According to Ronald Pachura, Inventory control refers to the systems and strategies businesses use to ensure that they have a adequate supplies of raw materials for production and finished goods for shipment to customers, while also minimizing their inventory carrying costs. Storing excess inventory is costly because the space and financial resources invested in the goods can often be put to better use elsewhere. At the same time, however, inadequate inventory stores can result in costly production shutdowns or delays in filling customer orders. Inventory control system, help companies to find the delicate balance between too little and too much inventory.
Inventories are materials stored, waiting for processing, or experiencing and processing. They are global throughout all sectors of the economy. Most managers don’t like inventories because they are like money placed in a drawer. They also incur costs for the care of the stored material and are subject to spoilage and obsolescence. In the last two decades there have been a spate of programs developed by industry, all aimed at reducing inventory levels and increasing efficiency on the shop floor. Some of the most popular are Continuous Work in Process (CONWIP), just-in-time manufacturing, lean manufacturing, and flexible manufacturing.
Nevertheless, in spite of the bad features associated with inventories, they do have positive purposes. Raw material inventories provide a stable source of input required for production. A large inventory requires less replenishment and may reduce ordering costs because of economies of scale. In-process inventories reduce the impacts of the variability of the production rates in a plant and protect against failures in the processes. Final goods inventories provide for better customer service. The variety and easy availability of the product is an important marketing consideration.
There are other kinds of inventories, including spare parts inventories for maintenance and excess capacity built into facilities to take advantage of the economies of scale of construction. Because of their practical and economic importance, the subject of inventory control is a major consideration in many situations. Questions must be constantly answered as to when and how much raw material should be ordered, when a production order should be released to the plant, what level of safety stock should be maintained at a retail outlet, or how in-process inventory is to be maintained in a production process. These questions are amenable to quantitative analysis with the help of inventory theory.