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Need of Inventory Management

This article focuses on the need of Inventory Management and its importance in the organization. inventory control helps to manage resources and smooth the flow of production to fulfil demand. We have tried to cover all points necessary to elaborate on the need for inventory control.

To meet variation in product demand

Many times, marketer or manufacturer face problems due to increased or decreased demand in the market. This creates an imbalance between demand and supply. This may lead to product scarcity or oversupply and ultimately loss in profit. To avoid this, the manufacturer can use inventory control and management as an important tool.

To maintain independence of operations

Inventory management helps to maintain independence of operations by keeping different operations at different processing rates.

To allow flexibility in production scheduling

Proper inflow and outflow of material help the production department to achieve flexibility in production scheduling. Hence inventory control reduces pressure on the production department by allowing them to get goods out.

To manage raw material level for variation in delivery time

Inventory control also helps to manage raw material level for variation in delivery time.

To take advantage of Economies of Scale & economic purchase order size

Up to a certain level, more production means more savings and cost-cutting. Inventory management helps an organization to achieve economies of scale. This can be a competitive advantage for an organization especially the production and marketing department. Ultimately, it helps the manufacturer to take advantage of Economies of Scale & economic purchase order size.

  • Lower per-unit cost
  • More Production
  • More bargaining with suppliers
  • Low cost, more demand

Inventory management also –

  • Reduce Transit Cost and Transit Times
  • To protect against demand and lead time uncertainties
  • To hedge against price increase
  • To take advantage of quantity discounts
  • To improve Customer Service
  • Inventory as a buffer
  • Cater to Cyclical and Seasonal Demand

This is all about Need of Inventory Management.

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