Inventory is a part and parcel of every facet of business life. Without it, no business activity can be performed, whether it being a service organisation like hospital and banks etc. or manufacturing or any trading organisations. Inventories play an essential and pervasive role in any organisation because that make it possible :
- to get right amount of stock at exact time of need to ensure continuous and smooth production,
- to avoid the physical impossibility and economical impracticability of getting right amount of stock at exact time of need,
- to order large quantities of goods, materials or components from the supplier at advantageous prices,
- to maintain more stable operating or work force levels,
- to take advantage of shipping economics,
- to plan overall operation strategy through decoupling of successive stages in the chain of acquiring goods, shipping to site warehouses and finally making it available to user department as and when required,
- to provide means against hedging against future price and delivery uncertainties,
- to make effective use of available capital and/or storage space, and
- to achieve favourable return on investment.
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