Reliant Logistics Institute


Inventory Management


Inventory Management is practiced as a confederacy of traditional materials activities bound by a common idea i.e. the idea of an integrated management approach to planning, acquisition, conversion, flow and distribution of inventories of raw materials, work in progress, factory supplies and finished goods awaiting for dispatch. Sometimes inventories of retail shops are also included in this broad concept. Inventory management includes the activities of purchasing, traffic, receiving, warehousing, surplus and salvage/scrap management as well as production planning and control. In addition to this customer service, scheduling, shipping and physical distribution are also sometimes included. Business organisation is a system of which inventory management is a sub system. Similarly inventory planning, programming, purchasing handling storage and control are the sub systems of inventory management system. The functions of which must be carried out either concurrently or in sequence. In most of the firms, Inventory Management, Marketing and Manufacturing are the three main operating sub systems in an organisation, which overlaps significantly and hence are continuing sou The other sub systems like finance and personnel serve the needs of the above three functions and also frequently add to conflict, too. One of the paramount advantages of logistic management course in kerala is that 65 it forces co-ordination between all these above functions. Inventory management cannot be performed in isolation and it does not occur in vacuum. It is closely related with other functional areas of business. Inventory management is an activity integrated, co-ordinated and entwined with such widely spread functions of management as purchasing, production, planning and scheduling, finance, marketing, physical distribution, store keeping etc. Inventory management is closely related with all the functions of engineering, procurement of materials down to final distribution. inventory management cannot function efficiently without proper co-ordination with other functions of business, due to following reasons : • Due to specialization the materials and consequently inventory management activities have become so wide that it requires co-ordination or direction towards common goal of business.

• To avoid jurisdictional disputes and overlapping between various functions of management

• Any development or change in any one function or department has its impact on other functions.

• Accepting inventory management as a system requires subordination of departmental interest to organisational interest.

• Inventory controller can control and co-ordinate with an overview that ensures proper balance of conflicting objectives.

• Rapid transfer of data reporting informal and short communication channels (along with formal ones) and necessitates integration.

• Increased computerisation/mechanisation, development of new tools and techniques of inventory management, use of operation research techniques like simulation, linear programming, queuing theory and Materials Requirement Planning, Just In Time inventories, crisis management etc. require that all the functions of business must be integrated for most economical operations Logistic Inventory Management can be broadly classified in two types : 26 66 Horizontal Integration : Integration of Inventory Management with other functions on horizontal line in the organisation structure viz. Design and Engineering, Research and Development, value analysis, Purchasing, Manufacturing, Marketing etc. Vertical Integration : Integration of the activities of Inventory Management viz. Planning, Procuring, Sourcing, Handling, Storing, Controlling, Receiving and Inspection, Disposal of wastes and scraps. All these functions and activities are responsible for attainment of organisational goal viz. minimising inventories and production cost, on time delivery of production materials and meeting delivery commitment to customer. Inventory Management has gained importance in India due to following reasons.

  1. Late industrialisation
  2. To conserve valuable foreign exchange
  3. To Release surplus capital for productive purpose
  4. To increase competitiveness in foreign markets by reducing costs
  5. Seller’s market
  6. Inflationary hoarding of stock s
  7. Strict import procedure
  8. Excessive dependence on foreign collaboration
  9. Inadequate storage facilities and higher cost of storage
  10. Use of scientific techniques at low ebb
  11. Mechanisation


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