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Inventory management or
control refers to the management of idle resources which
have future economc value. Alternatively, Inventory may be
defined as usable but idle resources that have eonomic value. |
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Inventory management is one important
aspect of the total management of an enterprise. It is
ultimately the responsibility of the top management to achieve
trade offs among marketing, finance, production and other
functions so as to obtain, as far as possible, an optimized and
relatively balanced trade off so as to maximize the overall
performance of the enterprise.
This has to be not only in the short-run but also
keeping the long run interests
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of the Company in view.
Inventory Management refers to maintaining , for a
given financial investment, an adequate supply of something to
meet an expected demand pattern.
It thus deals with determination of
optimal |
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policies and procedures for procurement.
In business management, inventory consists of a
list of goods and materials held or available in stock.
Management of inventory or Inventory management is all
about handling functions related to the tracking and management
of material. Inventory management is very important in
the case of Production Oriented Enterprises. However, it is also
relevant for the Service Sector. In India, the emphasis in the
early years was on production and on acquiring the skills and
capability to manufacture a host of items required to meet the
vast need of the country which had just achieved independence
and had embarked on a program of industrialization. Therefore,
attention got focused on marketing and on profitability.
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However, now there is a gradual appreciation of the need to keep
our enterprises profitable. R&D, Corporate Planning,
Productivity, etc., are tightly getting their due importance.
In simple terms, productivity is the positive relationship
of output viz-a-viz inputs. Inventory management can be
considered an important facet of output & input management.
This includes the monitoring of material moved into and out of
stockroom locations and reconciling |
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the inventory balances, setting targets, providing
replenishment techniques, reporting actual and projected
inventory status.
The task of ABC analysis, lot tracking, cycle
counting support etc. can even be a part of inventory
management. |
Inventory control is concerned with minimizing the total
cost of inventory. The three main factors in inventory control
decision making process are:
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The third element is the most difficult to measure
and is often handled by establishing a "service level"
policy, e. g, certain percentage of demand will be met from
stock without delay.
Terminology used in Inventory management / control :
Maximum Limit : When devising a suitable
Inventory model ,the Maximum limit establishes the upper
limit to which the stock of an inventory item shall be
allowed.
Minimum Limit : It is the lower limit to which
the stock can be allowed to fall in course of replenishment
of the stock of an item. Normally, this is taken to be the
safety stock also.
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Safety Stock : This is the stock that is
maintained to counter the variation in demand of an item
during the replenishment lead time.
Demand or Usage: Replenishment of stock and
usage of an item is an ongoing phenomenon in inventory
control. Demand thus is the rate of usage of an item. Over a
period of time demand is considered to be stable. However ,
demand can be seasonal or cyclical in nature depending upon
an item's nature. |
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