Saturday, 7 February 2015

Inventory Control and its Importance

To know about inventory control, first let us know what is or what constitutes inventory.

What is Inventory?
Inventory is the stock of goods or resources at your disposal as on any time.It can be any raw materials, finished goods or products under process and at an incomplete stage and all the spares and accessories and store items that are at your disposal as at the time of your counting or valuation.

So, virtually whatever you held in stock for your consumption or reuse for production or for any purpose constitutes the stock. Inventory is this stock in terms of money value as at a particular date or time.

Now let us discuss about Inventory Control.

What is Inventory Control?
Inventory control is the process of supervising and controlling the procurement or supply,  storage and consumption of goods to bring efficiency in its utilization. It is a process of tracking the purchases, their maintenance and optimum usage so as to reduce costs, wastage and excess utilization.
Why the need for Inventory Control?
Inventory Control and inventory management is necessary for following reasons:

  • To ascertain that quality is maintained and utmost utilisation is done of each stock. 
  • To control unnecessary purchases thereby locking up your working capital unnecessarily.
  • To workout when to purchase, where to purchase and how much to purchase.
  • To avoid wastage due to wear and tear of stocks.
  • To facilitate proper and easy identification of stocks so as to avoid undue delays in production due to lack of knowledge of items or prevent wrong inputs and issues done.
  • To facilitate accurate stock valuation and disposal of obsolete items.
How Inventory Control is done?
A good inventory control system involves the following steps.
  1. First step in inventory control is proper identification of stocks item wise by allotting some number or nomenclature to each item. This is to be done by the technical department who have full knowledge of the usage of each item. They will inform the inventory staff how to identify and group items under different categories according to their usages. 
  2. Second step is to classify and group the items under different groups so that items required for a particular process or machine are stored at one place in various categories and sub categories. This will facilitate the issue of these items when that particular process or department places requirements.
  3. So each item is stored in a shelf or container labelled with its sub-category and all the subcategories of a particular main category are stored in a separate rack, cabin or room allotted for it with their name plates bearing the main category. This facilitates each location and identification at the time of storage and also at the time of issuance of items.
  4. Valuations can be easily done with this method. As you have to simply count the number of objects and multiply with its unit rate.
  5. Periodical checkings should be done by both technical and inventory control staff to ascertain that no errors are committed.
  6. Any destroyed or obsolete items should be disposed off during these checkings so that quality and standards are maintained and your books show correct values of usable items only. 

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