequate stocks of raw materials, accessories, equipment, and finished products, and keeping accurate records of your inventory. What is Negative Inventory and How Can you Prevent it?
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