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Can a Company Eliminate Inventory Essay

Irrespective of the type of business that a company engages in, whether manufacturing, distribution or services, maintaining a certain quantity of inventory is inevitable. The quantum will depend on the operations of the company as well its policies relating to inventory storage and accounting. However advances in technology and new techniques of production have made it possible for companies to reduce inventory, albeit not eliminate it completely.

Technological innovations and developments including barcode readers, asset tracking devices, inventory management software and Point of Sales (POS) systems, among others, aid greatly in reducing excess inventory. With the help of these devices a company is made aware of the exact quantity and type of stock it possesses. Sales, purchases and stock-in-progress are readily recorded and the resulting final stock value can be determined immediately.

As a result, the company can identify the excess stock present and choose to either reduce production or increase deliveries to customers. This will decrease the inventory. Moreover, with the use of inventory management software, a company can plan and schedule the production process in a manner so as to manufacture the quantity of goods that will match the demand for the same. Various new techniques of production that reduce inventory, and thereby costs, have also been developed. The most popular one is the Just-in-Time (JIT) method of production or the Toyota Production System.

The JIT system integrates various areas of production and management to reduce inventory and the costs associated with its storage and supervision. It relies on signals called “Kanban” that notify when the next part of the process must be implemented. Production is driven by demand and the system stresses upon such inventory-reducing methods as reducing lot-sizes, ensuring frequent deliveries and reduction of number of parts. Thus, advances in technology have allowed companies to significantly reduce their inventory.

With the use of these innovations, a company can discern the actual need for inventory and plan its production and other operations accordingly. Wastage of stock as well as money will be diminished. Nonetheless it must be noted that no company can survive with zero inventory. Every company will have to maintain a certain amount of stock to continue operations without interruption. Thus, advancements in technology can help a company to reduce inventory to a large extent, but not to eliminate it completely.


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