Unit_5_Inentory_Control.docVIP

Unit Five Inventory Control Part one Text Inventory Control Inventory control, otherwise known as stock control, is used to show how much inventory you have at any one time, and how you keep track of it 1. It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers inventory at every stage of the production process, from purchase and delivery to using and re-ordering the inventory. Efficient inventory control allows you to have the right amount of inventory in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain. What are inventories? Inventories are often also known as stocks. They are anything which a firm has which is not currently being used for one of the firms functions. Most departments in the company will have inventories of something. The factory may have inventories of raw materials ready to produce, the office may have inventories of stationery and the warehouse may have inventories of finished goods. Inventories are vital to a company to help it function smoothly. If production had to be stopped every time the firm ran out of raw materials, the time wasted would cost the firm a fortune 2. If a shop had no inventory on the shelves, customers would soon desert them. The same is true of most areas the firm operates in ? I am sure you can appreciate the importance of planning ahead and having suitable levels of inventories. Inventories are considered to be current assets (the other current assets are debtors and cash) because many types of inventories can be converted into cash reasonably readily ? particularly inventories of finished goods . However, they are generally the least liquid of the current assets 3. At times of recession or similar it may be very difficult for the firm to sell inventories, and so although they may be listed as a certain value their true value may be lower. Types of invento