Inventory Management:-
Inventories represent a
substantial amount of firm’s current assets. Proper management of Inventory is
necessary so that this investment does not become too large, as it would result
in blocking capital which could be used in productive aspect in some where
else.
Inventory Management covers efficient management
of inventories in all its aspects including Inventory planning and programming,
Purchasing, Inventory Control, receiving, ware Housing and Store keeping,
Inventories handling and Disposal of scrap.
Definition:
“Inventory management
is concern with the determination of optimum level of investment for each
components of inventory and effective use of components and the operation of
components and the operation of an effective control and review of mechanism.
The main objectives of inventory management are operational and financial.”
In this context of
Inventory Management the firm is faced with the problem of meeting two
conflicting needs.
- To maintain a large size of inventory for efficient and smooth production and sales operations.
- To maintain a minimum investment in inventories to maximize profitability.
The aim of Inventory management, thus, is to
avoid excessive and inadequate levels of inventories and to maintain sufficient
inventory for the smooth production and sales operations.
An effective
inventory management should
- Ensure continuous supply of materials to facilitate uninterrupted production.
- Maintain sufficient stocks of raw materials in periods of short supply and anticipate price changes.
- Maintain sufficient finished goods inventory for smooth sales operations, and efficient customer services.
- Minimize the earnings cost and time.
- Control investment in inventories and keep it at an optimum level.
