Inventory control system is referred to as a system that incorporates all aspects of controlling inventories company. They include recording, turnover, storage and warehousing, tracking receiving, shipping, and purchasing. In different companies the activities related with each of the above mentioned areas might not be harshly contained in separate subsystems, though these functions have to be performed in sequence so as to have a well-executed inventory control system. Computerized systems of inventory control make it possible to combine different functional subsystems which are portion of the inventory management into a single unified system.
Role Of Inventory Management
Inventory management accomplishes a number of roles in an organization. They include tracking, reducing working capital and preventing out-of-stock situations among others. The inventory management system keep track of the company’s supplies and products. It involves recording of purchased inventory, inventory location, and inventories movement in a company. Inventory management also assist in lowering on the inventory investment to reduce cost and enhance the profitability of the company. Inventory management also makes it easy to measure the level of inventory and thus it makes it easy to identify low inventory and to alert the necessary department (Score, n.d.).
Reorder point is referred to as the inventory level where a firm would start a new processing execution or place a new order. It is computed as lead time in days multiplied by average usage. In this case, lead time is regarded as the time it takes the manufacturing of supplier process to deliver the ordered units. Daily average usage on the other hand is the number of units utilized every day. If a company holds a safety stock to serve as buffer and is the usage per day accelerates, the level of recorder would augment by the safety stock level. In this regard, the reorder point will be computed as lead time days multiplied by daily average utilization plus the safety stock.