Inventory of materials provides operational flexibility. but, many flexible operational systems need little inventory. explain this seeming contradiction
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Inventory is the store of extra raw materials to be used for production. It is considered to be the largest current asset that needs to be valued and counted in order to determine a company's profit and loss at the end of a business year.
Therefore, in order to smooth flow of business operations. Holding some form of inventory is important as it allows the business to meet up to the increasing demand instantly.
This is also quite true, that flexible businesses usually do not need a lot of inventory as they follow the technique of buying and purchasing according to the requirement.This can only be done if the company is able to establish good contact with the wholesaler who is ready to supply whenever needed.
But this may sometimes lead to increased costs for the business. As they are unable to gain bulk discounts, then ordering on urgent basis makes the wholesaler recognise the need, thus he is able to charge more.
So in my opinion holding some inventory is essential for the business be it a small one or a larger one. However, effective inventory management makes all the difference.
Therefore, in order to smooth flow of business operations. Holding some form of inventory is important as it allows the business to meet up to the increasing demand instantly.
This is also quite true, that flexible businesses usually do not need a lot of inventory as they follow the technique of buying and purchasing according to the requirement.This can only be done if the company is able to establish good contact with the wholesaler who is ready to supply whenever needed.
But this may sometimes lead to increased costs for the business. As they are unable to gain bulk discounts, then ordering on urgent basis makes the wholesaler recognise the need, thus he is able to charge more.
So in my opinion holding some inventory is essential for the business be it a small one or a larger one. However, effective inventory management makes all the difference.
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