Page 130 - DMGT525_MATERIALS_MANAGEMENT

Unit 9: Inventory Control

3. …………… is done by factoring in the demand and the lead time required to get the order Notes
filled.
4. Security involves alarm systems for securing ……………. and real-time tracking of
inventory items.
5. Climate-controlled storage systems and automated ……………. can help with inventory
quality control.

9.2 Advantages of Inventory Control

The various advantages of inventory control are as follows:
1. Makes JIT Possible: JIT is a frequently used inventory ordering system that requires the
use of an effective inventory control system and a solid understanding of the demand of
the products a company sells. JIT stands for “just in time,” meaning that supplies arrive
from the supplier just in time to be made into products and products are produced just in
time to fulfill orders.

2. Lowers Cash-Flow Pressures: When inventory is ordered without a real system in place, it
is merely an estimate of what may be needed. An inventory control system based on
actual data allows for ordering the right amount of inventory at the right time so that
demand is met without carrying excess items in the warehouse.
A system that can accomplish this will free up the cash that may be unnecessarily spent on
the inventory guessing game at a company without an effective system. Having more
products on hand than can possibly be sold will only mean there is less cash available to
accomplish other goals within the company.
3. Fewer Missed Sales Opportunities: The flip side of stocking too much inventory because
of a lack of inventory control is the absence of a product for the same reasons. Guessing the
amount of an item to order from a supplier may leave the company short of what the
demand is, meaning the consumer will not be able to buy what she is looking for should
she show up when the inventory is lacking a product.
Most businesses rely on money made from sales in order to be successful. If the company
cannot make the sale for any reason, they suffer for it. Having inventory control in place
will help eliminate this sort of problem and will improve the reputation of the company
among customers who always know they can count on the business to have what they
need when they need it.

4. Awareness of Discrepancies: With a proper inventory control system in place, it is easy to
compare physical inventory counts to the numbers in the system. If there is a discrepancy,
management will know about it immediately instead of the missing or excess items being
overlooked for weeks or months.
If an employee is stealing or if mislabeling or point-of-sale software glitches are causing
an item to ring up as something else, this type of inventory control will help identify the
problem so that it can be remedied quickly and have the least possible effect on business.

Self Assessment

Fill in the blanks:

6. ………….. is a frequently used inventory ordering system that requires the use of an
effective inventory control system.

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