Inventory Control Procedures in Manufacturing Organizations

Inventory Control Procedures in Manufacturing Organizations


Abstract

Inventories have been referred to be the "lifeblood" of any industrial company. Stocks are an investment that helps with production and/or serving consumers; without a doubt, an insufficient supply of inventories may grind industrial processes to a stop. The way inventories are controlled and managed may make a big difference in whether a company succeeds or fails. Insufficient inventory, for example, may severely disrupt the production-distribution cycle, which is so important to the existence of all manufacturing companies. Excess inventory, on the other hand, may suffocate a company's cash flow and therefore jeopardise its liquidity situation. In any case, inadequate inventory management may pose a significant threat to a manufacturing company's productivity.


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Introduction

The challenge of inventory management is to keep inventory levels sufficient but not excessive. Manufacturing firms rely heavily on inventory for financial reasons. They typically account for 20 to 60 percent of total assets on the balance sheet, and as inventories are reduced, their value is turned into cash, improving cash flow and return on investment. In addition, there is a cost of holding inventory, which raises operational expenses and reduces profit. (Arnold, 1991, p. 141.) As a result, effective inventory management is critical for industrial companies.

For More Details About Inventory Control Procedures in Manufacturing Organizations Please Visit Our Website


 Or call us +91 9481545735

Conclusion

The common goal of EOQ inventory selection models is to choose the order quantity (Q) that minimises total yearly relevant inventory cost. The yearly ordering cost and the annual holding cost are the two components in the most basic model. The yearly procurement cost is ignored since, regardless of the size of Q, the same amount will be spent on goods.

Determining the order quantity is often referred to as a trade-off issue, in which the holding cost is traded off against the ordering cost. Companies, on the other hand, are keen to decrease both. The truth is that businesses have significant inventory investments, and the cost of carrying inventory ranges from 25 to 35 percent of the inventory's yearly value. As a result, reducing inventory is a key objective for most manufacturing companies today.

For More Details About Inventory Control Procedures in Manufacturing Organizations Please Visit Our Website


 Or call us +91 9481545735

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