At any moment of time, every company holds some stock of various items. These items collectively make up the inventory of the company. Inventory is a very important asset in any company except the service organizations. Proper management of inventory is needed in every company. Here are some of the reasons for the same:
- Proper inventory level ensures timely fulfillment customer requirements.
- It ensures continuity against uncertainties of suppliers.
- In manufacturing, it also exists normally to streamline the flow of goods through all the steps in the production process, without any interruption.
- The right level of inventory facilitates optimum utilization of resources like machines, manpower and material.
- Inventory has impact on costs. These are two types of costs:
- Cost of carrying inventory (Material cost, ordering cost, holding costs (Storage, Insurance, Loss, Damage, Wastage etc.))
- Cost of not carrying inventory (Lost sale due to stock out, Loss of customer trust)
- Types of inventory to be managed are:
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- Raw material
- Work in progress
- Finished goods
- Consumables, supplies
- Packing material, components etc.
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