Inventory Management Definition
An Inventory otherwise called stock is the total list of goods, raw materials, finished products and other contents available in a company or store for sale.
Inventory Management entails the way the inventory of a business are ordered, stored, arranged and sorted for reselling purpose. Inventory management describes storing, moving, sorting, arranging, counting and maintaining of the inventory that a business has.
This process entails the management or supervision of stock items, how they are procured and made available for business (sales) purposes. Inventory management is a element of supply chain management that monitors how goods are moved from authorized facilities or warehouses to the point of business.
A Little More on What is Inventory Management
For many businesses and industries, their inventory is a list of materials or goods available for sale or the production of deliverables. An inventory is valuable to every company and must therefore be well managed or monitored. Due to certain threats that a company’s inventory is faced with such as damage or theft, an adequate inventory management is deployed by businesses.
Inventory management helps businesses know the items they have in stock, their conditions, risks and quantity. This process helps in knowing the appropriate time to restock specific items and why some items should be sold off without delay (especially those at the risk of being damaged). While small businesses do inventory management manually, large business employ the use of customized software such as ERP and SaaS for their inventory.
Just-in-Time (JIT) is a system used in inventory management, it is a strategy that many companies use in saving costs. Using the JIT method means that a company will order and receive materials needed for sales or production per time. The order is based on production or sales schedule, they only keep stock of materials or goods needed for a particular sales period.
Just-in-Time strategy can be traced back to the 1960s and 1970s when it was used a Toyota Motor Corp in Japan. This strategy can be risky because a company might be unable to meet its actual demand for a period.
Materials Requirement Planning (MRP) is an inventory management technique used in calculating the materials needed to manufacture a product. It is based on sales-forecast which entails that manufacturers depend on the accuracy of a sales record so that they can also accurately plan for inventory needs and communicate with suppliers. Using the MRP strategy also means that the inventory of available materials are taken and then used in determining the additional ones needed. Inventory are taken based on sales-forecast orders in the MRP inventory system.
References for Inventory Management
Academic Research on Alternative Inventory Control System (AICS)
Inventory management over firm life cycle: some empirical evidence, Elsayed, K. (2014).International Journal of Services and Operations Management, 19(4), 431-450.
Reliability Evaluation and Design of AICS: A Survey of Models and Experiments, Mohamed, A. A. M., Qureshi, M. A., & Behnezhad, A. R. (2005). Review of Accounting and Finance, 4(2), 59-85.
An empirical analysis and stochastic modelling of aggregate demand behaviour in a spare parts inventory system, Wright, G. G. (1991). (Doctoral dissertation, City University London).
Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective, Elsayed, K., & Wahba, H. (2016). Future Business Journal, 2(1), 65-80.
Blood bank inventory control, Jennings, J. B. (1973). Management Science, 19(6), 637-645.
Stock allocation among a central warehouse and identical regional warehouses in a particular push inventory control system, Jönsson, H., & SILVER, E. A. (1987). International Journal of Production Research, 25(2), 191-205.
Evaluating forecast performance in an inventory control system, Gardner, E. S. (1990). Management Science, 36(4), 490-499.
Selecting the best periodic inventory control and demand forecasting methods for low demand items, Sani, B., & Kingsman, B. G. (1997). Journal of the Operational Research Society, 48(7), 700-713.
Forecasting systems for production and inventory control, Fildes, R., & Beard, C. (1992). International Journal of Operations & Production Management, 12(5), 4-27.
Alternative inventory and distribution policies of a food manufacturer, Mercer, A., & Tao, X. (1996). Journal of the Operational Research Society, 47(6), 755-765.
Analysis and design of an adaptive minimum reasonable inventory control system, Towill, D. R., Evans, G. N., & Cheema, P. (1997). Production Planning & Control, 8(6), 545-557.