Inventory control / it’s advantages
Inventory or Stock Control
According to Gordon Carson “Inventory control is the process where by the investment in materials and parts carried in stocks is regulated, within pre-determined limits set in accordance with the inventory policy established by the management.”
Inventory control or stock control can be broadly defined as “the activity of checking a shop’s stock. “However, a more focused definition takes into account the more science-based, methodical practice of not only verifying a business’ inventory but also focusing on the many related facets of inventory management (such as forecasting future demand) “within an organisation to meet the demand placed upon that business economically”. Other facets of inventory control include supply chain management, production control, financial flexibility, and customer satisfaction. At the root of inventory control, however, is the inventory control problem, which involves determining when to order, how much to order, and the logistics (where) of those decisions.
Advantages of Inventory Control:
Scientific inventory control provides the following benefits:
1. It improves the liquidity position of the firm by reducing unnecessary tying up of capital in excess inventories.
2. It ensures smooth production operations by maintaining reasonable stocks of materials.
3. It facilitates regular and timely supply to customers through adequate stocks of finished products.
4. It protects the firm against variations in raw materials delivery time.
5. It facilitates production scheduling, avoids shortage of materials and duplicate ordering.
6. It helps to minimize loss by obsolescence, deterioration, damage, etc. 7. It enables the firms to take advantage of price fluctuations through economic lot buying when prices are low.
Limitations of Inventory Control:
(i) Efficient inventory control methods can reduce but cannot eliminatebusiness risk.
(ii) The objectives of better sales through improved service to customer; reduction in inventories to reduce size of investment and reducing cost of production by smoother production operations are conflicting with each other.
(iii) The control of inventories is complex because of the many functions it performs. It should be viewed as shared responsibilities.
