Factors Affecting Inventory Management

Topics: Supply chain management, Balance sheet, Inventory Pages: 2 (653 words) Published: August 31, 2012
Statement of the Problem
It is little wonder that business experts commonly cite inventory management as a vital element that can spell the difference between success and failure in today's keenly competitive business world; inventory can be nuisance, necessity or convenience. Organizations place stock in a subsidiary rather than a central position, but still an important element in operational effectiveness and often appear on the balance sheet as biggest current assets taking up a lot of money. Inventory management function is carried with procurement, supply chain, logistics and finance beside marketing department. Holding stock is an expensive affair and it is accepted that many organization hold too much stock at a time. A continuing drive to reduce stock without reducing service is needed to combat the natural tendency of stock to increase. Basically continuous supply of inventory cannot be guaranteed with absolute certainty. Delivery cannot be exactly matched with usage day by day economies associated with buying or manufacturing in large quantities more than offset the cost of storage, operational risks require the holding of stock to guard against breakdown or program changes for work in progress where completely balanced production flows is impracticable, for finished product where the holding of butter stock between production and the customer is desirable owing to fluctuation in price of commodity. . Inventory management must be designed to meet the dictates of the market place and support the companies’ strategic plans, new opportunities due to worldwide marketing, global sourcing of materials and manufacturing technology means many companies need to change their inventory approach. Stores department in an organization provides services in efficient manner, however the services cannot be attained effectively where stores operation is not operating efficiently. Organization with poor inventory management approach incurs the following: High Holding...
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