Essay on The Importance of Inventory Control

1602 Words Aug 6th, 2013 7 Pages
Inventory is defined as any stored resource that is used to satisfy a current or future need (Render, Stair & Hanna, 2012). Many things come to make up inventory a few examples of what make up inventory are finished goods, raw materials, and work-in-progress. When it comes to a company’s most important and often times most expensive assets you discover inventory makes up as much as 50% of a company’s total invested capital (Render, Stair & Hanna, 2012). This paper will take a look at the importance of inventory control and some inventory control models and the importance they play in the success and or failure of a company. Inventory is important in the day to day operations of every major business and many non business …show more content…
This means you may have to produce large amounts of pumpkin related goods in the summer even though you actually do not need it at the moment. You do this because you will need the product around Halloween. As you can see events are not regular in the standard sense, this is how irregular supplies and demand work. The fourth function of the importance of inventory control is Quantity Discounts. Companies are always looking to save money anywhere they can. Many suppliers when you place a large order will offer discounts. If you relate it, to normal day to day life look at it like buying in bulk. You can get a six pack of toilet paper for $2.99 or you can get a twelve pack of toilet paper for $4.99. A company may only need a few of a certain item at the moment, but will buy a little more than needed for the future so they can save money y during the present. A company may take some risk when it comes to quantity discounts because of the possibility of products going bad if not used in time, theft, or additional costs related to insurance or storage. The fifth function of the importance of inventory control is avoiding stockouts and shortages. This function can be broken down pretty easily, if a company is always out of something consumers will be less likely to trust that company in the future. Customers like to have their needs satisfied, if they

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