• Why is it so important to control inventories?
• How does one decide which inventories need more control and management time?
• How are inventory carrying costs, inventory ordering costs and the optimal ordering size determined?
• When should inventories be ordered?

• Information on the costs and benefits of investment in inventories cannot be obtained from the statutory accounts, so consider other sources:

• formal and informal analysis of purchasing department
• arrange for one-time in-depth analysis
• formal analysis of marketing department

• Identify the total inventories at the closing balance sheet date from the accounting records of the company.
• Identify the most valuable or the most important items from the complete list of inventories.
• The ratio of the selected, most important, inventories to total inventories held is important. Usually, the ten most important items account for over 50% of total inventories.
• Identify the management procedures currently applied to control different types of inventories.
• Compare existing control measures with measures offered in this table and identify the necessary steps to improve inventory control or eliminate unnecessary control procedures.

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