The difference between in-process inventory, safety stock inventory, and seasonal inventory - Assignment Example

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The accounting department uses the concept to account for the value of the in-process inventories just in the same manner it does for the raw…
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The difference between in-process inventory, safety stock inventory, and seasonal inventory
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Inventories In-process inventory refers to the work that has started production at the manufacturing firm, but yet to reach thecompletion stages. The accounting department uses the concept to account for the value of the in-process inventories just in the same manner it does for the raw materials, as well as, finished products (Saxena, 2003). The estimation of the inventory of goods in the process of production between the stocking points is possible through the application of the standard turnover rates to budgeted production (Jacobs & Chase, 2013). An example of the in-process inventory is a raw metal in the hardware store. The production of the raw metal involves a mix of raw materials.
The safety stock inventory refers to the stock that a firm holds to guard against lead-time, uncertainty in demand, and supply. Safety stock is a significant factor that determines the balance between the inventory investment and the service to the customers (Dear, 2009). The high stock safety indicates excellent service and investment in the inventory (Saxena, 2003). A company can reduce the in-house safety stock levels by shrinking the delivery lead times assigned to the suppliers. An example in hardware store involves keeping some packets of cement in anticipation of the demand that may exceed the forecasts. In case of the cement shortage, the hardware store will respond to the uncertainty in demand.
Seasonal inventory encompasses products that have demand in particular seasons. The products do not have consistent and stable demand. The firms should strategize how to purchase and manage the seasonal inventory effectively in anticipation of demand (Dear, 2009). The management is significant in order to offset the temporary seasonal demand of the products. In the hardware store, the Christmas cards are seasonal inventory. The hardware store should ensure it has enough Christmas cards to satisfy demand in December.
Dear, A. (2009). Inventory management demystified. London: Chapman and Hall.
Jacobs, R., & Chase, R. (2013). Operations and Supply Management the core, 3rd Edition. New York: McGraw Hill.
Saxena, J. P. (2003). Warehouse management and inventory control. New Delhi: Vikas Pub. House. Read More
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