Inventory management or control nowadays has become unavoidable in any manufacturing process. The basic managerial objectives of inventory control are two fold.
- To avoid over and underinvestment in inventory and
- To supply the right quality of goods, of light quantity at the proper time at a reasonable price.
Objectives and Importance of Inventory Management
The objectives and importance of inventory control management may be discussed follows:
1. Availability of Materials
The first and foremost objective of inventory management is to make all types of materials available at all times whenever it is required by the production department so that the flow of production may not be interrupted and the production may not be held up for want of a supply of materials.
It is, therefore, advisable to maintain a buffer stock of all essential items to move on the production on schedule.
2. Minimizing the Wastage
Inventory control or management aims at minimising the wastage of inventory at all levels, like, during its storage in godowns or at work in the factory.
Normal wastage or uncontrollable wastage should be not be permitted beyond a permitted level and abnormal and uncontrollable wastage should strictly be controlled.
Wastage of materials by leakage, theft, embezzlement, and spoilage due to dust, rust or dirt should be avoided.
3. Better Services to Customers
In order to meet the demand for quality goods, it is the responsibility of the concern to produce sufficient stock of finished goods at the proper time to ensure the execution of orders of customers. It will improve the image of the firm.
4. Control of Production Level
Proper inventory control helps to increase and to maintain a buffer stock of raw materials to meet any eventuality in difficult time.
Production variations can also be avoided through proper control of inventories.
5. Optimum Level of Inventories
The management can procure the inventory in time in order to run the plant efficiently.
If regular and prompt information about the availability of materials is provided to it.
Thus, helps the management in maintaining the inventory at optimum level keeping in view operational requirement. It also avoids the out-of-stock danger.
6. Economy in Purchasing
A proper inventory management brings several advantages and economics in purchasing.
Management makes every attempt to purchase the inventories in bulk and to take the advantages of favorable market conditions. Top 8 Documents Used in Transportation and Warehousing (Explained).
7. Optimum Investment and Efficient Use of Capital
From the financial point of view, the prime objective of inventory management is to have an optimum level of investment in inventories.
There should neither be any deficiency of stock which may abstract the production flow nor should there be any excessive investment in inventories so that it may block the funds of concern that may otherwise be utilized fruitfully in other activities.
So that the management must control the quantum of inventories by fixing the minimum and maximum levels and to avoid the deficiency or surplus stock positions.
Thus, now you know the Objectives and Importance of Inventory Management.