Definition And Purpose of Inventory Management
Inventory management is a material or goods stored to be used to fulfill a
specific purpose, such as for use in the production process or assembly, for
resale, or for parts of an equipment or machinery. Inventories can be raw
materials, auxiliary materials, goods in process, finished goods, or parts. You
could say there are no companies that operate without supplies, even though
inventory is simply a source of funds idle, because before the inventory used
to mean funds that are bound therein can not be used for other purposes. Once
the importance of this inventory so that the accountants put it on the balance
sheet as a current asset heading.
As one of the important assets of the company, because it usually has a value
large enough and have an influence on the size of the operating costs-planning
and inventory control is an important activity that received special attention
from the management company.
Each section in the company can view the inventory of a variety of different
sides. The marketing department, for example, require high inventory levels in
order to serve customer demand as possible. The purchasing department tend to
buy goods in large quantities in order to obtain discount so the price per unit
will be lower. Likewise, parts production, require large inventory levels to
prevent the cessation of production due to shortages of materials. On the other
hand, the finance department chose to have inventory as low as possible in
order to minimize investments in inventory and warehousing costs.
Inventory control system can be defined as a series of control policies to
determine the level of inventory that must be maintained, when the order to
increase the supply must be carried out and how the orders should be held. This
system determines and ensures the availability of proper supplies in quantity
and timing.
Appropriate inventory control is not easy. If the amount of inventory is too
large lead to the emergence of large idle funds (which are embedded in
inventory), increasing storage costs, and the risk of damage to larger items.
However, if the supply is too little lead to the risk of supply shortages
(stockout) because often the material / goods can not be imported sudden and
what's required, which led to the cessation of the production process, delays in
the sale, and even loss of customers.
As other operations management decisions, the most effective policy is to
achieve a balance between the various interests in the company. Inventory
control should be done in such a way so as to serve the needs of materials /
goods properly and with lower costs.
Some functions skelter contained by the inventory to meet the needs of
companies, as follows.
- Eliminate the risk of delays in delivery of raw materials or
goods needed by the company
- Eliminate risk if materials ordered are not good so it must be
returned
- Eliminate risks to price increases or inflation
- To store raw materials produced on a seasonal basis so that the
company will have no trouble if the material was not available on the market
- Making a profit on the purchase based on quantity discounts
- Providing services to customers by providing the necessary
goods.
Inventory management is a material or goods stored to be used to fulfill a
specific purpose, such as for use in the production process or assembly, for
resale, or for parts of an equipment or machinery. Inventories can be raw
materials, auxiliary materials, goods in process, finished goods, or parts. You
could say there are no companies that operate without supplies, even though
inventory is simply a source of funds idle, because before the inventory used
to mean funds that are bound therein can not be used for other purposes. Once
the importance of this inventory so that the accountants put it on the balance
sheet as a current asset heading.
As one of the important assets of the company, because it usually has a value large enough and have an influence on the size of the operating costs-planning and inventory control is an important activity that received special attention from the management company.
Each section in the company can view the inventory of a variety of different sides. The marketing department, for example, require high inventory levels in order to serve customer demand as possible. The purchasing department tend to buy goods in large quantities in order to obtain discount so the price per unit will be lower. Likewise, parts production, require large inventory levels to prevent the cessation of production due to shortages of materials. On the other hand, the finance department chose to have inventory as low as possible in order to minimize investments in inventory and warehousing costs.
Inventory control system can be defined as a series of control policies to determine the level of inventory that must be maintained, when the order to increase the supply must be carried out and how the orders should be held. This system determines and ensures the availability of proper supplies in quantity and timing.
Appropriate inventory control is not easy. If the amount of inventory is too large lead to the emergence of large idle funds (which are embedded in inventory), increasing storage costs, and the risk of damage to larger items. However, if the supply is too little lead to the risk of supply shortages (stockout) because often the material / goods can not be imported sudden and what's required, which led to the cessation of the production process, delays in the sale, and even loss of customers.
As other operations management decisions, the most effective policy is to achieve a balance between the various interests in the company. Inventory control should be done in such a way so as to serve the needs of materials / goods properly and with lower costs.
Some functions skelter contained by the inventory to meet the needs of companies, as follows.
As one of the important assets of the company, because it usually has a value large enough and have an influence on the size of the operating costs-planning and inventory control is an important activity that received special attention from the management company.
Each section in the company can view the inventory of a variety of different sides. The marketing department, for example, require high inventory levels in order to serve customer demand as possible. The purchasing department tend to buy goods in large quantities in order to obtain discount so the price per unit will be lower. Likewise, parts production, require large inventory levels to prevent the cessation of production due to shortages of materials. On the other hand, the finance department chose to have inventory as low as possible in order to minimize investments in inventory and warehousing costs.
Inventory control system can be defined as a series of control policies to determine the level of inventory that must be maintained, when the order to increase the supply must be carried out and how the orders should be held. This system determines and ensures the availability of proper supplies in quantity and timing.
Appropriate inventory control is not easy. If the amount of inventory is too large lead to the emergence of large idle funds (which are embedded in inventory), increasing storage costs, and the risk of damage to larger items. However, if the supply is too little lead to the risk of supply shortages (stockout) because often the material / goods can not be imported sudden and what's required, which led to the cessation of the production process, delays in the sale, and even loss of customers.
As other operations management decisions, the most effective policy is to achieve a balance between the various interests in the company. Inventory control should be done in such a way so as to serve the needs of materials / goods properly and with lower costs.
Some functions skelter contained by the inventory to meet the needs of companies, as follows.
- Eliminate the risk of delays in delivery of raw materials or goods needed by the company
- Eliminate risk if materials ordered are not good so it must be returned
- Eliminate risks to price increases or inflation
- To store raw materials produced on a seasonal basis so that the company will have no trouble if the material was not available on the market
- Making a profit on the purchase based on quantity discounts
- Providing services to customers by providing the necessary goods.
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