Inventory control is the process of managing the stock of goods or materials held by a business, with the goal of optimizing the balance between supply and demand. The objective of inventory control is to ensure that a company has enough inventory to meet customer demand while minimizing the costs associated with holding excess inventory.
The techniques
used for inventory control can vary depending on the type of business and the
nature of the products being sold. However, some common techniques include:
Describe the concept and techniques of inventory control
Economic Order
Quantity (EOQ): This technique involves calculating the optimal quantity of
inventory to order at one time, taking into account the costs associated with
ordering and holding inventory.
Just-In-Time
(JIT): JIT inventory control involves minimizing the amount of inventory on
hand by ordering and receiving goods just in time for production or sale.
ABC Analysis:
This technique involves categorizing inventory items based on their importance to
the business and allocating resources accordingly. The most important items, or
A-items, receive the most attention and resources, while the least important
items, or C-items, receive the least.
Safety Stock:
This involves maintaining a buffer stock of inventory to ensure that unexpected
increases in demand or delays in delivery do not result in stockouts.
RFID and
Barcode Scanning: These technologies can be used to track inventory levels and
monitor stock movement in real-time, enabling more accurate and timely
inventory control.
Overall,
effective inventory control is crucial for any business that deals with
physical goods. It helps to ensure customer satisfaction, reduce waste and
costs, and improve the overall efficiency of the supply chain.
There are
several techniques of inventory control, some of the most common ones are:
Economic Order
Quantity (EOQ): EOQ is a formula that calculates the optimal quantity of
inventory to order at a time. It takes into account the cost of holding
inventory, the cost of ordering inventory, and the demand for the inventory.
Just-in-Time
(JIT): JIT is a system where inventory is ordered and received just in time for
it to be used in production. This system helps to reduce waste and the cost of
holding inventory.
ABC Analysis:
ABC analysis categorizes inventory into three categories based on their
importance. A-items are high-value items that require strict control, B-items
are medium-value items that require moderate control, and C-items are low-value
items that require minimal control.
Safety Stock:
Safety stock is extra inventory that is kept to ensure that there is enough
stock to meet unexpected demand. It helps to prevent stockouts and maintain
customer satisfaction.
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First-In,
First-Out (FIFO) and Last-In, First-Out (LIFO): FIFO and LIFO are methods of
inventory valuation. FIFO assumes that the oldest inventory is sold first,
while LIFO assumes that the newest inventory is sold first. These methods are
used to determine the cost of goods sold and the value of inventory on the
balance sheet.
Reorder Point: Reorder point is the level of inventory at which an order for more inventory is triggered. It takes into account the lead time for ordering inventory, the demand for the inventory, and the desired level of safety stock.