Inventory means stock of goods. To finance managers inventory connotes the value of raw material, consumables spares and stores, work in progress and finished goods, in which the company’s fund have been invested. We can identify inventory as those goods which are procured, stored and used for day-to-day functioning of the organisation. Today’s inventory is tomorrow’s consumption. The classical definition of inventory is that it is an ideal resource of anything having an economic value. From this it follows that inventory control is a planning and devising procedure to maintain an optimal level of idle resources. Inventory deals with the determination of optimal procedures for procuring stock of commodities to meet future demand. The inventory of the retailer or the manufacturer, can be taken as a paradigm. In order to sell an item he must maintain a stock of that item to meet the demand.