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Inventory Control
Effective inventory control insures that an adequate but not excessive bank of materials is on hand at all times to meet operating requirements. Under Utopian plant operation, materials would move through the plant in a thin smoothly flowing stream, and no storage of material would be required at any point. However, seldom if ever is this entirely practical, for segregation and storage of material are necessary to permit of production schedule, to facilitate manufacturer in economic-lot quantities, to take advantage of quantity purchase, and to prevent possible pilferage or the “selection” of work by the production operators.
The size of the inventory control carried is based principally on the relation costs involved. Dorman materials represent a considerable cash investment, and their storage incurs certain carrying cost. However, the costs of not maintaining an adequate inventory are likewise great for, as production delays develop, other and often more serious cost factors are introduced. Hence, it is the function of effective inventory control to maintain an inventory of such size that the coasts of carrying too large an inventory are balanced against those resulting from an inadequate bank of materials.
“The stocks of materials required by any industrial enterprise represent a large financial outlay and investment is fact occasionally overlooked by the plant personnel and supervisory force.”
The story is told of an operating executive who at one of his periodic foremen’s meeting with apparent carelessness dropped some coins form his pocket to the floor. The foremen promptly rushed to gather up the coins for him---for which efforts the executive duly gave his thanks together with the subtle reminder that materials in the plant represented a considerably greater investment than that represented by the company’s cash. He then proceeded to contrast their interest in retrieving cash from the floor with the way in which they willingly permitted materials to be left on the floor and around machines and benches where these materials frequently became damaged, lost or stolen.