# Inventory Control
## Objective
The objective of inventory control is to strike a balance (trade-off) between stock-out and over-stocking. Stock must be sufficient to meet production requirements so that an uninterrupted production flow is maintained, without tying up excess working capital.
## Bases of Inventory Control
Management may control inventory through:
1. By setting quantitative levels — e.g. reorder level, maximum, minimum, danger levels.
2. On the basis of relative classification — e.g. ABC, VED analysis.
3. Using ratio analysis — e.g. inventory turnover ratio.
4. Physical control — perpetual inventory and physical verification.
## Importance of Proper Recording and Control of Material
| Aspect | Why it matters |
|---|---|
| Quality of final product | The quality of output depends on the quality of input materials. |
| Price of final product | Materials form a major part of the product, so material cost directly affects the final price. |
| Production continuity | Enough stock must be held to avoid interruptions to production. |
| Cost of stock-holding & stock-out | Holding stock causes interest/opportunity costs and losses (evaporation, obsolescence); under-stocking causes lost revenue and missed commitments. |
| Wastage and losses | Some wastage in handling is normal; losses are normal or abnormal depending on material and process, and need efficient control. |
| Regular resource information | Up-to-date information on availability and usage supports timely, informed decisions. |