Inventory has to do with the materials kept on hand, either to make a product or to resell it in most instances. This definition excludes services, because obviously they cannot be stored in the way that, say, automobiles and computer can. Though here we describe importance of inventory management. Why have inventory at all? Although rarely asked, this is a question that entrepreneurs should never over look.
The answer strongly influences how best to plan and control inventories. Reasons for having inventory include:
Importance of inventory management
- Avoid the loss of customers because a product is not in stock
- Enable customers to look over a product before buying it.
- Capitalize on discounts in the price of raw materials,
- Make a product in quantities that minimizes costs.
- Keep a plant from cutting back or shutting down.
- Speculate against increases in price and cost.
- Assure customers of prompt delivery.
- Protect against strikes.
Inventory control is important for all types of businesses but it is relatively more important in case of small business because of its limited resources and insignificant market share in the locality. Blockage of capital and inability to deliver goods when asked may seriously affect the prospect of the small business.
It is for this reason, small business should care most for managing inventory with all-time vigilance.
You may like also:
- Why do small businesses fail
- How to start a small business
- Selection of Line of Activity for Small Business
- Factors to consider when buying a small business
- Considerations of location selection for small business
- Human Involvement in Different Stages of Small Business
- How to do accounting for a small business
- Budgeting for small business
- Essential data of internal controls for small business
- How to increase profit in a small business
- How to computerize a small business
- Advantages and disadvantages of using computer in small business
- All about Small Business Risk Management strategy
- All about Small Business Production