Evangelista, Justine Rey E. Ms.

Amarila

3.2BSBAFM-CY2-PM BAFCBMEC2 – Operations Management

TASK 3: Write an expository essay regarding the importance of inventory control in making
sound production and operations decisions, cite examples.

What Is Inventory Control?

Inventory control, also called stock control, is the process of ensuring the right amount of
supply is available in an organization. With the appropriate internal and production controls, the
practice ensures the company can meet customer demand and delivers financial elasticity.
Inventory control is essentially about reducing costs and improving service. It is also how you
manage your working capital to maintain consistent and adequate cash flow.

Achieving effective inventory control is accomplished by having the right product, in the
right place, at the right time. Maintaining the stock necessary to meet customer’s needs, deliver
on quality expectations and to minimize the numerous costs associated with holding inventory.

Inventory control have a different method to manage levels, safeguard the inventory and
to report it correctly on financial statements. This involves knowing your stock inside and out
how much is available, where it is and what condition it is in. It’s also about ensuring that you
are storing stock efficiently, keeping inventory costs down and minimizing the time spent
counting and controlling inventory.

There are four methods that inventory control used and these are; (1) Economic
Orders Quantity refers to the optimal amount of inventory a company should purchase in
order to meet its demand while minimizing its holding and storage costs. (2) Organizational
Control refers to processes by which agents are able to establish and maintain control over
an organization. It comprises the strategic planning process as well as methods and devices
that make other agents' behaviors consistent with objectives. (3) Quality Control helps you
stay on top of suppliers, monitor each batch of inventory, make better decisions around
future sales orders, keep customers happy, and meet any regulatory requirements. Lastly,
(4) Control the future is about forecasting the possible demand to avoid obsolescence and
spoilage that could affect the company.

There are four reasons why inventory control is important; (1) it is important since
it keep counts accurate through digital inventory system that electronically scans the
barcode of both new and retrieval items. (2) Inventory control can help the inventory
management to have a right decision since it can track the inventory that is sold and
replaced item in a specific time (3) Proper inventory control prevents inventory write-offs
for inventory that has no longer ha value by reducing waste, making it easy to calculate
inventory value, and helping your bottom line by only carrying inventory that you need.
Lastly, (4) Proper inventory stock control aims to let you hold the least amount of
inventory in your warehouse(s), yet enough to keep up with demand. These are the reasons
why inventory control is important in the company so that they can be updated for the item
that is needed to be reordered and at the same time management can determine the
product that is on trend.

In conclusion, Inventory control is no easy task. Too much inventory and you lack funds to
invest in other areas of the business or risk dead stock. Too little inventory and you may lose
potential sales, cause of massive delays, and customer satisfaction levels plummet. Inventory
control requires input and output from operations that lines up with demand, promotions, and
finances. Inventory management is an essential part of every business. with an effective
inventory management system in place, the business can significantly reduce its various cost like
warehousing cost, inventory carrying cost, ordering cost, etc. It improves the supply chain of the
business.