"Inventory" to many business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products. Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts money into the cash register. In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. In fact, many small and large businesses cannot absorb the types of losses arising from poor inventory …show more content…
Source(farmers restaurant case)
* If inventory management is taken seriously and done properly it will help farmers restaurant to reduce its costs and increase sales. An effective way of achieving this is by having an inventory management system in place, which will track and maintain inventory so that customer demand can be met. They can also be linked to the accounting or management departments, so that all operations can become more effective, reducing costs and maximizing profit.
* An inventory management system works by recording customer sales in a real time format, and automatically re-ordering stock when it reaches a pre-determined level. This electronic ordering is called EDI (Electronic Data Interchange) and means that companies will always carry necessary stock, and so will not waste money on ordering what is not needed.
* These systems can also differentiate between different styles of the same stock, such as size or colour variations, so a company will not have an excess of one and not enough of the entire range. This process enables management to see what is selling and what is not, so future decisions can be made using facts, rather than hunches, again making inventory more cost effective.
* It is also important to maintain excellent and accurate inventory management because as the needs of