Introduction The major source of revenues for retail and wholesale businesses is the sale merchandise. In terms of dollars, the inventory of goods held for sale is one of the largest assets of a merchandising business. The cost of goods sold is the largest deduction from sales because merchandise is continually being bought and sold. In fact, this cost is often larger than the total of other expenses.
Inventories are also important to manufacturing companies.
Less money is there by tied up in inventories and the costs associated with carrying inventories are reduced. The purpose of this procedure, as the name implies, is to make sure that all materials, resources, operators, and other elements required for a production process will be easy to get at the necessary place just at the time in which they are needed to make the process to continue. In order to meet the demanding timetables of multiple customers, suppliers must know the ability of their production facilities to meet alternate demand scenarios. Anything over the minimum amount necessary is viewed as waste, because effort and material expended for something not needed now cannot be utilized now. The different people put words in a different order but they all have the same idea of cutting costs to benefit the company.