LASCBI stands for Latin America Supply Chain Management. Inventory is the heart of Supply Chain Management and will explain their importance in due course. Inventory balances can be calculates using the same logic that can be applied to calculating a bank account. In this
case, Product ID may be used in place of the account. Sometimes, when
location is important, a combination of Product ID and Country ID may
serve as the account.
In many systems, historical inventory balances may not be stored in the
database. In these situations, all we are given is the current on-hand balance
and the table with all inventory transactions. When needed, historical
inventory balances can be created using a similar approach.
A very similar logic can be used to calculate inventory aging. When inventory
is managed in lots, each lot is recorded with its own manufacturing
date. In this case, calculating inventory age is rather simple. Conversely,
when lots are not managed and different batches of inventory are
co-mingled, calculating the estimated age requires certain initial
assumptions and a very particular logic.
The assumption we have to use is that the older inventory is consumed
before the newer inventory. This principle is called first in, first out (FIFO).
Using the FIFO principle, we will assume that the inventory on the warehouse
shelf was supplied in the most recent batch(es) that were received by
the warehouse.
The calculation logic begins with the current balance as the starting point.
Then, the program needs to read all the goods receiving transactions, starting
from the most recent transaction, and moving back in time toward
earlier transactions. For each transaction, the running balance needs to
be depleted by the transaction Quantity and the corresponding part of the
current balance becomes aged.
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