Posted in Operations and Supply Chain Terms, Total Reads: 1084
Definition: Inventory Management
Inventory management is a very essential function that decides the wellbeing of the supply chain as well as the impact the economic health of the balance sheet. It includes managing and controlling raw materials, stocks, finished goods, warehousing, storage and other aspects which help reach the product from production to distributor or retailer. Each organization regularly strives to uphold optimum inventory to be able to meet its necessities and avoid over or under inventory that can impact the monetary statistics of the firm.
Inventory is forever dynamic. A prerequisite of inventory management is steady and vigilant assessment of exterior and interior factors and control via planning and evaluation. Most of the businesses have an individual department of inventory planners who incessantly observe, control and evaluate inventory and interface with manufacturing, procurement and finance sections of the firm.
In a business or association, all the functions are interlinked and coupled to each other and are time and again overlapping. Some key features like supply chain management, logistic handling and inventory management form the spine of the business delivery function. Therefore these functions are very significant to the managers.
What is an Inventory?
Inventory is an inactive stockpile of material goods that posses financial worth, and are held in a variety of forms by an organization in its guardianship until stuffing, dispensation, alteration, use or sale in a prospect point of time.
Any organization which is into manufacturing, trading, sale and repair of a product will unavoidably hold stock of a range of physical possessions to assist in future utilization and sale. While inventory is a necessary evil of any such business, the organizations cling to inventories for various reasons; some of them are speculative purposes, functional purposes, physical necessities etc.
• All organizations occupied in fabrication or trade of products keep inventory in one form or the other.
• Inventory can be in whole state or unfinished state.
• Inventory is held to assist in future use, sale or further value accumulation.
• All inventoried resources have profitable value and can be measured as assets of the firm
Top 3 Challenges for Managing the Inventory are as follows:
1. Understanding the Inventory –Organizations should take a holistic view into knowing both basic vs. non-basic matter and at what time they should be ordered. Basic items are those that you sell ant time of the year and need incessant replenishing of stock. By sorting these out from non-basic or seasonal items inventory levels can be much more allied with a recognized schedule and product lifecycle. However, knowing your items are is just the first step. One must have knowledge about stock capacity, what is going to be ordered, the size of the order, and what needs to be refilled.
2. Incompetent Processes – Built on or rely on dated software or manual processes are used for inventory management systems. This creates an extremely demanding work setting for anybody caught up in the inventory management process. One must begin with a review of current standard operating procedures and settle on where gaps may lie in the systems.
3. Client Demand – Customers needs are varying daily and they are looking to their distributors to allow for elasticity in orders. With the mounting demand of struggle it becomes more taxing to keep up with the exclusive needs of the consumers to reassure they do not have those needs met by some other firm.