Thesis And Limitations Of Inventory Management

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1. Introduction This chapter contains the background of the study, statement of the problem, significance of the study, research objectives, research questions, scope of the study and limitations of the study. 1.1 Background to the Study Inventories are essential for the successful operation and working of all business organizations. Inventory generally refers to the materials in stock. It is also called the idle resource of an enterprise. Inventories represent those items which are either stocked for sale or they are in the process of manufacturing or they are in the form of materials, which are yet to be utilised (Kumar & Suresh, 2008). Firms and organisations typically stock hundreds or even thousands of items in inventory ranging from…show more content…
On the other hand, because inventory is expensive, it is also important to stock leaner quantities of it to avoid paying carrying costs like taxes, insurance, security, and storage and to avoid paying the opportunity cost of unavailable working capital. The overall objective of inventory management is thus to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds (Stevenson, 2007). It is therefore quite evident that effective inventory management can make a significant contribution towards a company’s profit as well as increase its return on its total…show more content…
This assumption cannot however be applied to perishable goods which become partially or entirely unsuitable for consumption with the passage of time. Perishable goods constitute a large portion of retailer inventory and they lose value with time due to deterioration and or obsolescence. Retailers dealing with such goods require considering the factors of short shelf life and the dependency of sales on inventory displayed in determining optimal procurement policy (Nagare, Dutta & Kambli, 2013). Inventory management of perishable items is a major challenge for many retail organisations; ordering too many or too few of these items directly impacts sales and profits. Retail organisations manage the availability of goods with an effective supply chain cycle. The availability of goods whether perishable or otherwise depends to a large extent on the demand per day at the retailer's outlet (Rai, Singh & Vaish, 2013). Determining the demand per day for perishable goods in retail stores is very difficult in practice. For perishable goods, their demand per day is said to be stochastic (non-deterministic) in nature and this adds to the complexity in their
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