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Wednesday, May 26, 2010

Inventory Control - Objectives, Benefits

Inventory Control - Objectives, Benefits

Inventory control is a planned approach of determining what to order, when to order and how much to order and how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales.

Objectives of Inventory Control

1. To ensure adequate supply of products to customer and avoid shortages as far as possible.

2. To make sure that the financial investment in inventories is minimum (i.e., to see that the working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an important objective.

4. To maintain timely record of inventories of all the items and to maintain the stock within the desired limits

5. To ensure timely action for replenishment.

6. To provide a reserve stock for variations in lead times of delivery of materials.

7. To provide a scientific base for both short-term and long-term planning of materials.

Benefits or Advantages of Inventory Control

It is an established fact that through the practice of scientific inventory control, following are the benefits of inventory control:

1. Improvement in customer’s relationship because of the timely delivery of goods and service.

2. Smooth and uninterrupted production and, hence, no stock out.

3. Efficient utilization of working capital.

4. Helps in minimizing losses due to deterioration, obsolescence damage and pilferage.

5. Economy in purchasing.

6. Eliminates the possibility of duplicate ordering.

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