Are you aware how much capital is tied up unnecessarily in maintaining stocks of items which may be non-moving or slow-moving?

On an average, inventories are 60 % of the current assets in any institutional or industrial unit. Because of a large size of inventories maintained by them, a considerable amount of fund is locked up. It is, therefore, required to manage the same efficiently & effectively in order to avoid unnecessary investment. An institute neglecting the inventory management may fail ultimately. It is possible for an institute to reduce its level of inventories to a considerable degree, e.g. 10 to 20 per cent, without any adverse effect on the smooth working, by using simple inventory planning and control techniques. The reduction in inventories carries a favorable impact on the working of the institute. Maintaining inventories involve in locking up of the institute’s funds and incurrence of huge storage and handling costs. Both excessive & inadequate inventories are not desirable. The institute should always avoid a situation of over investment or underinvestment.

Supplies or stores and spares play a major role in the inventory management of SME organizations/institutes. Supplies include office & plant cleaning materials like soap, brooms, oil, fuel light bulbs etc. Though these materials do not directly enter into production, but they are necessary for smooth production process. The carrying costs, such as the costs of storage, handling, insurance, recording & inspection, also increase the cost of the inventory.