STUDENTS' CORNER - 102
Inventory Reduction is another predominant objective of the logistics.
Inventory refers to a collection of products, materials and even
unfinished goods, stored in a warehouse for further commercial activities. It
also has another equally if not more important dimension: it is an accounting
term. Let us see how it is critically
connected with the accounts of the company.
To stock materials in a warehouse is to have invested in the purchase
of raw materials, in getting them converted into finished products through
employees and also keeping incomplete products for further activities. The company has put in a lot of money in the
stock. Unless the stock is converted
into cash through sales, the money invested is unproductive bringing no returns
to the company.
This situation explains many things. Warehousing is essential as the
company cannot afford to fail to satisfy the customer by not meeting his needs
in time. Therefore, stocking the products within a margin of volume that will
be suggested by the marketing personnel is well within the interests of the
business. But at the same time, stocking out of proportion to the expected
demand of the market leads to waste of finance.
The investment in the stock cannot be used for any other business
activity. Here comes the critical importance of inventory management which in
fact aims at maintaining minimum requirement of products.
It requires a skill that knows how to balance between stock in excess
and stock in shortage. Excess stock cuts
in the profit of the company and shortage of products will lead to loss of
business and a customer. It is suggested
that to avoid undue problems of this inventory intricacies, just in time
inventory can be adopted. You get the
materials required on time so that your customers too get them in time. To achieve this goal, logistics management
comes to rescue. Efficient logistics
management, too complex and a difficult a task to be entrusted to rather
novices, attains the goal of reduction in inventory.