Organize the inventory or not by Gloria Martí

ORGANIZE THE INVENTORY OR NOT

Since immemorial times, ancient towns used to store large quantities of food to be used in times of drought. This is how arises the problem of inventories, as a way to cope with scarcity periods which will ensure the survival of life and the development of their normal activities. This form of storage of all assets and food needed for survival prompted the existence of inventories.

As you might know; the basis of all business is the buying and selling of assets and services; from here comes the importance of the inventory’s management by the same. This accounting management will allow the company to maintain control in a timely manner, and therefore, the economic situation.

The purpose of the inventory is to provide the company with necessary materials for its continuous and regular development, that is, the inventory has a vital role for the consistent and coherent operation within the production process and therefore meeting the demand.

The objective is to provide or distribute properly necessary materials to the company, placing them at disposal at the right time in order to avoid increases on lost costs of their selves, allowing to correctly satisfying the company’s real necessities which must keep adapted constantly. Therefore the inventory management must be closely monitored and controlled.

The inventory allows winning time because neither the production nor the delivery can be instantaneous; they must count of the product existence which ones may recur on rapidly in order to not make the real sale wait until the production process ends. And this is a very important point for the companies that are in a highly demand market.

Some companies consider that they should not keep any type of inventory because, while the products are in storage, they do not generate performance and must be financed. However it is necessary to maintain some kind of inventory because:

1. Demand cannot be certainly predicted
2. Some time is required to develop a product in order to sell it.

Besides that fact that excessive inventories are expensive, inventories are also insufficient.

To conclude, the best inventory strategy is the one which understands and considers the characteristics of the products’ demand and their complexity. Due to the impact that the inventory has in all chain, it must be a critic business process which ensures a proper maintenance of the systems that administrate it.