Ques : Describe Objective of Inventory Management ?

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The twin objectives of inventory management are operational and financial. The operational objective means that the materials and spares would be available in sufficient quantity on time so that work is not disrupted for want of inventory. The financial objective means that investment in inventories should not remain idle and minimum amount of capital should be locked in inventories. The objectives of inventory management are summarized as follows:

Operating Objectives

1) to ensure continuous supply of materials
2) to ensure uninterrupted production
to minimize risks and losses
to ensure better customer service
to avoiding stock out danger.

Financial Objectives

1) to minimize investment
2) to minimize inventory related costs and
3) to ensure economy in purchasing

Factors Affecting Level of Inventory

As stated in the previous sections the firm should maintain its inventory at reasonable
level. The quantum of inventory depends upon several factors, some of the important
factors are mentioned below:

 Nature of Business
 Inventory Turnover
 Nature and Type of Product
 Market Structure
 Economies of Production
 Inventory Costs
 Financial Position
 Period of Operating Cycle
 Attitude of Management

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