Definition of inventory management

Inventory management refers to the process of overseeing and controlling a company's goods and materials, including their procurement, storage, and usage. The goal is to ensure a balance between supply and demand while minimizing carrying costs and maximizing efficiency.

Explanation of inventory management

Effective inventory management involves tracking stock levels, ordering and restocking products at the right time, and optimizing storage to prevent overstocking or stockouts. It is crucial for businesses to meet customer demand, reduce holding costs, and enhance overall operational performance.

Example of inventory management

A retail store uses an inventory management system to track the quantity of each product, reorder when necessary, and maintain an organized stockroom.

Strategies of inventory management

• ABC analysis: Classify inventory items into categories (A, B, C) based on their importance, and manage each category differently.
• Just-in-time (JIT): Minimize holding costs by ordering inventory just in time to meet demand.
• Forecasting: Utilize historical data and market trends to predict future demand and adjust inventory levels accordingly.

Related terms

• Supply chain management
• Stock keeping unit (SKU)
• Reorder point
• Cycle counting