Business Inventory control Essay Example | Topics and Well Written Essays - 500 words

Business Inventory control - Essay Example At the same time, money which is tied in inventory can’t be used for other purposes (Dubrin, 2011, pg: 211). Because of these reasons, it is very important to monitor and keep a control over inventory. Inventory control takes all the more importance because of the following reasons (Jawahar – Lal, 2008, pg. 118): a. Demand fluctuations –Demand for an organization’s products vary from season to season. In times of fluctuating demands, inventory plays a very critical role. Insufficient inventory will lead to frequent stock-outs whereas a very high inventory will lead to huge costs for storage and maintenance of inventory. b. Uncertainty in receiving the item from the supplier – Often there can be uncertainties in receiving inventory items from the supplier. An organization should keep buffer against such uncertainties by keeping sufficient stocks of the inventory. Inventory is one of the most critical components of the order to cash conversion cycle. It is important for an organization to have a control over the inventory because the same affects the profitability of the firm considerably. A less amount of inventory will lead to stock-outs and customers being returned without the sales while a high amount of inventory on the other hand leads to high cost in storage and