Inventory

• Overall


  Inventory refers to all the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit.

  Their levels must be carefully monitored so that excess or insufficient levels of stock to not occur

  Some businesses hold large inventories to ensure they don't run out of stock → this however, can come at a major cost because the stock has to be stored → can also result in the business missing opportunities to invest money in other places

  It's important to manage materials effectively so that costs can be kept down
• Inventory Control


  Rate of inventory of stock turnover differs depending on the type of business

  Inventory Control → system businesses use to ensure that the costs associated with maintaining an inventory of materials are kept at a minimum

  Costs are minimised by not allowing materials to remain idle and by making sure that they are available form production when needed

  Control can occur through both physical control and inventory and through accounting control e.g. inventory recording system

  Computerisation --> minimise theft
• JIT and inventory sufficiency


  Some businesses use inventory system walled Just In Time (JIT) → ensures that the correct materials arrive just as needed for production - reduce storage costs and reduce risk of waste occurring, thereby improving the business’s financial performance

  Businesses must ensure that inventory turnover is sufficient to generate cash to pay for purchases and pay suppliers on time so that they will be willing to give credit in the future