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This web site is designed to help navigate
you through the mountain loads of information about inventory
management.
An important task of working-capital
management is to ensure that inventories are incorporated into the
firm's planning and budgeting process. Sometimes, the level of inventory
reflects the orders received by the general manager of the plant without
serious analysis as to the need for the materials or parts. This lack of
planning can be costly for the firm, either because of the carrying and
financing costs of excess inventory or the lost sales from inadequate
inventory. The inventory requirements to support production and
marketing should be incorporated into the firm's planning process in an
orderly fashion.
The three subsystems are tied together in a single inventory-management system. The inventory management system can also be illustrated in terms of the three subsystems that comprise it. The figure below ties each subsystem together and shows the three items of information needed for the decision to order additional inventory.
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