Study on Inventory Management

Topics: Inventory, Manufacturing, Inventory control system Pages: 44 (10533 words) Published: February 26, 2013


Management must be concerned with all aspects of the firm’s operation includes production of goods delivery of services, sales and marketing activities, and supporting functions, such as personal training and data processing to handle these responsibility, most firms extensive use of financial data and reports. As businesses becomes larger and more complex, financial assumed the responsibility of dealing with problems and decisions associations with managing the firm’s assets.

Inventories constitute the major element in the working capital of many business enterprises. For instance, inventories on an average constitution 60 percent of the current asset in the public limited companies in INDIA. It is, therefore, necessary to manage inventories efficiently and effectively to avoid unnecessary investments in them. Inventories have a direct impact on the profit of the firm. Profit is affected the inventories in several ways.

Firstly, too much, or too little affects the rate of return on investment. Secondly, the rate at which the inventories move through the production on distribution process also affects the cost of doing business.

It is therefore, necessary to formulate and initiate inventory policies which will serve as guides in determining the correct level of inventory to maintain and correct amount of working capital to invest in inventory. To develop adequate inventory plan, it is necessary to have thorough knowledge of the objectives of inventory management and inventory management techniques.

A firm neglecting the management of inventories will be jeopardizing its long run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories to a considerable degree e.g.,10 to 20, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive inventories carries a favourable impact on company profitability.

This study is mainly focused on the investment in inventory and to minimize the scrap level that is raised from stocks that is stored for a long time. Since the organization has number of raw materials, it is difficult to maintain the inventories, so by classifying on the basis of requirement of individual ware houses it will be easier to control the inventory level. The raw material will be classified by using various analyses and the most important items are in terms of necessity and values will this techniques. By identifying these materials it will be a lot easier to maintain these material more of these material efficiently and avoid any scrap arising out of these materials. Hence the in the organization will be maintain and controlled more efficiently with minimal cost giving maximum output


Inventory generally refers to the materials in stock. It is also called the idle resource of a company. Inventories represent those items which are either stocked for sale or they are in the process of manufacturing or they are in the form of materials which are yet to be utilized. It also refers to the stockpile of the products a firm would sell in future in the normal course of business operations and the components that make up the product. Inventory is a detailed list of those movable items which are necessary to manufacture a product and to TYPES OF INVENTORIES

A manufacturing firm generally carries the following types of inventories: * Raw Materials.
* Bought out parts.
* Work-in-process inventory (WIP).
* Finished goods inventories.
* Maintenance, repair and operating stores.
* Tools inventory.
* Miscellaneous inventory.
* Goods in transit.
* Goods for resale.
* Scrap Material.

In ASHOK LEYLAND mainly four kinds of inventories are identified: 1. RAW MATERIALS INVENTORY: This consists of basic materials that have...
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