Inventory Management

Inventory Management and Control

Inventory or stock is any raw material, work in progress , or finish goods that are within the operations of an organization or business. It is usually one of the biggest assets held on the balance sheet and the biggest use of working capital, and has many uses throughout the operations of a business.

Inventory Management is the application of data collection, demand, forecasting, lean and operational principles to manage the total amount of inventory within the supply chain at any point in time and manage inventory holding costs.
Inventory management is an important business and operational function as it can provide the capacity and flexibility to service peak, changing or stable customer demand in a cost effective manner. This is important in order for the operation of a business to be profitable as inventory holding costs can be as high as 40% of the value of the stock held. Inventory management is usually carried out with the aid of an inventory software package which can be integrated into most ERP systems and to some degree in MRP systems depending on the inventory software features. More on inventory costs: Inventory management costs

Inventory management is undertaken to manage inventory holdings and production of one-off, multiple order, and ongoing inventory replenishment cases, which have distinct ways of triggering supply orders and balancing demand with production & purchasing orders and optimal inventory holdings to avoid running out of stock. These inventory models and exmples of them are:

Single order Inventory Control

-Yield Management -Other single inventory cases

Multiple order Inventory Control

Most multiple order inventory models can also be defined as build to stock or build to order inventory systems depending on demand, operations, and management objectives. Other Multiple order inventory control models are:

Note: Whichever inventory management model is chosen, it must also integrate the management of stock in, out and inside the warehouse. This can be aided by stock and inventory rotation. These models are further explained in their respective pages above. The model best applicable to a business or operation will depend on the good being produced and sold, its shelf life, value to weight ratio , industry inventory turnover ratios, supplier and production lead times among a few factors. Refer to the pages above to learn more.