Inventories of Finished Products: What it is and How it is Managed

For any company, one of its most precious and valuable assets is its inventories. The amount of tangible assets you own and the crucial function are vital to achieving your business goals.

Their role is essential for a company to obtain benefits and profits from its production or its reason for being. That is why it is also great importance the need to know what assets are owned. Also, permanently, what is their type, where are they located and what is their monetary value.

Even this need to register all assets of the company according to their condition and usefulness goes even further than a simple list with their information, the company must monitor and maintain these goods under surveillance to avoid losses, as well as to keep them in safe places where they do not lose their physical condition, are damaged by storage, are lost or situations Similar.

What is a Finished Goods Inventory?

It is evident that in a company, a factory to be more specific, usually uses different goods to make its final product; When starting the production line, it requires raw material, which will be transformed with mechanical or physical means to obtain its Final product, which when finished, can be stored to be used for distribution and sale.

It is when the products are properly stored, that they no longer need to go through a production line, and that they can be sold, that we can speak of a finished product inventory.

This is nothing other than the proper storage, in safe conditions, of the products intended for sale, that is, those that have already transformed the raw material into the final product.

As an example, there is the case of a bakery, its raw material is the ingredients to prepare its bread production: flour, salt, eggs, yeast, butter and Any other that is used in its preparation and presentation with which it will be delivered to the final consumer, in this case all the people who go to the bakery to buy bread.

Seen on this smaller scale, the baker removes the ingredients that he needs to prepare his product, from the raw material inventory And, after transforming them into a baked dough, he stores them in his inventory of finished products.

These breads have already completed the stages of the production process, they have already left the production line and are already part of the inventory of finished products; but the baker must always know and verify how much product he made, how much he sold and how much is still stored and suitable for sale.

Finished Goods Inventory Functions

As has already been inferred, it is essential to keep an adequate inventory control of the finished products of any company, since otherwise, they could not fulfill their function of:

• Quickly know with how many goods or products you can meet the order of a client, or several of them.
• Know the amount of finished products that the company has in a given amount, what items it is about, their amount, their location, their date of manufacture and its exact location, among a lot of additional information, for example size, weight, colors and many other similar
• Guarantee the prompt attention of the orders placed by your clients.
• Streamlines the dispatch and distribution process of your merchandise.
• It allows the adequate, and necessary, inventory turnover, thereby minimizing obsolescence, the decomposition of perishable products, or the loss of products, either due to theft or by the attack of insect or rodent pests.
• It allows to maintain a good business image, fulfilled with its clientele.

Administration and Control of the Inventory of Finished Products

To achieve proper management, it is very important to maintain good inventory management and control. It is especially important to have that of the finished products, given the great value they have. It is not only about the raw material used in its production, the labor used for its manufacture and the time it took for it is also considered part of its cost.

It is thus an inadequate administration and management of this type of inventory, can cause losses, in some cases these can be as large, which may well compromise the operation of the company and its permanence in the market.

Inadequate inventory management of finished products is evidenced by:

• Loss of items.
• Occupying all storage leads to the stoppage of production, which generates losses and additional costs.
• A minimum inventory can cause the loss of business opportunities by not being able to make an adequate supply in the market.

Importance of Finished Goods Inventory

The inventory of finished products is important since the adequacy of its control can generate:

• Large profits or bankruptcy of the business.
• Attract new customers, keep current ones, or cause rejection from many.
• It allows you to make a profit.
• Encourage planning.
• Balance the sales and production units.
• It allows to meet unexpected demands of the product.
• Strengthens the company by preparing it for any contingency in the market.
• It allows estimating the demand.
• It will favor the growth and permanence of the company in the market.