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Inventory Control

Inventory control is the system devised and adopted for controlling investment in inventory. The investment in inventory is high in most of the undertakings engaged in manufacturing, whole sale and retail trade. The amount of investment is sometimes more in inventory than in other assets.. It involves inventory planning and decision making with regard to the quality and time of purchase, fixation of stock levels, maintenance of stores record and continuo’s stock-taking.

The game of inventory management aims to attain a healthy balance between cost of inventory and cost of not giving it (cost of stock out). The main objectives of inventory control are operational and financial. TH operational objectives mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objection means that investment in inventories should not remain idle and minimum working capital should be locked in it. The following are the objectives:-

(a)    To ensure continuous supply of materials, spares and finished goods so that production should not suffer at any time and the customers demand should also be met.
(b)    To avoid both over-stocking and under-stocking of inventory.
(c)    To maintain investments in inventories at the optimum level as required by the operational and sales activities.
(d)    To keep material cost under control so that they contribute in reducing cost of production and overall costs.
(e)    To facilitate finishing of data for short term and long term planning and control of inventory.
(f)    To ensure right quality of goods at reasonable prices. Suitable quality standards will ensure proper quality of stocks. The price-analysis, the cost-analysis, value-analysis will ensure payment of proper prices.
(g)    To ensure perpetual inventory control so that materials shown in stock ledger should be actually lying in the stores.
(h)    To design proper organization for inventory management. Clear cut accountability should be fixed at various levels of the organization.
(i)    To minimize losses through deterioration, pilferage, wastages and damages.
(j)    To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralizing purchases.

There are many tools and techniques for inventory control.
(a)    Determination of stock levels
(b)    Determination of safety stocks
(c)    Selecting a proper  system of ordering for Inventory
(d)    Determination of Economic order Quantity
(e)    ABC Analysis
(f)    VED Analysis
(g)    Inventory  turnover ratios
(h)    Aging Schedule of Inventories
(i)    Classification and codification of inventories
(j)    Preparation of Inventory reports.

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