Inventory Management

What is Inventory Management?

Inventory management refers to the practices and processes used to control inventory holding levels, minimise costs and bottlenecks and manage current and future stock requirements. It is used to manage required service levels for internal and external customers and inventory visibility in supply chains.

There is no single best way for inventory management. Each of the many techniques available (e.g. JIT, EOC, EPQ, MRP, VMI) have their benefits and disadvantages. The most suitable approach is determined by current and future supply/production arrangements.

The key to successful inventory management is to capture accurate data throughout the operational process ensuring stock is available when required and the right quantities are ordered.

What are the steps to the successful application of Inventory Management?

  • The manufacturer informs the distributor how many items are sold (captured by barcoding).
  • The distributor processes the information provided by the manufacturer.
  • The manufacturer replenishes the distributors stock.
  • The distributor invoices the customer.
  • The customer sends payment.

What are the advantages of Inventory Management?

  • Good inventory management optimises the supply chain and increases reliability.
  • Effective inventory management minimises the chances of lost sales.
  • Costs can be reduced and operational metrics improved.

What are the disadvantages of Inventory Management?

  • Effective inventory management can be expensive depending in the organisation structure.
  • Effective inventory management can be complex and time consuming.
  • There is no complete elimination of risk.

Performance monitoring of inventory management is dependent on the framework used to measure it.

To find out more about this subject read the full knowledge paper: Warehouse and inventory management

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Inventory Management


For addition reading on this topic visit Operations Management


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