What is Inventory Management: Simplified Definition
Inventory Management is a process that helps companies order, store, move, and monitor their products as a part of business operations. It helps companies keep track of their resources and requirements while simultaneously assisting them in organizing products for better and more efficient access.
Inventory Management: Technical Definition
ClickPost defines Inventory Management as the process of procuring, organizing, and maintaining raw materials and/or goods that are utilized for production or disposed of through sale in pursuance of business objectives.
What is the role of Inventory Management?
The role of Inventory Management is to help companies assess their stock requirements and keep adequate quantities of goods to conduct business smoothly while fulfilling their need to grow. Further, the process allows companies to keep track of shortages, wastage, and overabundances to improve efficiency.
Inventory Management also helps companies place goods in strategic locations for improved access and shipping, depending on the requirements of the customers.
What are the Different Types of Inventory?
There are three main types of inventory that the company keeps:
1. Raw materials
Raw materials are required by companies to create products that can be sold to consumers.
2. Unfinished goods
Companies add value to unfinished goods in their production facilities to create saleable products.
3. Finished goods
Finished goods are products that can be readily sold by a company.
What is the difference between Stock and Inventory?
The key difference between Stock and Inventory is the nature of goods they refer to.
The term Stock is generally used to refer to the reserve of finished goods that companies can readily sell to the end consumer.
However, the term Inventory refers to the reserve of goods and materials that are utilized and/or sold by a company.
What are the different ways of Managing Inventory?
Here are some of the ways that companies can manage their inventory.
Sorting inventory helps companies store goods strategically, giving them on-demand access to goods through accurate mapping of the storage facility. While sorting saves time for companies, it also allows them to optimize storage spaces.
Tracking product information such as expiration dates, defects, order size, and pricing information allows companies to make informed business decisions.
Through the use of market data, consumer behavior, and trend analysis, companies can forecast the demand of products and, thus, place purchase orders for different goods based on varying levels of requirement.
What is an Inventory Management System?
An Inventory Management System is a solution that companies can use to manage different aspects of their inventory through a single location. The solution can be a data analysis tool, spreadsheet software, or a dedicated solution developed for managing inventory.
Inventory Management can be periodic or perpetual. Depending on the requirements of the business, companies can use the system to monitor and manage inventory over specific periods or in real-time.