In the preceding section the objectives of inventory management have been outlined. The financial managers should aim at an optimum level of inventory on the basis of the trade off between cost and benefit to maximise the owner’s wealth. Many sophisticated mathematical techniques are available to handle inventory management problems. But they arc more appropriately a pan of production management and lie outside the scope of this book. Nevertheless, they involve in built financial costs. The financial managers



should, therefore, be familiar with them. We have discussed in this section some simple production oriented methods of inventory control to indicate a broad framework for managing inventories efficiently in conformity with the goal of wealth maximisation. The major problems areas that comprise the heart of inventory control are (i) the classification problem to determine the type of control required, (ii) the order quantity problem, (iii) the order point problem, and (iv) safety stocks.

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