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{{B}}Inventory{{/B}} Inventory belongs to an important element of the cost of doing business in a large company. If a company is assembling cars, they must have a large number of parts in hand so that the assembly line does not stop because one part is missing. If cars are going down the assembly line and one person is supposed to fasten wheels on to the car, the whole line will stop if he runs out of fasteners. This means that several hundred men will be waiting while someone must find fasteners for the wheel. So there must be a sufficient number of parts of all sorts nearby in order to keep the car assembly line running smoothly. A large supply of spare parts is very expensive, so a company will try to keep its inventory as low as it can without finding it necessary to stop production for lack of a part. In a planned company, i.t was often difficult to secure spare parts and so many companies ordered many extra parts and kept large supplies of parts so that if a mistake was made in planning, they could continue to produce. This was known as just-in-case inventory. As an economy moves from s planned economy to a market economy, the-important thing for a business is to make money and not just produce. It's very expensive to keep large suppliers available just in case there is a delay in delivery. So increasingly, companies are moving to another system of inventory of spare parts as low as possible. This way they do not have to pay for parts used in production until just before they are paid for the finished product. This saves them much capital and is a much more efficient method of operating. The problem with this is that if a shipment is delayed or lost for some reason, the whole factory may have to stop because they don't have one little part. This is very expensive. Most modern industries try to keep inventory as low as possible, but when they adopt just-in-time inventory control, they try to keep at least some extra in stock for emergencies: |