Classification of inventories: by forms and by functions

Can be common (shared) functions performed, but – various levels of control. Some inventory – fixed and non-controlling, while other – possible to control (in perspective – all controlled).

According to basic logistic activities

1. Production inventories – material resources and goods-in-process, intended mainly for internal consumption to ensure an ongoing prod-n process;

2. Stocks in provision (at suppliers facilities), on the way from a supplier till a storehouse of a producer;

3. Stocks of goods (товарные запасы), ready products, allocated at storage facilities (distributors) awaiting for sale;

4. Aggregated material stocks. Subject for logistic optimization from the point of total costs.

Prod-n inventories (functions):

1. Current inventories. Created as a result of misfit between volumes of supply and one-time consumption; main part of prod-n inventory, called to satisfy continuous prod-n process.

2. Seasonal stocks. Associated with a seasonal demand variation, prod-n nature (agriculture), transportation means, etc.

3. Risk stocks (reserves - RS). RS = Costs of maintenance – costs of inventory absence. Another type – advance purchase if price changes (increase) anticipating. Choice: extra maintenance costs vs. costs of purchase with higher price taken.

4. Stocks created if future events are well defined and anticipated (difference from RS). Ex.: shortage of a product, future price increase has been declared – no need for associated risk evaluation. Restrictions – shortage of turnover capital.

5. Autonomy reserves (автономные запасы). Majority of contracts stipulate the requirement to a supplier to keep a certain level of ready products in reserves. This enables a short-term planning flexibility, and independence of contracting sides. The ability highly evaluated by management.

6. Non-liquid stocks (poor quality, discrepancy of logistic cycles with product life-time).

Placement in logistic chain (forms):

1. Raw material and packaging;

2. Intermediate product (goods-in-process);

3. Ready product;

4. Service goods (repair and maintenance), especially valid for agriculture;

5. Goods for re-sale

Recycling stocks might be significant as well.

Can be other classifications.

2. Warehouses, their types and functions

Why to store? – see “reasons of creating inventories”. Also – necessity for concentration of material reserves within some points of logistic chain. Therefore - warehouse – integrated part of a logistic chain, which creates both value and costs.

The goal: transformation of parameters of material flows for their further effective utilization.

Logistic process (at a storehouse) includes:

1. Loading – unloading; 2. Purchasing; 3. Controls of purchasing; 4. Post and allocation of material resources; 5. Internal transportation; 6. Information services; 7. Expeditions; 8. Collecting and delivery of package (containers, pallets, etc); 9. Completion (assembling into lots) clients orders; 10. Other services.

Basically, the storehouses are not considered as creating added value, or producing extra (new) material values. Choice for an enterprise: comparison of practicality of services provided with their costs.

Goods at a store place, consequences: 1. Capital invested, but temporally “frozen”; 2. Extra costs of store itself; 3. Quality issues (depends on the product).

The services under different market conditions might be both useful (practical) and (or) costly.

Warehouses (storehouses): buildings and different devices designed to accept, allocate and store the merchandise, providing additional services when needed and forwarding to the following consumer.

The types, depending on:

Nature of products:

Storehouses of ready products; packages; raw materials, goods-in-process; waste materials; etc.

Logistic intermediaries:

Own warehouses of prod-n enterprises; storehouses of distributors, transport firms, cargo transforming, expeditors, etc.

Product specialization:

Highly specialized (one or a few product positions); bounded specialization; broad specialization.

Can be also by: forms of ownership, availability of roads (railways) nearby, technical possibilities, etc.

The functions:

Warehousing and storage; provision of services; consolidation and breaking cargoes into smaller units; transformation of production assortment into consumption one; etc.

Essential points, under the function of: