INTRODUCTION Inventories constitute the most significant part of current assets of a large majority of companiesin India.

On an average, inventories are approximately 60% of current assets in public limitedcompanies in India. Because of the large size of inventories maintained by firms, a considerableamount of feuds is required to be committed to them. It is therefore, absolutely imperative to mnage inventories efficiently and efficiently in order to avoid unnecessary investment. A firmneglecting the management of inventories will be jeopardizing its long run profitability and mayf a i l u l t i m a t e l y . I t i s p o s s i b l e f o r f o r e a c o m p a n y t o r e d u c e i t s l e v e l s o f i n v e n t o r i e s t o a considerable degree e.g. 10 to 20 percent, with out any adverse effect on production and sales, byusing simple inventory planning and control techniques. The reduction in excessive inventorycarries a favorable impact on a companys profitability. MEANING OF INVENTORY:Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. Inaccounting language it may mean stock of finished goods only. In a manufacturing concern, it may includes raw materials, workin-progress and stores etc. In the form of materials or suppliesto be consumed in the production process or in the rendering of services.In brief, Inventory is unconsumed or unsold goods purchased or manufactured. NATURE OF INVENTORIES :-

Inventories are stock of the product a company is manufacturing for sale andc o m p o n e n t s t h a t m a k e u p t h e p r o d u c t . T h e v a r i o u s f o r m s i n w h i c h i n v e n t o r y e x i s t i n a manufacturing company are raw materials, work in progress and finished goods. RAW MATERIALS:Raw materials are those inputs that are converted into finished product thoughthe manufacturing process. Raw materials inventories are those units which have been purchasedand stored for future productions. WORK IN PROGRESS:-

These inventories are semi manufactured products. They represent products thatneed more work before they become finished products for sales. FINISHED GOODS:Finished goods inventories are those completely manufactured products whichare ready for sale. Stock of raw materials and work in progress facilitate production. While stock of finished goods is required for smooth marketing operation. Thus, inventories serve as a link between the production and consumption of goods. The level of three kinds of inventories for a firm depend on the nature of its business. Amanufacturing firm will have substantially high levels of all three kinds of inventories, while ar e t a i l o r wh o l e s a l e f i r m wi l l h a v e a v e r y h i g h a n d n o r a w ma t e r i a l a n d wo r k i n p r o gr e s s inventories. Within manufacturing firms, there will be differences. Large heavy engineering

companies produce long production cycle products, therefore they carry large inventories. On theo t h e r h a n d , i n v e n t o r i e s o f a c o n s u me r p r o d u c t c o mp a n y wi l l n o t b e l a r g e , b e c a u s e o f s h o r t production cycle and fast turn over. Firms also maintain a fourth kind of inventory, supplies or stores and spares. SUPPLIES: It includes office and plant cleaning materials like soap, brooms, oil, fuel, light, bulbsetc. These materials do not directly enter production, but are necessary for production process.Us u a l l y, t h e s e s u p p l i e s a r e s ma l l p a r t o f t h e t o t a l i n v e n t o r y a n d d o n o t i n v o l v e s i g n i f i c a n t investment. Therefore, a sophisticated system of inventory control may not be maintained for them. Download 1 Go BackComment Link Embed Zoom of 104 Readcast 0inShare