The supply chain and inventory management forms the backbone of any organization. Inventory can be defined as an idle stock of physical goods having some economic value maintained by any organization. These goods are stored in various shapes and that can be processed, packed, transported and sold at any time in future.
Reasons of Inventory Management:
Different companies maintain inventory for different reasons. However, some of the most important factors that force companies to maintain an inventory are given below.
- Helps in Meeting Seasonal Demands:
Demand orders received by companies are seasonal that mostly depends upon various festivals or seasons etc. The past record of the companies helps them to predict potential sales. Therefore, these companies maintain a reasonable inventory to propel their production at the peak time and rush their products to the market.
- Meet Variation in Production Demand:
An effective system can also help to accommodate a changed production plan that is influenced by factors like estimates, sales, orders and socking patterns. Similarly, holding inventory in or nearby a production plant will assist in providing raw materials to maintain the production speed.
- Economies of Sales in Procurement:
It is much cheaper for a company to buy raw materials in bulk rather than buying small lots. Inventory management is the process that provides complete storage solutions and thus impacts the overall profits of the company as well.
- Reduces Transit Costs and Times:
Similarly, it can be quite costly to buy raw materials from foreign countries or from a far of place within the country. Therefore, if company buys the raw material in bulk, it can safe considerable amount of money in terms of transportation, shipment and transit time costs. Similarly, bulk purchase can also help to minimize the impacts of problems like unexpected delays in delivery, strikes and power failures.
- High Demand Items:
The main purpose is to provide storage solutions for high demand items that sometimes have lead life of several months. Thus, if a certain material goes high in demand but its supply is low, companies can overcome the problem by issuing that item to production line from the inventory stores.
For More Information Regarding Warehouse and Distribution in Auckland Contact US