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achieve maximum profit with minimum resources
Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state
The objectives of inventory management is to :
- Improve customer service
- Economies of purchasing
- Economies of production
- Transportation savings
- Hedge against future
- Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)
- To maintain independence of supply chain
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The main objective of inventory management is to maintain inventory at appropriate level to avoid excessive or shortage of inventory because both the cases are undesirable for business. Thus, management is faced with the following conflicting objectives:
1. To keep inventory at sufficiently high level to perform production and sales activities smoothly.
2. To minimize investment in inventory at minimum level to maximize profitability.
Other objectives of inventory management are explained as under:-
1. To ensure that the supply of raw material & finished goods will remain continuous so that production process is not halted and demands of customers are duly met.
2. To minimize carrying cost of inventory.
3. To keep investment in inventory at optimum level.
4. To reduce the losses of theft, obsolescence & wastage etc.
5. To make arrangement for sale of slow moving items.6. To minimize inventory ordering costs.
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