Inventory analysis is one the most popular topics in production and material management.

One
reason is that almost all types of business organization have inventory. For many firms inventory
is the largest current asset. Inventory is usually through in terms of stock of materials or idle
goods that are held by an organization for use sometimes in future. Whatever form inventory
tasks or whatever its purpose, it often represents a significant cost to a business firm. If a f irm
carries excessive inventories, it is estimated that the average annual cost of carrying inventory
would be approximately 30% of the total value of inventory held by the firm. Hence, if the
amount of inventory could be reduced to an optimal level, both stock cost and inventory carrying
cost can be reduced to the minimum possible level. Skillful inventory management can make a
significant contribution to a firms’ profit (Bhat, 2003:566).