nowadays, we are in an era that the Competition completely dominates the business sector. so that’s why we find organizations striving to raise their productive efficiency and exploit their resources optimally to ultimately achieve their goals and vision.
And because inventory is one of the resources of an organization where it is considered its most important current asset, dealing with an item like it requires complete Management whose procedures extend far beyond the inventory and rearrangement of items, as it includes everything starting from production and business management to inventory control, current demand analysis, forecasting the expected time to adjust inventory to demand and production and even reports and accounting.
Inventory management, like other departments, not only needs to plan programs, policies, and organizational procedures to facilitate the process of investing in inventory but also needs a comprehensive monitoring approach to evaluate the performance of the organization to ensure that its needs for various materials continue to be met with the best efficiency and lowest possible cost.
It is a systematic approach to the implementation of plans and policies related to inventory, as it includes the design and selection of systems and programs used to ensure the safety of receipt and disbursement procedures for materials needed for manufacturing and non-manufactured and finished goods So that its levels are consistent with the production plans to meet the project’s needs and facilitate the evaluating’s process of the enterprise’s performance and reduce losses to achieve the goals of the organization efficiently and effectively
Objectives of inventory control
- effective inventory control helps to provide adequate information on stock levels and then maintain quantities and items promptly for production processes
- avoid duplication and raise the efficiency of invested funds by reducing storage costs and obtaining the lowest prices of materials necessary for manufacturing, which directly impacts the factory’s profit margin.
- avoid freezing liquidity resulting from excess inventory, improve productivity by reducing losses resulting from it and manage cash incoming and outgoing
Methods of inventory control
Inventory control methods differ according to the purpose of the control itself, they can be classified based on time, source, objectives, or area of control, and we will address the following four most important methods of inventory control
This type of control focuses on inventory’s quality by physically examining a random sample of available materials and items, and making sure they haven’t expired or that any error occurred during receipt, or that the materials necessary for manufacturing become unfit to produce goods or services of the required quality in the market
Inventory quantities are controlled by monitoring the received or stored units of each type and knowing the quantities required to be provided to the production lines through cumulative flow maps that show the necessary quantities of inventory during the periods of the year depending on the quantities produced in advance, and periodic inventory and internal audit committees are made to evaluate inventory quantities and their conformity with the specified quantities and book balances, through which it is possible to detect stagnation or imbalance in the number of units received as a result of any errors so we can try to fix this and avoid it in the future
The cost of inventory is monitored by performing a cost-benefit analysis to adjust the investment process in inventory and reduce the costs of purchase, insurance, inspection, receipt, and so on. This is done by predicting the size of the investment, its various costs, and to what degree the actual costs are in line with what has been determined in advance
Just-in-time inventory management
A timeline is made that includes the period during which the materials necessary for manufacturing were purchased, the storage time, inventory, and use of the items so there is no scope for deadstock in the organization, and this program is adopted to follow the workflow in the warehouses and avoid delaying the purchase or exceeding the specified period for the use of raw materials
Stages of inventory control
The stages of inventory control are divided into three basic stages, namely
- Setting standards: – this stage consists of identifying tools for measuring actual work, whether quantitatively or qualitatively, to know the level of performance of the organization or the target Department.
the standards are divided into:-
Quantitative: such as standard storage level and standard amount invested in inventory
qualitative: such as the specification of items and how rules can be applied in the organization
- Performance measurement: – according to the standards set in the organization’s plans and programs, the actual performance of the organization is measured through several processes such as inventory, inspection, or standard cost accounting and expenses calculation
- Correction of deviation: – the business’s course is corrected by taking corrective measures to return things to their previously determined course, and this comes after comparing the actual performance with the plan, and those deviations may be due to poor planning or circumstances beyond the will of the organization and its capabilities
from the above, we find that inventory management and control is one of the administrative tasks that have a very important impact on the ability of enterprises to compete in the markets and maintain customer satisfaction
Therefore, top management should pay attention to inventory management and control as a source of the organization’s core strength in the market and one of its competitive advantages.