Rendado, Archelyn G.

BTLE HE-I

Manage and Control Your Inventories Properly

Inventory management is a systematic approach to sourcing, storing, and

selling inventory—both raw materials (components) and finished goods (products). In business
terms, inventory management means the right stock, at the right levels, in the right place,
at the right time, and at the right cost as well as price.

When you are in a business, you need to keep sufficient stocks of raw materials, in-
process goods, and finish goods in order to meet your production and sales targets. This is
called Inventory. Inventory management control means that you must take care not to have too
much, or too little of the required stocks. In other words, neither overstock nor under-stock.

Keeping far more stocks than what is needed is having working capital tied up and not
earning money for you. In fact, it is costing you more money because goods and raw materials
tend to deteriorate while in stock. For example, iron and steel part rust, wood rots and
becomes stained, goods for sale become stained and dirty and can only be sold at a discount.

On the other hand, you must be on guard against having too little of the materials and
supplies you need. It is always a good idea to have a little more than you estimated to use.
Having so much extra materials, goods in process, and finished products allows you too:

 Meet sudden increase in sales demand; and

 Make up rejected or damaged parts and products

Running short of raw materials suddenly will slow down or disrupt your production. Workers will
be idle while waiting for the materials to arrive. This is time and money wasted. It might also mean a
potential loss of sales or costumers.

How to Control the Inventory

Inventory control or stock control can be broadly defined as "the activity of checking a

shop's stock." It is the process of ensuring that the right amount of supply is available within
a business.

The basic idea behind the inventory control is to operate your business effectively with
the least amount of stock. To be able to do this, you should know:

 When to order
 How to often order
 How much to order
To be able to answer the above questions, you should know how to distinguish between
basic stocks goods and seasonal goods because each kind is controlled in a different
way.

Basic stocks goods are those, which are either sold at as much the same rate at
all times or regularly used in production. For instance, in a food store, these would
include rice, flour, cooking oil, and the like. In a garments store, these would be t-shirts,
socks, and underwear. In a furniture factory, these include standard-size planks,
plywood sheets, nails, screws, glue, and a varnish.

Seasonal goods are those that move quickly at some time and slowly than the
others. In a bookstore, these would include notebooks, books, and other supplies that
sells heavily just before and during the opening of classes. In a garments store, these
would be warm clothing, umbrellas, and raincoats during or just before the rainy
season. In a toy factory, these could be colored plastic pellets for use in the production
of plastic toys before the Christmas season.