Inventory Management and its Importance

inventory management

What is Inventory or Stock?

Inventory is stock refers to the goods and materials that a business holds for the ultimate purpose of resale. The various forms of materials held by the organization are known as inventory. It includes raw materials, finished goods, work in progress and daily consuming goods.

Inventory is physical goods in store bought for the purpose of the major business activities which hasn’t been sent to the workplace. In the case of a bank, draft, cheque, ledger, varchar, and stationary equipment can be taken as inventory.

Purpose of Holding Inventory

Inventory is held in an organization for three motives they are –

  1. Transaction motive – to facilitate smooth operation
  2. Precautionary motive – to guard against unpredictable changes
  3. Speculative motive – to take advantage of price fluctuations

Why we should not keep high inventory levels?

  • Huge capital investment
  • Space  usage
  • Obsolescence
  • The complicated inventory control system

Why we should not keep low inventory levels?

  • Inventory deficit

Inventory Management

Inventory management is the management to keep the optimum (not less, not more) level of inventory for the smooth operation of an organization. Inventory management also keeps the investment in inventories at a reasonable level.

Effective inventory management is all about knowing What is on hand, Where it is in use, and How much finished product results.

कार्यालयलाई चाहिने भौतिक सामानहरु ठिक समयमा, ठिक ठाउँमा, ठिक मात्रामा उपलब्ध गराई अधिक हुन र अभाव हुन नदिई सरल तरिकाले कार्यालयको संचालन गर्ने कार्यलाई नै जिन्सी व्यवस्थापन भनिन्छ।

कुन सामान, कति मात्रामा खरिद गर्ने, कुन ठाउँमा पठाउने, कहिले दोस्रो खरिद आदेश दिने, अन्तिम मौज्दात कति राख्ने,समानलाई कसरि सुरक्षित राख्ने भन्ने प्रश्नहरुको जवाफ नै जिन्सी व्यवस्थापन हो।

Why Inventory? (Importance of Inventory Management)

  • To achieve the organizational goal by reducing investment
  • To protect and productive use assets
  • To reflect all the records of inventory
  • To establish inventory discipline by minimizing the risk of theft, misuse of inventory
  • To formulate inventory related policies
  • To purchase, use and manage the assets at low cost
  • To prepare a base for the inventory inspection
  • To stop purchasing unwanted goods
  • To minimize the risk of stock out and over stock
  • To keep the inventory level at a reasonable level