Inventory

Concept of Inventory:

Inventory refers to those goods which are held for eventual sale by the business enterprise. In other words, inventories are stocks of the product a firm is manufacturing for sale and components that make up the product.
Thus, inventories form a link between the production and sale of the product.

Inventory Management Objectives:

Inventory management is performed to simplify the operational activities. Some of the primary objectives for which it is carried out are as follows:

1. Preventing Dead Stock or Perishability: With an optimal inventory level, the chances of wastage in the form of goods spoilage or dead stock.
2. Optimizing Storage Cost: It reduces the chances of maintaining excessive stock, even the requirements are pre-determined, which ultimately cuts done the unnecessary warehousing costs.
3. Maintaining Sufficient Stock: Now, the production department need not worry about the shortage of raw material or goods because of its constant supply.
4. Enhancing Cash Flow: Inventory has a significant impact on the cash flow of the company. With effective inventory management, the organization can ensure sufficient liquid cash to enhance its operational efficiency.
5. Reducing the Inventories’ Cost Value: When there is a constant purchase of goods or stock, the organization can ask for discounts and other benefits to decrease the purchase price.