MANZANO, May Angelica R. Oct.

5, 2014

MBA-1 POM

Assignment No. 4: Inventory Management

1. What is the impact of Inventory Control and Management to the operations

and production of economic goods?

Inventory Control and Management is said to be the fundamental of

operations management activity. Typically, firms carry out inventory

management with the purpose of maintaining the right amount of stocks to

meet customers’ demands and ensuring continuous supply of materials to

facilitate operations. Inventory is one of the most important assets of an

organization. It provides a significant link between production and sales of

product. Thus, it is very essential for firms to undertake effective and

efficient inventory control methods in order to achieve its goals of satisfying

its customers and at the same time, increasing their profit.

Successful inventory control and management enables an

organization to balance the cost of holding these inventories and the benefit

it get from maintaining such level of inventories to meet customer demands.

It also enables them to keep track of inventory transactions and assist them

to plan carefully the inventory level that is most beneficial to the

organization.
 As stated earlier, inventories are one of the most important assets of

an organization. It is basically the stocks of resources held for the purpose

of sales (merchandise inventory) or for future production (raw materials).

Since it will be very economically unsound and physically impossible to

have goods arrive exactly when demands for them occur, inventory of goods

is kept to meet customer demands. Without stock on hand, customers

would have to wait before their orders are fulfilled. Some customers might

not be willing to wait and the tendency is they will go to other firms who can

satisfy their demands. Inventory management is also applied in the

production system in order to ensure a smooth flow of production and to

reduce the cost of idle inventory on hand. Production materials like raw

materials, work in process and spare parts are kept to meet reliability of

operations, flexibility of production and to reduce cost of production.

To conclude, inventory control and management implies the

coordination among materials procurement, utilization and controlling. It

ensures that the firm has the right quantity and quality of inventory at the

right time and at the least cost possible.

2. How is Inventory Control and Management related to the three (3) major

thrusts of operations namely : Economy, Quality and Quantity.

With regard to economy, inventory control management helps

managers to minimize the cost of carrying these inventories through proper

planning of the right quantity of inventories to be maintained in their

warehouse. Knowledge of inventory control and management also enables

the management to reduce cost by balancing the holding costs and ordering

cost (EOQ and EPQ model). Moreover, if there are sufficient inventories

needed in the production (raw materials), then the production speed will be

faster, thus reducing the production cost.

As mentioned in my discussion in question number 1, inventory

management helps managers to determine the right quantity and helps in

achieving the best quality of goods. Obviously, inventory control and

management is related to quantity. It helps managers to properly plan the

optimum level of inventories to be kept in its storeroom in order to satisfy

the demands of their customers as they arise. For quality, inventory control

and management is useful in the production system. It ensures a smooth

flow of production in order to produce the best quality of products that will

meet the expectations of their customers.

Clearly, inventory control and management is directly related to the

satisfaction of customers and profitability of an organization. Thus, it is

important that a business organization adopts inventory methods that will

best suit their objectives.