The twin objectives of inventory management are financial and operational. The operational objective implies that the materials and spares would be obtainable in sufficient quantity on time hence work is not disrupted for want of inventory. The financial objective implies that investment in inventories must not keep idle and minimum amount of capital must be locked in inventories. The objectives of inventory management are summarized as given below:
Operating Objectives
1) To make sure continuous provides of materials
2) To make sure uninterrupted production
3) To minimize risks and losses
4) To make sure better customer service
5) To ignoring stock out danger.
Financial Objectives
1) To minimize investment
2) To minimize inventory related costs and
3) To ensure economy in purchasing
Factors Affecting Level of Inventory
As stated in the previous sections the firm must remain its inventory at reasonable level. The quantum of inventory based upon several factors, several of the important factors are as given here:
a. Financial Position
b. Nature and Type of Product
c. Market Structure
d. Nature of Business
e. Attitude of Management
f. Inventory Costs
g. Inventory Turnover
h. Economies of Production
i. Period of Operating Cycle