Inventory Control

Inventory means stocks i.e. stocks of raw material, stores, consumables, work in progress, finished products etc. In maximum business concerns, a large amount of funds are invested in buying stocks of materials. This not only results in unnecessary blocking of funds in stocks but also an increse in the cost of production due to increased expenditure on insurance and storage of additional  stocks. This increased cost can add to the price of our product and make our product uncompetitive in the market, which can result in lesser sales and hence lower profits.  An efficient inventory control system  can result in optimum level of investment in inventories to avoid blocking and wastage of funds and a reduced cost of product. Hence the main purpose of inventory control is to attain efficiency in production and sales with the minimum investment in inventories.

Techniques of Inventory Control

Different techniques applied for inventory control are:

  1. Setting of different stock levels
  2. ABC analysis
  3. Determination of Economic Order Quantity
  4. Two bin system
  5. Use of perpetual inventory records
  6. Continuous stock taking
  7. Establishment of a system of budgets
  8. Review of slow and non-moving items
  9. Control ratios


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