INTRODUCTION:

Meaning:

Inventory analysis is the examination of inventory to determine the

optimum amount to keep on hand. Traditionally, this has been done by balancing the costs
of ordering and holding inventory (known as the economic order quantity). However,
considerably more inventory analysis must be conducted to account for additional factors,
including Just-in-time ordering, Order fulfillment philosophy, Inventory obsolescence,
Cash availability.

In short, inventory analysis involves more than the use of a single calculation to
determine inventory levels. Instead, a number of factors involving company strategy,
production systems, financing, and the requirements of the marketplace must all be
examined to arrive at the optimal inventory level.

Definitions:

Inventory control can be defined as “Determining and maintaining

optimum investment in inventory given the significance of benefits and cost association
with holding inventory ”.

Inventory Control relates to “ a set of policies and procedure by which an

industries determines which materials it will hold in stock and the quality of each that
it will carry in stock “. Therefore inventory control is otherwise known as STOCK
CONTROL.

Merits of inventory analysis and techniques:

 It enables the material to be procured in economic quantities.

 It eliminates delays in production caused by the non-availability of required
materials.
 It works as a check on the over accumulation of inventories and thereby results in
minimum investment consistent with production requirements.
 It reduces inventory losses caused by inadequate inspection of incoming materials
and losses due to obsolescence, deterioration, waste and theft while in storage.
  It ensures proper execution of policies covering procurement and use of materials.
It also facilitates timely adjustment with changing conditions in the market

Demerits of inventory analysis and techniques:

(i) Efficient inventory control methods can reduce but cannot eliminate business
risk.

(ii) The objectives of better sales through improved service to customer;

reduction in inventories to reduce size of investment and reducing cost of production
by smoother production operations are conflicting with each other.

(iii) The control of inventories is complex because of the many functions it

performs. It should be viewed as shared responsibilities.