Q. Importance of Inventory Management

1) Inventory helps in smooth and efficient running of business.

2) Inventory provide service to the customers immediately or at a short notice.

3) Due to absence of stock, the company may have to pay high prices because of piece-wise purchasing. Maintaining of inventory may earn price discount because of bulk purchasing.

4) Inventory also acts as buffer stock when raw materials are received late and so many sales orders are likely to be rejected.

5) Inventory also reduces product costs because there is an additional advantage of batching and. long smooth running production runs.

6) Inventory helps in maintaining the economy by absorbing some of the fluctuations when the demand for an item fluctuates or is seasonal.

7) Pipeline stocks (also called process and movement inventories) are also necessary where the significant amount of time is consumed in the transshipment of items from one locality to another.