Faculty of business department of accounting an assessment of fixed asset managementin the

2.13 Inventory Reduction
Inventory reduction is about eliminating excess inventory, improving inventory turn rates, 
increasing inventory turnover, and meeting on time delivery. Excess inventory ties up money and 
needs to be reduced in order to free up cash for investment in revenue-growth activities. One of 
the major problems to inventory reduction is the mistaken notion that improved inventory control 
management is all that is required to improve inventory rates, increase inventory turnover and 
provides an on going inventory reduction program. Certainly, lack of control contributes to 
excessive inventory, but often an organizations negative reaction to material shortages, and that 
the major focus of most material groups is to supply required inventory and not look for ways to 
improve inventory turns, is the driving factor in poor performance in inventory reduction. Many 
companies have achieved inventory reduction and improved on time delivery by implementing 
systems such as Enterprise Resource Planning (ERP), Just in Time (JIT), and other approaches to 
inventory management, and these systems do reduce inventory and improve inventory turnover,
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but there is still room for improvement. There are some basic steps that any company can use to 
improve inventory turnover these are Set a realistic objective for inventory levels, Identify those 
items that are in excess of acceptable inventory levels, Identify obsolete and defective inventory, 
Make a list of actions to be taken to reduce the inventory, and Devise new procedures to help 
eliminate future build up of inventory. (http://www.invatol.com, Harvard business review 
"Introduction to inventory'"/
19, 12, 2013)
2.14. The Inventory Decision Model
Substantial research has been devoted to determining optimum inventory size, order quantity, 
usage rate, and similar considerations. In developing an inventory model, we must evaluate the 
two basic costs associated with inventory: the carrying costs and the ordering costs. Through a 
careful analysis of both of these variables, we can determine the optimum order size to place to 
minimize costs. ("Stanley and Geoffrey, 2009:108)