Inventory Control and its Importance

Inventory Control is the management of stores &stock to the utmost benefit of the business. 

Before discussing Inventory Control, let us know what constitutes an Inventory.

What is Inventory?

Inventory is the stock of goods or resources available to you at any given time.

It can be any raw materials, finished goods, or products under process and at an incomplete stage, and spare parts, stores, and accessories that are at your disposal as at the time of your counting or valuation.

So, virtually anything you hold in stock for your consumption, for reuse in production, or for any other purpose constitutes the overall stock. 

Inventory is this stock in terms of money value as at a particular date or time.

Now let us discuss Inventory Control.

What is Inventory Control

Inventory control is the process of supervising and managing the procurement or supply, storage, and consumption of goods to improve efficiency in their use. It involves tracking purchases, their maintenance, and optimal usage to reduce costs, waste, and overuse.
                                            

Importance of Inventory Control

Inventory Control, or efficient management of stocks and purchases, is necessary for the following reasons:

• To ascertain that quality is maintained and utmost utilisation is made of each stock. 
• To control unnecessary purchases, thereby avoiding locking up your working capital that could be used for better purposes.
• To work out when to purchase, where to purchase, and how much to purchase.
• To avoid wastage due to the wear and tear of stocks.
• To facilitate easy and accurate identification of stocks and avoid undue delays in production due to a lack of knowledge of items or due to incorrect entries and storage.
• To facilitate accurate stock valuation and disposal of obsolete items.

How to Control and Manage Inventories

A good inventory control system involves the following steps:

1. The first step in inventory control is the proper identification of stock items, item-wise, by assigning a number or nomenclature to each item. This should be done by the technical department, which has full knowledge of each item's usage. They will inform the inventory staff how to identify and group items into different categories according to their usage.
2. The second step is to classify and group the items so that items required for a particular process or machine are stored in one place, organized into categories and subcategories. This will facilitate the issue of these items when that particular process or department places requirements.
3. Each item is stored on a shelf or in a container labeled with its subcategory, and all subcategories of a particular main category are stored in a separate rack, cabinet, or room allotted to it, with nameplates bearing the main category. This facilitates location and identification at the time of storage and at the time of issuance of items.
4. Valuations can be easily done with this method. Simply count the number of objects and multiply by the unit rate.
5. Periodic checks should be done by both technical and inventory control staff to ensure that no errors are committed.
6. Any destroyed or obsolete items should be disposed of during these checks so that quality and standards are maintained and your books show correct values of usable items only.