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Basics of Inventory Management
Basics of Inventory Management

Stock tracking, optimize levels with real-time updates, and understand reorder points for efficient production and purchasing decisions.

Dayvid Lorbiecke avatar
Written by Dayvid Lorbiecke
Updated over a week ago

This article's goal is to help you better understand the principles of Inventory management in Katana by explaining stock movements related to sales, making, and purchasing.

Tip for costing principles

Check out understanding moving average cost to better comprehend costing principles in Katana.

Using Katana, you can manage both finished product and raw material stock.

Stock movements in Katana are automated in real-time based on purchasing, making, and selling activities. This means you don't need to update stock levels manually to rely on your inventory levels.

Within Katana, you’ll find the optimal inventory levels for all your products and materials and using this info, you can make accurate manufacturing and purchasing decisions to avoid out-of-stock or excess inventory situations.

Katana’s calculation for optimal stock balance does more than look at your current and safety stock levels, it also examines your open Sales, Purchasing, Outsourced purchasing and Manufacturing orders that have reserved items or will add future stock items.

The Inventory list

Access your Inventory tab from the Stock screen to find a column containing the stock levels for all your products and materials on a variant level. You can also look at the Value in stock and Average cost columns to gain more insight into your inventory.

This screen also contains 5 other columns with helpful stock quantity info:

  • In stock - the amount of stock you currently have on hand. Products are added to stock when a Manufacturing order (MO) is completed or an Outsourced purchase order (OPO) is received. Products are removed when a Sales order (SO) is delivered. Materials are added when a Purchase order (PO) is received and removed when a MO or OPO (with materials included in the Product recipes / BOMs) is completed. In stock levels can also be changed through a Stock adjustment.

  • Committed - the amount of stock dedicated to an open SO, MO or OPO. Products are committed to an open SO, and materials are committed to open Sales, Manufacturing, and Outsourced purchase orders.

  • Expected - the amount of stock expected to arrive in the warehouse. Products are expected from an open MO or OPO, and materials from an open PO.

  • Reorder point - the product or material inventory level that indicates when to replenish stock. This number can be edited directly on the Stock screen. Learn more about Reorder points, how to set a Reorder point, and how to determine the appropriate level for a Reorder point.

  • Missing / Excess – indicates the optimal quantity of an item based on your product manufacturing and material purchasing decisions. The number shown is based on the following equation [In stock - Committed + Expected - Reorder point]. If the value is negative, create a MO or OPO for a product or a PO for a material.

Always pay attention to the Missing / Excess column to ensure you have enough products and materials in your warehouse to satisfy customer demand and meet manufacturing needs. Sort by the Missing / Excess column to quickly see which items have the lowest stock levels (according to the optimal level calculation).

Try to avoid keeping too much surplus inventory to dissipate unnecessary extra costs.

Reorder Points

Inside Katana you can set Reorder points for all of your products and materials.

We suggest setting a Reorder point for each product if you’re using a Make-to-Stock approach and keeping some products in stock. As Katana doesn’t have a sales forecasting functionality that automatically sets Reorder points, you'll need to manually create and edit each product and variant. If you're using a Make-to-Order approach, leave the Reorder points for products at zero.

We suggest adding Reorder points to materials for both approaches to satisfy manufacturing needs. For safety, most businesses will keep some stock levels for materials even when products are solely Make-to-Order. Just like products, Reorder points for materials need to be set manually.

Instead of only comparing In stock and Reorder point quantities, you should base your product manufacturing and material purchasing decisions on the Missing / Excess quantity from the Inventory tab. The Missing / Excess figure is more accurate as it takes into account open Sales, Manufacturing, and Purchase orders - following your current sales and manufacturing plan.

Detailed Inventory Info

Click on the In stock, Committed, and Expected quantities to see more info about your inventory. For example, the last 365 days of stock movements (making it easy to track the reasons behind Average cost changes), orders related to specific quantities, and other relevant info.

Clicking on the In stock quantity for an item opens up a historical stock movement report with quantities and costs related to each change over the last 365 days. It makes it easy to track the reasons for changes to Average cost or the quantity for each item.

Your feedback is invaluable. Let us know your thoughts on this article or anything in Katana you'd like to see improved: [email protected]

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