and the quantity to be purchased, plus the additional costs of storage.

In some situations, when entrepreneurs are too cautious about losing profit by stocking up on goods, the business may encounter frequent “out-of-stock” incidents that can cause negative impacts on the business. An effective inventory control scheme is necessary to ensure that “out-of-stock” incidents are minimized and unwanted profit losses are avoided. Businesses must not always expect that “out-of-stock” incidents will be rare occasions; once it occurs, it is about time to revise the inventory management scheme. If an effective plan is carried out, the business can avoid shortage, save more money and earn higher profits.

Another important concept in controlling inventory is the re-order point, which refers to the time when new stocks are purchased and stored. Based on the business needs and demands of the clients, entrepreneurs can make a prediction of the best time when to do the re-ordering of goods. The time between two orders must not be very short to ensure that the storage room will not run out of space, keep goods in their best conditions and avoid possible financial losses due to either shortage or surplus of goods. Determining the perfect time to do the re-ordering will require a businessman to know the timeframe of delivery and the right amount of quantities needed by the business by the time it arrives. In addition, the overhead costs, miscellaneous fees and shipping expenses of ordering small quantities versus ordering large quantities must carefully evaluated to ensure that the re-ordering point will be highly beneficial to the business.

Businessmen and entrepreneurs must keep in mind that inventory control plays a vital role in managing a business. An efficient scheme for controlling goods can save a businessman from unnecessary trouble and can help him save and earn a lot of money. Moreover, the pleasant feeling of satisfying the needs of customers and earning their loyalty is the best part of running the business through effective control of inventory.