MSG Team's other articles

11945 Why Companies Living Quarter to Quarter is Both a Good as well as a Bad Idea

Living for the Next Quarter Of late, many publicly listed companies have been living “quarter to quarter” or the practice of setting targets, tracking them for progress, and closing out sales and revenue generating items based on the next quarter which is a short term imperative rather than planning for the longer term. This has […]

11713 Understanding the Confidence Interval

The confidence interval is a central concept of hypothesis testing. Although understanding its mathematical and statistical meaning is beyond the scope of this module, one needs to have a fair idea of the concept. Hence, a brief introduction of the confidence interval that is essential for the Six Sigma project team to understand is as […]

11618 Transformation of Business Intelligence in the Age of Big Data

The Transformation of Business Intelligence from Analysis to Prediction Business Intelligence which refers to the slicing and dicing of data to mine it for clues on everything from consumer behaviour to the business strategies of rivals and competitors has come a long way since the earliest days when it was used for market intelligence to […]

12609 Can the Government be Run Like a Business?

During the election campaign in 2016, Donald Trump repeatedly stated that he planned to run the government like a business. He would use this as a unique selling point. All the previous presidents, as well as all of his competitors, were professionals like lawyers, doctors and so on. Donald Trump argues that since he was […]

11391 Rags to Riches and Back: The Story of Chinese Boom and Bust

The 1970’s The story of China’s growth began in the 1970’s. Back then China was an extremely poor country with one of the lowest per capita income in the world. The population of the country was largely agrarian. The output of food grains was so small that starving to death was a possibility in China. […]

Search with tags

  • No tags available.

While inventory classification of raw materials for Inventory Management purposes follows ABC Classification, Finished Goods inventory is classified under additional categories based on various attributes including sales volumes/patterns, functional attributes and operational requirements.

Stock Category depending upon Sales Channels

Finished Goods at the very basic level is manufactured and stocked separately depending upon the Business Units as well as the Sales Channels.

  1. A normal standard category common to most of the products is the classification of - Export SKU & Domestic SKU stocks. Along with FG Stocks exists a separate classification of spare parts and accessories under FG Inventory.

  2. Many product categories classify inventory based on Sales Channels as under:

    SKUS for Institution Sales
    SKUS for Channel Sale
    SKUS for Direct Delivery
    SKUS for Sales to Govt., Defense and NGO and other projects

    1. The basic product may be the same, but depending upon the classification they may contain additional bundling or kitting items etc.
    2. Computer Industry is a classic example, which follows the above classification in FG inventory.

  3. Automotive Components and Products are categorized into:

    1. OE Supply SKU - SKUS, which are manufactured to supply to Original Equipment Manufacturers.
    2. After Market SKU - SKUS, which are manufactured to supply to Spares Market through Dealer Network.
    3. Exports - SKUS, which are manufactured for Export out of the Country.

  4. FG Stock: Fast Moving, Slow Moving & Non Moving - FG Inventory is often categorized into Fast Moving, Slow Moving and Non Moving stocks indicating their frequency and volume of sales. This categorization is intended to serve the functional purpose of determining the sales performance of categories of Goods.

  5. Bought Out Items SKU Category: All the FG goods marketed and sold by an organization need be manufactured by themselves. They could be sourcing items from other vendors or buying items from overseas markets.

    Global companies normally have plants spread over all continents and manufacture different categories of products. In such cases a particular countries requirement of certain products may be sourced from overseas factories of the company.

    Inventory for such imported and bought out items is maintained under separate bucket to be able to identify them easily. Their valuation and costing and profit margins may be different from those of in house manufactured goods.

    Further imported Goods would have import duty and tax liabilities, which may be different from that of in house manufactured inventory.

    Example: Computers and Desktops are manufactured by Global MNCs like Dell, HP & Lenovo. They have established manufacturing facilities in various countries catering to the local and international markets. Typically they produce few of the SKUS locally and the other products are sourced from overseas facilities. They also buy monitors, keyboard and accessories from OE Suppliers. These are considered bought out items in their inventory l listing.

  6. Other functional categories of inventory: In warehouses, to facilitate operational processes as well as for ease of identification etc., inventory is categorized into many more classifications including but not limited to:

    1. Stock on Hold - Inventory that is frozen/blocked and cannot be released for sale or consumption.
    2. Scrap & Obsolete - Materials that are rejected, damaged and not usable or those that have crossed the shelf life and expiry date are categorized under scrap category.

    When a particular SKU is no longer salable due to lack of demand and has become obsolete, it gets classified under obsolete stock and continues to be valued in the books of accounts.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Companys approach to Inventory Health

MSG Team

Inventory Management Systems

MSG Team

Why and When to avoid Holding Inventories

MSG Team