Purchasing & Inventory Procedures

Running an inventory in a business can be a large task, as the inventory manager must
control the traffic in the inventory, conduct purchases and ensure the overall value of
the inventory is balanced. This is because a company's inventory is considered an asset
and can therefore severely affect the overall worth of the business if it is not maintained.
Purchasing and inventory procedures can help improve the operations of the inventory
and maintain a positive net value.

Inventory Procedures
Inventory procedures are often called inventory control procedures, as they include
controlling and maintaining the products or items stored on the inventory premises.
Inventory procedures can include doing manual counts of stock quarterly or biannually
and writing detailed reports about changes in the inventory status for business
executives. A single inventory manager is often hired to handle all incoming and
outgoing inventory traffic.

Purchasing Procedures
Purchasing items to stock the inventory must only be done where there is a need. Some
company executives will provide a figure that represents the lowest amount of stock
allowed to be in the inventory at any given time. This means that when an item reaches
this limit, the inventory manager must place an order to restock the inventory. The
purchase must be done to refill the needed item plus restock any items that may
currently be in demand or are selling faster than others.

Overstock Inventory
Overstocking the inventory by placing large orders can become an issue in terms of the
safety of employees going through the inventory on a daily basis. Overstocking the
inventory is essentially buying more products than are required to be ready for an
increase in sales or production. Although overstocking may increase the overall asset
value of the inventory for a temporary period of time, it can quickly become a liability or
waste if the products are not used before expiration or while they are demand.
Importance of Purchase Control
Controlling inventory purchases is important for two reasons. The first reason is the
company's budget. The available amount of inventory purchases may not handle large
orders that go beyond the common spending limit. Purchasing a large order with the
goal of overstocking the inventory can throw the company's budget off balance,
especially if it is not planned or discussed with business executives. The second reason
purchase control is important is the expiry dates on the products. Buying too many
products with expiry dates for the inventory can end up as waste and liabilities if they
are not sold before they expire.

Production & operations: Flow production

As a business grows the scale of its operations, it often needs to change its method of
production to allow greater production capacity.
A small business might use job or batch production to provide a personalized or
distinctive product.  However, if the product is intended for much larger, mass markets,
then alternative methods of production may be required in order for the product to be
produced efficiently.  A key production method in these circumstances is flow
production.
Flow production involves a continuous movement of items through the production
process. This means that when one task is finished the next task must start
immediately.  Therefore, the time taken on each task must be the same. 
Flow production (often known as mass production) involves the use of production lines
such as in a car manufacturer where doors, engines, bonnets and wheels are added to
a chassis as it moves along the assembly line.  It is appropriate when firms are looking
to produce a high volume of similar items.  Some of the big brand names that have
consistently high demand are most suitable for this type of production.

Advantages
Flow production is capital intensive.  This means it uses a high proportion of
machinery in relation to workers, as is the case on an assembly line.  The advantage of
this is that a high number of products can roll off assembly lines at very low cost.   This
is because production can continue at night and over weekends and also firms can
benefit from economies of scale, which should lower the cost per unit of production.

Disadvantages
The main disadvantage is that with so much machinery it is very difficult to alter the
production process.  This makes production inflexible and means that all products have
to be very similar or standardized and cannot be tailored to individual tastes.
Another disadvantage of using flow production is that the work can be pretty boring for
employees involved.  Keeping staff motivated is therefore an important issue for
management