## Inventory Control
### Core Objective
Inventory control is about striking a balance — holding enough stock to keep production running without interruption, but not so much that money is tied up unnecessarily.
> The central trade-off: Stock-out (running out) vs. Over-stocking (holding too much).
- Under-stocking → production stops, lost sales, missed commitments.
- Over-stocking → tied-up capital, interest/opportunity cost, risk of obsolescence and deterioration.
### Four Bases of Inventory Control
Management controls inventory through any combination of these approaches:
| Basis | What it means |
|---|---|
| By setting quantitative levels | Fixing re-order level, minimum, maximum, and danger levels |
| On the basis of relative classification | Classifying items by importance/value (e.g., ABC analysis) |
| Using ratio analysis | Monitoring inventory turnover and similar ratios |
| Physical control | Physically safeguarding, storing, and counting stock |
### Why proper recording and control of material matters
| Reason | Explanation |
|---|---|
| Quality of final product | Output quality depends on the quality of input materials |
| Price of final product | Material is a major cost component, so it directly affects selling price |
| Production continuity | Adequate stock avoids interruptions to the production flow |
| Cost of stock-holding & stock-out | Holding costs interest/opportunity money and risks losses (evaporation, obsolescence); under-stocking loses revenue |
| Wastage and losses | Some wastage is normal; losses are classified as normal or abnormal and need control |
| Regular resource information | Up-to-date availability/usage data supports timely decisions |