The inventory means physical stocks of good which is kept in hand for smooth and efficient running of future affairs of an organisation at the minimum costs of funds blocked in inventories. In a manufacturing organisation, inventory control plays a significant role because the total investment in inventories of various kinds is quite substantial. In this lesson we are going to discuss the meaning of inventory, need to control invantory, the advantage of material control, essential factor, of material control, the ABC analysis techniques, the process of invantory control.
Inventory can be defined as the stock of goods, commodities or other resources that are stored at any given period for future production. In real, inventory control is a process itself, with the help of which, the demand of items, scheduling, purchase receiving, inspection, storage and despatch are arranged in such a manner that at minimum cost and in minimum time, the goods can be despatched to the production department. Invantory control makes use of available capital in a most effective way and ensures an adequate supply of goods for production.
Need of Inventory Control
The main objectives of Inventory Control are as follows:
1. For Effective Cost Accounting System:Cost accounting system is useful only when there is a tight control over cost and invantory cost is a major part of total production cost.
2. To Check Waste and Wastage: Invantory control not just only ensures uninterrupted material supply to production department but also ensures the control from purchasing to supply of finished goods to customers. So in this way it checks waste and wastage whether it is about time, money or material.
3. To Check Embezzlement and Theft: Inventory control is to maintain necessary records for protecting theft and embezzlement.
4. For the Success of Business: Customer’s satisfaction is very much important for the success of business and customer’s satisfaction is directly related to the goods supplied to them. If the goods supplied to customers are low in cost with good quality at right time, it ensures the success of business. Invantory Control helps in achieving this goal.
5. For the Life of the Business: In absence of Inventory Control there are many risks of losses.
6. To Check National Wastage: Inventory control checks the wastage of nation’s resources such as raw minerals, ores, etc.
Advantages of Material Controls
Advantages of material controls are as follows:
1. It helps to minimise loss by obsolescence, deterioration damage, etc.
2. It helps to protect against thefts, wastages, etc.
3. It helps managers in decision making.
4. To minimise capital investment in invantory.
5. To minimise the cost of material purchasing.
6. To increase the storing capacity.
7. To maintain reasonable stocks of materials.
8. To facilitates regular and timely supply to customers.
9. To ensures smooth production operations.
10. To check national wastage.