Sufficient inventories facilitate production activities and help to customer contentment

by provide good quality of service.

The basic financial aim of inventory management to holding inventory to a minimum
level in related its cost .holding inventory means capital binded up at both ends of
production system.
For a usual manufacturing firm, this impasse in form of raw material at one end of
production system, WIP (or semi finished) goods within it, and utterly finished goods at
additional end. However keeping low inventories means customer may go to other
manufacture and company loses its goodwill.
For a trade firms such as Retail stores inventory refers to reserve of finished goods for
sale, as for a manufacturing firm, the definition of inventory means stock of raw
material, WIP and finished goods. One most important factor having an essential
bearing on inventories is cost incurred on supervision of goods in stock.
The inventory carrying cost is comprises interest on money invested for material in
stock ;warehousing cost ,including rentals,taxes,labour ,cost, overheads, electricity bill ,
water and maintenance ;cost of material handling equipment ;shrinkage; evaporation
deterioration or spoilage of goods ;obsolescence etc. in India inventory carrying cost
varies from 28 to 32 percentage of total cost. Thats why inventory management plan
strategies that raise wealth maximization a company with optimum inventory cost.
Inventory management is very complex and complicated in nature .it is very hard to
determine how stock is stored at optimum level .if company stock too much it locks its
capital and if it is too little its affects its value. Inventory management apply various
inventory techniques to handle these problems such EOQ model, reorder level, just in
time etc
In this study we are compare inventory management and analyze which techniques they
prefer and why? And these inventory control techniques impact on managements
decisions.
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1.1 INVENTORY MANAGEMENT
1.1.1 OVERVIEW
Inventories constitute a vital branch of current assets of a company. On an average 50
percentage of current assets are utilized in managements of inventory in India.
A firm keeping more inventory means funds are unnecessary tied up .the firms which
do not keeping inventory may suffer from losses in long run. Because market demand is
totally uncertain. So companies are always tried to find a way between these two
criteria. Inventory control techniques help to company to reduce stock cost up to 10-20
percentages (possible). Without affecting production and sales activities of a
comapny.Therefore inventory control are applied to reduce carrying cost and enhancing
company profitability.
1.1.2 MEANING OF INVENTORY
Inventory means stocks of goods are kept in an organization to smoothen its functioning
in form of finished goods. For a manufacturing concern it is stock of raw material, work
in progress, stores etc.
Inventory includes following items:
Raw material
In process material
Standard components
Goods support in production process e.g. fuel, tools, coolants, zig and fixture
etc.in brief inventory is money kept in stores in form of raw
material,semifinished and finished products
.
FIGURE 1
1.1.3 NATURE OF INVENTORY
Inventories are basically categorizes in following classes
RAW
MATERIALS
WORK IN
PROGRESS
FINISHED
GOODS
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Production inventories: these are of two types
Inventories those are purchased from market like raw material, spare parts and
components
Special parts or components manufactures in one own company and kept for stock to
use.
MRO inventories or Maintenance, repairs and operating supplies: these are
purchase material kept for maintenance of production cycle but do not form finished
goods. These are petrol, oil, diesel, lubricants, machine tools, repair parts, jigs etc.
Work in progress or in process inventories: these are semi finished goods usually
found on industrial unit floor used in numerous stages of production
Finished goods: These goods are ready for sale. Finished goods are associated with
demand fluctuations whereas raw material and work in progress is related to production
process inventories make a connection amid production and consumption of goods.
The four kinds of inventories are kept according to needs of organizations
Manufacturing units keep more focus on first three kinds of inventories, having long
production cycle ,keeping high stock; whereas retail stores having only finished goods
as inventories, the products that have small production cycle are kept at low inventory
with fast turnover cycle.
1.1.4 MEANING OF INVENTORY MANAGEMENT:
As soon as market becomes highly competitive material mangers use inventory
management as tool to control cost. Inventory is a tenure that used to describe unsold
goods is waiting for sale and raw material is waiting for production process in stores of
organizations. Generally stocks are kept within organization, in warehouse near or far,
shelves of stores etc.from manufacturing point of view raw material are kept within
factory needed at any time. Inventory management mainly concern with satisfy the
customer whether he is outside the organization and a real customer who pays for

what he gets, or inside the organization, user of stores who may be regarded as customer
From viewpoint of small business owners inventories are shown and tangible assets in
form of raw material, WIP, finished products .the working capital locked in inventories,
for retail stores merchandise inventories are only benefit when they add money to cash
register. In big business unit it is not easily to determine inventory. large firms keeps
inventory to get high profits. But now a day it is not easy to carry large inventories. in a
any organization market manger always tries to have more product variety and large
stock due to demand fluctuation in market and uncertainty with it. Production manger
always main focus on economic cost processing so that production process bears
reasonable cost. Then finance manger main concern about minimum capital locked in
inventory. So to carry all these objectives inventory management is done to produce and
store goods at optimum cost.
So inventory management is collectively functioning of an organization which includes
its methods to organize inventory. Every minute spend on inventory management add to

companys value