Inventory control is managing inventory to maximize benefits, including setting limits and keeping enough elements on hand. It helps manage tax obligations and increases profitability. The approach applies to raw materials, finished products, and aids in loss prevention efforts. Efficient inventory control procedures allow companies to devote more finances to other essential operations.
Inventory control is the process of managing an inventory so that the business derives maximum benefit from the existence of the inventory. The strategy typically includes functions such as setting limits on the effective size of inventory, while also taking care to keep enough elements on hand to allow the company to operate at maximum efficiency. When conducted responsibly, inventory control also helps businesses manage their tax obligations more effectively and thereby increase the overall profitability of the operation.
While there are many different theories and processes that are employed in inventory management, many of them are based on the concept of usage. This is especially true when the inventory in question is composed of raw materials or equipment that are important to the ongoing operation of a manufacturing facility. The idea is to make sure there are always enough resources available to maintain the desirable level of production, but not so many resources that they sit in storage for long periods of time.
In many countries, taxes are levied on inventories of this type. By exercising responsible inventory management, businesses are able to keep inventories as low as possible to reduce their tax burden, but can never run short of what is needed to enable the business to fulfill orders from customers . This delicate balance is normally achieved by establishing order procedures that allow materials to be received shortly before they are needed for production, thus ensuring that they do not spend a lot of time in stored inventory.
The same general approach to inventory control also applies to inventories of finished products. Here, the idea is to produce enough goods to meet customer demands and fill orders in a timely manner, but not create situations where finished goods need to be stored for long periods of time. By accurately projecting customer usage, production quotas can be adjusted so that orders are processed efficiently, without the need to maintain large inventories to fill those orders. This aspect of inventory control can also aid in loss prevention efforts, since the shorter the storage time for finished goods, the less chance there is of those goods being damaged in some way.
Robust inventory control also allows companies to make the most of their resources. Less inventories mean fewer company resources tied to the value of the inventories themselves. Coupled with the lower tax burden, the company with efficient inventory control procedures can devote more of its available finances to other essential operations, such as marketing campaigns, research and development, and manufacturing process refinement.
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