CONCLUSION
Inventory or stock control consists of managing the materials carried in stock, both
as to kind and amount, so that their use will make the greatest possible contribution
to the net profit of the business. A system of stock control must be designed to insure
against shortages of materials whether the firm is in the industrial or mercantile field.
A second general purpose of stock control is to keep the stocks on hand as small
as possible without jeopardising sales or the continuity of production processes. The
business which keeps its stocks at the lowest minimum level, consistent with demand,
has several advantages. First, its capital investment in inventory items or materials is
kept at a minimum level. Second, the items in stock are much fresher and timely
if the inventory is held at the lowest point than if it is allowed to expand without
careful control. Third, as a corollary advantage, holding inventory at a minimum
level tends to reduce losses from depreciation and obsolescence. This is obvious since
materials and supplies sitting in a storeroom serve only one purpose, that of assuring
their availability when needed. Fifth, the practice of carrying small, fast-moving inventories tends to lessen the losses a manufacturer would suffer from price declines
on a falling market. This means that the period between the time when materials are
received into stock and the time when they move out into use or delivered to a customer
is short. Therefore, on a falling market the manufacturer who limits his stock is
likely to dispose of it at a price level not too far below that at which he bought it (or
the cost of manufacturing it). Of course, the converse is true and comments were
made on Anticipation Stock in the first section.
This paper has sought to discuss the general concepts and techniques of inventory
management and control. We have covered those techniques used to manage the
items in the inventory investment, based on the firm's inventory policies and objectives,
and how management should set these policies. The emphasis has been on those
companies which purchase their inventories. However, when a firm manufactures
inventory, it must blend these techniques with a system of production planning.
These companies must deal with lead times which depend on the control of backlogs,
which in turn requires planning of capacities and control of production rates. Therefore,
the control of lead time involves inventory control, production planning, and
production control. Production planning is defined as "the function of setting the
limits or levels of manufacturing operations in the future, consideration being given
to sales forecasts, and the requirements of men, machines, materials and money"[15].
It serves as the link between Inventory Control (availability of materials), and Production
Control (availability of manpower and machinery).
However, as mentioned, our emphasis has centred on inventory as a capital investment.
We have covered the ABC concept of classification, the EOQ concept, forecasting
using single smoothing with error tracking, periodic review and order point
ordering controls for independent demand, and requirements planning for dependent
demand. We have also discussed the working stock's, safety stock's, and customer
service's affect on capital investment. We concluded the paper with the use of exchange
curves to review possible inventory policies, and the use of management policy
variables to control inventories within inventory policies. The contents seek to
provide the basic knowledge needed by managers whose decisions affect inventories,
and for top management who must determine the firm's policies and objectives.