The objective of inventory control is to provide uninterrupted production, sales, and/or customer-service levels at the minimum cost.
Having too much inventory or too little inventory will have adverse effects on the overall performance of any company.
A component of supply chain management, inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale. In addition, it helps reduce the chaos associated with trying to meet customer demand
A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.
Importance of Inventory Control
- A mismanaged inventory can lead to an unnecessary increase in the working capital. The excess funds could have been fruitfully directed to fuel the company’s growth initiatives or research and development efforts.
- Effective inventory management would lead to low storage costs, which will in turn lead to an increase in the company’s profits. Storage space is expensive; if you are able to manage your inventory well and able to reduce the amount of goods that you need to store, then you will require less space, which will in turn lead to low warehouse rental costs.
- It can help you satisfy your customers by providing them with the products they need in the swiftest manner. Poor inventory management leads to lower availability of goods and higher delivery time. Hence, if you want to gain those service satisfaction stars, you need to manage your inventory well.
- Goods stored in inventory over a long period may spoil. This leads to unnecessary overheads in operating a business. Hence, proper inventory management can help you reduce those costs greatly.
- If you have inventories scattered in various locations, you need a proper system to manage those inventories on the basis of demand and supply. Inventory management techniques can help you go a long way in managing multiple inventories while focusing on sales
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