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Inventory Control Systems



Inventory is naturally difficult current asset to control. By the location, in a manufacturing company, it could be spread from the warehouse to the production area, certain companies may store their inventory in another [offsite] location. It may use hundreds or even thousand of part codes. It may contain obsolete items.  Some of them may belong to the company while some others may belong to other parties.

In this post series we are going to talk about inventory control systems, what issues to be addressed by an inventory control system. Then It will be broken into sets of possible detail (described) inventory controls in such areas as: in-transit inventory, inventory storage, obsolete inventory, and inventory transactions.




What Issues To be Addressed by an Inventory Control System?

There are at least three major concerns to be addressed when dealing with inventory:

1. It should be designed to prevent or at least minimize the risk of loss by any means. Okay, there is no way [neither any system] to hundred percent prevent inventory loss. But at least there should be sufficient controls are place to mitigate the greater risks of inventory loss.

2. The control system should ensure that goods shipped out billed to customers in appropriately manner. Ideally the system should be able to make sure that every inventory shipped out of the warehouse area is attached with proper bills. Proper bill means proper quantity, specifications, and amount to the correct customer.

3. The control system should ensure that costs are applied to inventories in fairly and consistently manner.


Read also:

Inventory Costing Control

Inventory Transactions And Billing of Shipped Goods Control

Inventory Stocking Control

Inventory Storage And Off-Site Storage Control

Inventory In-transit Control 

Obsolete And Scrap Inventory Control  



  1. rajesh.kumar1978

    Dec 5, 2008 at 6:34 am

    I want to know the general formula for calculating no of days inventory

    avg sales of branch = 20 lacs
    inventory at branch = 25
    NO of DAYS = ???

  2. Putra

    Dec 6, 2008 at 1:56 am

    You can use Inventory Turnover Ratio. The most simple turnover calculation is to divide the period-end inventory into the annualized cost of sales. A variation on the preceding formula is to divide it into 365 days, which yields the number of days of inventory on hand. This may be more understandable for you; for example, 43 days of inventory is more clear than 8.5 inventory turns, even though they represent the same situation, isn’it?.

    The formula is as follows:

    365 [:] [Cost of goods sold[:]Inventory]

    To do so, then you need to know what is the Cost Of Goods Sold and the inventory value at the respective branch.

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