Inventory managementis the science of controlling purchase, stocking and consumption of raw materials, other consumables that enter finished product. The management function ensures that there is neither bottleneck in manufacture owing to shortage of materials nor is storage cost too high in view of surplus stock. For this purpose, minimum quantity in stock, reorder level, reorder quantity and maximum stock for eachitem of inventory are fixed. There is ABC method (also called always better control) that consists of giving more attention and supervision of more valuable and important items than other less valuable and less important items.
G. K. Ajmani Tax consultant http://gkajmani-mystraythoughts.blogspot.com/
Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures.
Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review. Most of the organizations have a separate department or job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments.
It all boils down to cutting down inefficiencies in purchase decisions to avoid blocking of working capital in obsolete,slow-moving stocks.It's a realm where a purchase management comes into play!
