Logistic
Management
First Assignment: Inventory Management System
Submitted by: Humayun Shahzad
Registration No.: L1S17MBAM0047
Submitted to: Sir Sarfraz Rashid
Designation: Lecturer
Date: November 6, 2019
University of Central Punjab, Lahore
UCP Busines School
Inventory Management System of Erply
Erply is an American enterprise software company focusing on point of sale and inventory management
technology. It was founded in Estonia by Kristjan Hiiemaa in 2009. Initially, Erply launched as a retail
payment solution for small to medium-sized businesses. They have since expanded to big box retailers
and offer point of sale technology, inventory control, billing, business reporting, and custom barcodes.
The ERPLY POS uses FIFO for inventory accounting, primarily because it is one of the most accurate
methods for calculating inventory cost. The FIFO principle comes into play in many of the functions
in the ERPLY system, including setting product costs, setting wholesale prices, and setting warehouse
prices.
Inventory Management System of Pepsi
PepsiCo is one of the world’s leading food and beverage companies serving more than 200 countries
and territories around the world. Pepsi is a carbonated soft drink manufactured by PepsiCo. Originally
created and developed in 1893 by Caleb Bradham and introduced as Brad's Drink, it was renamed as
Pepsi-Cola on August 28, 1898, and then renamed as Pepsi in 1961. Pepsi uses the FIFO (First in First
Out) method of inventory management to keep its product running and to avoid new products from
being expired.
Inventory Management System of McDonalds
Mcdonald uses just-in-time inventory management system. As the namesuggests, JIT (just in time)
provides the supplies for the customer in time. When a customer orders aburger, mcdonalds does not
start to cook. It reheats and assembles the burger according to theparticular order. If mcdonalds begins
to cook food when a customer places an order, mcdonalds will take time to prepare a burger. As
mcdonalds is a fast food, it cannot make a customer to waitfor a long time to get the ordered burger.
With the help of just in time inventory managementsystem, mcdonalds pre-cook a batch of hamburgers
and keep them under heat lamps. They keepthem as long as possible and eventually discard what could
not be sold. The advantage of this system is to serve a customer as fast as possible while having the
finished product sitting in the inventory as short as possible.
Which one is better for the Organization?
FIFO (First in First Out):
First in, first out systems can be beneficial in a variety of industries. Many products benefit from a first-
in, first-out (FIFO) method for storage and picking. The FIFO method is especially critical for items
such as fresh or frozen foods, beverages, drugs and other items with an expiration date, such as sterile
medical supplies, high-volume consumer goods or batteries. For items like these, a FIFO inventory
management method increases operational efficiency, makes the best use of available warehouse space,
and reduces the potential for inventory write-offs due to expirations.
LIFO (Last in First Out):
This method means that the most recent stock to come into your warehouse should be sent out first.
The new stuff is used up first, taking priority over old stock. LIFO is not a good indicator of ending
inventory value because the leftover inventory might be extremely old, perhaps obsolete, which
results in a valuation much lower than today's prices. The LIFO method results in less net income
because COGS is greater.
Waighted Average Method:
Weighted average is typically used when products are physically indistinguishable or easily
substituted, like commodities. Under the weighted average method every unit in inventory is priced
using an average of the cost of all items in inventory. Say you buy 20 barrels of oil at $100, 20 barrels
at $110, and 20 barrels at $120; your average cost is $110. Under the weighted average method when
you sell a barrel of oil you assume your cost was $110, regardless of what you actually paid for that
individual barrel.
