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Inventory is accounts for all parts and Raw Material Company keep for production and sales in future. Inventory can be a boon and a bane for the company because of the uncertainty attached to it. A company needs to carry an inventory because sometimes production can get affected because of the unavailability of raw materials. Sometimes production demand is so high that the market needs more finished products than a company has produced. To avoid such conditions and minimize their effect on the company, it needs to create a proper model to help the company decide the inventory; such a management model is called inventory management.
Managers always use these inventory management models to reduce the surplus cost used in purchasing extra raw materials, transportation, and storage of unprocessed or finished products. Companies that have more raw materials and less production rate are very much dependent on inventory management.
However, it is not just about raw materials; they also help manage properties, products, and goods in stock. Big companies where raw material is the main products like in food processing companies, retail businesses, etc. minimize, the manufacturing companies need to produce a lot of raw material to prepare for unpredicted situations. But a large amount of inventory can become a liability as capital there is a risk of spoilage, storage cost, damage, theft, etc.
For this reason, inventory management for all kinds of companies is required to know the amount of raw material to purchase, ordering it, production cost, the storage cost of raw material. All companies have their method of inventory management. But certain companies need not worry much as there are long-lasting products. At the same time, the food industry and clothing industries need inventory management as their goods can perish or go out of fashion.
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