Inventory is the quantity or total amount of goods and materials in a store or factory for some immediate or some future use. The reasons for holding more than adequate stocks of inventory would be
1. to keep business operations running and to meet current orders
2. to meet unforeseen demand and to effectively meet customer orders
3. to take care of the lead time , ie , the time gap between ordering the stores and receiving them and place orders accordingly
4. to use as a hedge against price increases and inflation and control losses
5. to even out erratic demand requirements.
Inventory control or inventory management is an attempt to maintain an adequate supply of goods while minimizing inventory costs resulting from obtaining and holding inventory with the purpose of providing information to “efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with the customers.” .
Some of the terminologies related to inventory management are
EOQ-Economic Order Quantity – or how much to order
SAFETY STOCKS- how much inventory to hold on hand
REORDER LEVEL – the minimum levels of stocks at which new order for stocks is to be placed.
Visual control –enables the manager to examine the inventory visually and determine if more inventory is required.
Tickler control -enables the manager to physically count a small portion of the inventory each day so as to cover the entire range of inventory regularly over several days.
Click sheet control is a method whereby the manager records the item as it is used on a sheet of paper. This information is used while determining the reorder levels.
Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item.
Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action. Off-line point-of-sale terminals relay information directly to the supplier’s computer who uses the information to ship additional items automatically to the buyer/inventory manager.
The final method for inventory control is done by an outside agency. A manufacturer’s representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise is removed from stock and returned to the manufacturer through a predetermined, authorized procedure.