ADVANTAGES AND DISADVANTAGES OF

THE INVENTORIES
JACKELYNE VILLAGRÁN MAGALLANES

MSM. OSCAR H. MONJARÁS ENRÍQUEZ

MAY 05 2020
Advantages and Disadvantages of Inventories
ADVANTAGES
REDUCE ORDERING COSTS.
When ordering a batch of raw materials from a supplier, a cost is incurred for it.
order processing, order tracking, and for the receipt of the purchase
in warehouse. By producing a larger quantity of batches, larger inventories will be maintained,
however, fewer orders will be made over a specified period of time and with
Hello, the annual costs of ordering will be reduced.

OPERATIONS CONTROL
This tool allows you to have relevant information about all the
products that are available, making it easier to delegate tasks to the
departments, adequately supply the demand for certain occasions or prevent that
Something accumulates with the risk of not being sold and incurring losses.
REDUCE COSTS DUE TO MISSING MATERIAL.
Not having available material in inventory to continue with production or
to meet customer demand, costs are incurred. Among these costs
we mentioned lost sales, dissatisfied customers, costs associated with delays or
stop production. In order to have a protection to prevent shortages, one can...
maintain an additional inventory, known as safety stock.
STORAGE.
In many sectors there are times when something simply is not requested, either because
during those months it has no use or concerns excess raw materials, but with
Inventories can have an organization of everything that is stored, since it
it will be saved for when production resumes or when a customer is
interested.
REDUCE ACQUISITION COSTS.
In the purchase of materials, acquiring larger batches can increase the
raw material costs, however, lower costs can be reduced due to
discounts for quantity and lower shipping and handling costs apply to
materials. For finished products, larger batch sizes increase
work-in-progress and finished goods inventories, however, the unit costs
averages could turn out to be lower due to machinery costs and
technology is distributed over larger batches.
HAVING THINGS ALWAYS AVAILABLE.
This tool allows any company to always have what the
people need, since in a place without materials to work or things that
selling, their activities will cease and economic losses will occur. This prevents them from
to the customer the inconvenience of not finding what they are looking for and to a lesser extent, at least they
He will let you know when it will be available again.

COST REDUCTION.
When something is offered in large quantities, it often comes with discounts that make
cheaper products and the inventory allows for an organization of all this.
In this way, it is possible to place orders with certain suppliers to significantly reduce
percentage of the price and have more profits.
PRODUCTION CONTROL.
In this case, different factors are included, as it can be from the clients,
until the conditions of the month. There are seasons when the demand for certain
products increase or where the food harvest is reduced and with an inventory is
it is possible to have a more adequate control to know exactly what will be necessary
in the future and thus be able to prepare, preparing a larger budget, making more
orders or working more.
DISADVANTAGES
STORAGE COST.
Among the costs incurred to store and manage inventories are
they find: interest on the debt, unearned interest that would be gained
about income, warehouse rent, conditioning, heating, lighting,
limpieza
insurance and management.
DIFFICULTY IN RESPONDING TO CLIENTS.
The existence of large inventories in process obstructs production systems.
increases the time required to produce and deliver orders to customers, with
It reduces the response capacity to changes in customer orders.
OBSOLETE PRODUCTS.
If something is kept for a long time, it may happen that something comes out.
to the market that does exactly the same, but with greater appeal and features
additional, so that all the products in the inventory would become obsolete and
the possibilities of selling them would be reduced, creating occupied space and many
lost.
COST OF COORDINATING PRODUCTION
Large inventories obstruct the production process, which requires more
personnel to solve traffic problems, to resolve congestion of the
production and coordinate programs.
EXPENSIVE TO MAINTAIN.

In this sense, there are several factors involved, since, if the storage capacity
if it is reduced or reaches its maximum capacity, offers would be lost in quantity and there would be
losses due to not being able to acquire more things. There is also the possibility that it
continued the manufacturing or take advantage of the materials that are already available, but as the
the space is limited, more space would need to be rented, which would increase the costs in the long run.
prices.

COSTS FOR DEFECTIVE PRODUCTS IN LARGE BATCHES.

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