Introduction And Meaning Of Inventory Management
Inventory management is a process of ordering, acquiring, storing, tracking and record keeping of materials . It is a process of tracking, controlling and managing the movement of inventory (raw materials, work-in-progress and finished goods) to ensure the smooth operation of the business activities.
Importance Of Inventory Management
Some of the major importance of inventory management can be summarized as follows:
1. Smooth Functioning Of Business Activities
Inventory management helps to maintain optimum level of inventory in the company. So, business activities like production, distribution and selling can be performed smoothly and effectively.
2. Prevents Over And Under-stocking
Good inventory management system makes balance between the demand and supply of materials by analyzing the needs and availability of inventory. So, it helps to avoid overstocking and under stocking of materials in the store.
3. Reduce Wastage And Costs
It helps to maintain optimum level of inventory in the warehouse. It prevents excess stock that helps to minimize unnecessary storage cost and wastage of materials.
4. Better Cash Flow
Inventory management discourages overstocking of materials that helps to lower the cost of inventory and improves the cash flow in the business.
5. Proper Control
Inventory management is important to avoid loss, misuse and damage of materials in the store.
6. Increased Customer Satisfaction
It ensures regular supply of goods in the marketing by avoiding stock out problem. So, it helps to increase customer satisfaction and loyalty.
Also Read
Importance Of Working Capital Management
Importance Of Receivable Management
7. Maximizes Profitability
Because of adequate stock and smooth operation, it helps to increase the production capacity of the firm. Better supply of goods increases the sales volume. Therefore, it increases the production, sales and profitability of the company.
8. Improves Goodwill And Image
Because of regular supply of goods at fair price and increased number of satisfied customer, it helps to improve the image and goodwill of the firm.
