Due to high costs involved in inventories, proper
management and control is considerably vital and the action is always
synonymous with material management. Due to the high costs involved in stocking
of inventory, a proper management and control is vital and inventory management
is in fact, synonymous with material management.
Inventory management (IM) involves the development and
administration of policies, systems, and procedures for minimising the total
costs. IM also helps in decision making on all related issues such as customer
service requirements, production schedule and purchasing. IM stresses on
decision making and the need for integrated information flow. Following are the
factors which influence inventory management and control.
· Type of product.
· Type of manufacture.
· The volume of production.
Maintaining an optimum level of investment is the most
important objective of inventory control. Based on the requirements,
organisations use from simple to highly specialised mathematical models of
inventory control.
A simple approach to inventory control typically involves
reviewing of stock by the purchaser in order to check what inventory items are
in short supply. Once the check is done, the purchaser places the order when
he/she thinks a minimum level has been reached or when the inventory of a
particular item is exhausted. Excessive purchasing costs, carrying costs, and
the probability of stock out are the disadvantages.
The disadvantages of the simple method can be overcome by drawing a
re-order line in the storage area. This clearly indicates when an order needs
to be placed. The line needs to be high enough to cover normal usage till the
stock arrives. You could also have a two bin system, such that an order is
placed when the contents of the working bin are finished. Perpetual inventory
system can also be used as an inventory control
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