Inventory Control and Management

• What is inventory?


  Inventory refers to the stock of goods or materials that a business holds for the purpose of production, manufacturing, or sale. It includes both raw materials or components used in the production process, as well as finished goods ready for sale or distribution.
• Types of inventory contain...

  Raw materials, work-in-progress and finished goods.
• Raw materials.


  This includes the materials and components that are used in the production process but have not yet been processed or transformed into finished goods.
• Work-in-progress.


  Also known as WIP inventory, this consists of goods that are in the production process but have not been completed yet. These goods are at various stages of production and require further processing before becoming finished goods.
• Finished goods.


  These are the final products that are ready for sale or distribution to customers. Finished goods are the end result of the production process and are held in inventory until they are sold.
• What is inventory control?


  Inventory control is about keeping track of the materials, products, and supplies that a business needs to make its products. It involves making sure there's enough inventory to meet customer demand, but not too much that holding high levels of inventory becomes costly.
• Why is inventory control important?

  Meeting customer demands, minimising costs and avoiding over stocking or understocking.
• Why meet customer demands?


  Businesses must ensure they have sufficient stock to meet customer demand promptly. Failure to do so can lead to lost sales, delays in fulfilling customer orders and complaints. Inventory control ensures that products are available when customers need them, leading to increased customer satisfaction and loyalty.
• Why minimising costs?


  When a business holds a lot of inventory, it needs space to store it, and this can be expensive. There are also costs associated with insuring and maintaining inventory. The higher the level of inventory, the higher the costs of storage, which increases costs of production. By reducing storage costs, manufacturers can free up working capital that would otherwise be tied up in inventory.
• Why avoiding under and overstocking?


  Understocking can lead to a business running out of a particular product, leading to lost sales and potential customer dissatisfaction. On the other hand, overstocking ties up capital and can result in increased carrying costs. Products can go out of date, deteriorate or perish if they are in stock for too long, for example food products. Effective inventory management reduces the risk of holding excess inventory that may become obsolete or outdated.