What is inventory?
What are its varieties? Inventory is the buffer between two related sequential
activities. Between purchase and production, between the beginning and completion
of production, and between production and marketing, buffers are needed. Buffer
means a cushion to fall back on. Production should not suffer due to some difficulty
in purchase of raw materials. Marketing should not suffer due to some difficulty in
production. If the business has some stock of raw materials, a temporary difficulty in
purchase will not affect production since the stock of raw materials can be used. If
there is a stock of finished goods marketing will not be effected due to any
temporary hurdle in production. The stocks of raw materials and finished goods,
therefore serve as buffers absorbing the difficulties in purchase and production
respectively. So, inventory takes different forms. Stocks of raw materials, work-inprocess and finished goods are prime inventory. Stocks of consumable stores (like
cotton waste, lubricants, etc) maintenance materials (tools, jigs, etc), and packing
materials are some secondary inventory. A business has to carry certain amount of
inventory. Carrying too much or too little of inventory is bad. Inventory management
is concerned with deciding of right quantity.
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