Business Inventory Controls

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Business Inventory Control Meghan Farrar, Amanda May, Nancy Dinges, Scott Moore and Bianca Holmes American Public University Introduction “Inventory is one of the most expensive and important assets to many companies, representing as much as 50% of total invested capital. Managers have long recognized that good inventory control is crucial” (Render et al, 2011). Therefore, it is really no surprise that companies place such a high importance on inventory control. An analysis of the planning and forecasting process, as well as the uses of inventory control will certainly verify the significance of inventory control in the business environment. In addition, by utilizing several inventory methods: economic order…show more content…
This suggests that a company can have the best of both worlds by decoupling. The proper storage of resources can decrease the level of inventory a company must carry to meet the needs of production. One of the main sources of inventory issues is the lack of an accurate accounting of what is actually in the system. An effective system to account for the items that are necessary to produce a product or service will decrease the amount of unexpected outs or overages (Iyer, 2005). In addition to physical items, labor can also be stored in inventory (Render et al, 2011). Smoothing out irregular supply and demand so that you always have adequate products available for customers to purchase will increase consumer goodwill and profits. There are several different types of inventory control systems that need to be fine-tuned to decrease shortages and overages of the finished product. Those include work-in-progress, material requirements and the master production schedule (Scanlon, 1995). When a company maximizes their response to each of these systems, this can decrease inventory requirements, which ultimately decreases costs and increases profits. Quantity discounts are another possible method of increasing profits through inventory control. The key to using quantity discounts is making sure to maximize discounts while minimizing inventory carrying costs. Determining when and how much inventory is necessary to be purchased is a function of
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