Explain  Inventory Control ?Inventories Control Techniques ?

Inventory Control 

Inventory control is concerned with the  acquisition,storage,handling and use of inventories so as to ensure the availability of inventory whenever needed, providing adequate provision for contingencies, deriving maximum economy and minimizing wastage and losses. 

Hence Inventory control refers to a system, which ensures the supply of required quantity and quality of inventory at the required time and at the same time prevent unnecessary investment in inventories. 

It is one of the most vital phase of material management. Reducing inventories without impairing operating efficiency frees working capital that can be effectively employed elsewhere. Inventory control can make or break a company. This explains the usual saying that “inventories” are the 
graveyard of a business.

Designing a sound inventory control system is in a large measure for balancing operations. It is the focal point of many seemingly conflicting interests and considerations both short range and long range. The aim of a sound inventory control system is to secure the best balance between “too much and too little.” Too much inventory carries financial rises and too little reacts adversely on continuity of productions and competitive dynamics. The real problem is not the reduction of the size of the inventory as a whole but to secure a scientifically determined balance 
between several items that make up the inventory. 
 

The efficiency of inventory control affects the flexibility of the firm. Insufficient procedures may result in an unbalanced 
inventory.

Some items out of stock, other overstocked, necessitating excessive investment. These inefficiencies ultimately will have adverse effects upon profits. Turning the situation round, difference in the efficiency of the inventory control for a given level of flexibility affects the level of investment required in inventory. The less efficient is the inventory control, the greater is the investment required. Excessive investment in inventories increase cost and reduce 
profits, thus, the effects of inventory control of flexibility and on level of investment required in inventories represent two sides of the same coin. 

Control of inventory is exercised by introducing various measures of inventory control, such as ABC analysis fixation of norms of inventory holdings and reorder point and a close watch on the movements of inventories.

Inventories Control Techniques 

ABC Analysis of Inventories The ABC inventory control technique is based on the 
principle that a small portion of the items may typically represent the bulk of money value of the total inventory used in the production process, while a relatively large number of items may from a small part of the money value of stores.

The money value is ascertained by multiplying the quantity of material of each item by its unit price. 
 

According to this approach to inventory control high value items are more closely controlled than low value items. Each item of inventory is given A, B or C denomination depending upon the amount spent for that particular item. “A”or the highest value items should be under the tight control and under responsibility of the most experienced personnel, while “C” or the lowest value may be under simple physical control. It may also be clear with the help of the following examples: 

“A” Category – 5% to 10% of the items represent 70% to 75% 
 of the money value. 

“B” Category – 15% to 20% of the items represent 15% to 20% 
 of the money. 

“C” Category – The remaining number of the items represent 5% to 10% of the money value. 

The relative position of these items show that items of category A should be under the maximum control, items of category B may not be given that much attention and item C may be under a loose control. After classification, the items are ranked by their value and then the cumulative percentage of total value against the percentage of item are noted. 

A detailed analysis of inventory may indicate above figure that only 10 per cent of item may account for 75 per cent of the value, another 10 per cent of item may account for 15 per cent of the value and remaining percentage items may account for 10 per cent of the value. The importance of this tool lies in the fact that it directs attention to the key items.