Quantitative Analysis for Management, 13/e

6.1 Importance of Inventory Control

Inventory control serves several important functions and adds a great deal of flexibility to the operation of the firm. Consider the following five uses of inventory:

1. The decoupling function

2. Storing resources

3. Irregular supply and demand

4. Quantity discounts

5. Avoiding stockouts and shortages

Decoupling Function

One of the major functions of inventory is to decouple manufacturing processes within the organization. If you did not store inventory, there could be many delays and inefficiencies. For example, when one manufacturing activity has to be completed before a second activity can be started, it could stop the entire process. If, however, you have some stored inventory between processes, it could act as a buffer. ...