Control Procedures

It is of utmost importance that a company have a good system of materials inventory control. Achievement of good control keeps costs at a minimum level and plant production on a smooth, uninterrupted schedule. The following principles should be incorporated into an inventory-control system:
 Inventory is the result of purchasing raw materials and parts. It is also the result of applying labor and factory overhead to the raw materials to produce finished goods.
 Reduction of inventory is the result of normal use and either finding alternative uses for or scrapping unneeded items.
 Optimum inventory investment is based on quantitative techniques that are designed to minimize the cost of carrying inventory and the cost of ordering inventory.
 Efficient purchasing, management, and investment in materials depend on an accurate forecast of sales and resulting production schedules. Forecasts help determine when to order materials. Controlling inventory is accomplished through production scheduling.
 Inventory control is more than maintaining inventory records. Control is exercised by people who are making personal judgments partially on the basis of their past experiences. Their decisions are made within a general framework of organizational objectives and policies to achieve them. Control is relative, not absolute.
 Methods of inventory control vary depending for the most part on the cost of the materials and their importance to the manufacturing process. Expensive materials, or those essential to production, tend to have their program for control reviewed more frequently despite the cost and effort of doing so by experienced personnel.