Articles on Inventory Management

Inventory Management - Introduction

Every organization tries to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial condition.

Inventory Management Concepts

Inventory management and supply chain management are the backbone of any business operations. Important concepts of Inventory Management are discussed in detail.

Need for Inventory Management

Inventory is a necessary evil that every organization would have to maintain for various purposes. Reasons why organizations maintain Inventory are discussed in detail.

Finished Goods Inventory

All Manufacturing and Marketing Companies hold Finished Goods inventories in various locations and all through Finished Goods Supply Chain.

When to avoid Holding Inventories

Inventory Management requires smart planning and continuous monitoring of the inventory levels coupled with quick decision-making. Many organizations generally tend to avoid holding inventories except at certain times.

Types of Inventories

Inventory is categorized into two types based on the demand pattern, which creates the need for inventory. The two types of demand are Independent Demand and Dependant Demand for inventories.

Components of Inventory Costs

Inventory costs are basically categorized into three headings - Ordering Costs, Carrying Costs and Shortage or stock out Cost and Cost of Replenishment.

Inventory Classification

In most of the organizations inventory is categorized according to ABC Classification method, which is based on pareto principle. The article discusses about the advantages and disadvantages of ABC Classification.

Finished Goods Inventory Classification

Finished Goods inventory is classified under additional categories based on various attributes including sales volumes/patterns, functional attributes and operational requirements.

Inventory Control

Inventory control is exercised through inventory audits and cycle counts. An inventory audit essentially comprises of auditing the books stocks and transactions and matching physical stocks with the book stock.

Inventory Inefficiency Factors

The inter-dependence of transactions which are sequential and parallel, renders inventory susceptible to inefficiencies occurring in operations, transactions, and documentation over a period of time.

Factors affecting Inventory Operations

The efficiencies of inventory management are largely dependent upon the skills and knowledge of the inventory planners, the focus and involvement of management and the management policies coupled with the inventory management system.

Challenges in Inventory Management

To ensure Inventory control is maintained there are some critical points we need to focus upon. All these points are discussed in detail.

Inventory Health

Every unit of Inventory has an economic value in the books of the company. Therefore as an asset one needs to have a control over the inventory and ensure that the books stock matches with the physical stock.

Company’s approach to Inventory Health

In any business, it is essential to have optimum inventory at all times. The company should have clearly defined metrics to measure and define inventory health as well as inventory operations health.

Inventory Turnover & Inventory Health

Inventory turnover is an indicative of health of inventory operations. The inventory turnover as a measure of health of sales and business is used extensively in Retail, textile as well as FMCG segments.

Need for Inventory Operations

An inventory strategy can be designed on paper but then to be able make it operational, one needs to have a realistic exposure and experience to the field operations and have a hang of how things work on the ground.

Inventory Planning

Inventory Planner's main job consists of analyzing demand and deciding when to order and how much to order new inventories.

Inventory Management Practices

Good inventory Management practices in the company help by adding value in terms of having control over and maintaining lean inventory.

Inventory Management Systems

Modern day inventory is managed by sophisticated system applications that are designed to manage complex inventory plans.

Our Team

Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.