Inventory Management Basics
Let’s learn more about Inventory Management Basics. Inventory is referred to as the stock of any item or resource used in an organization. The system is the set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be. By convention, manufacturing inventory generally refers to items that contribute to or become part of an organization’s product output. Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies and work-in-progress. In services, inventory generally refers to the tangible goods to be sold and the supplies necessary to administer the service.
As a part of your supply chain, inventory management includes aspects such as controlling and overseeing purchases — from suppliers as well as customers — maintaining the storage of stock, controlling the amount of product for sale, and order fulfillment.
Naturally, your company’s precise inventory management meaning will vary based on the types of products you sell and the channels you sell them through. But as long as those basic ingredients are present, you’ll have a solid foundation to build upon.
The basic purpose of inventory analysis in manufacturing and stock keeping services is to specify (1) when items should be ordered and (2) how large the order should be. Many organizations are tending enter into long-term relationships with vendors to supply their requirements for probably the entire year. This changes the “when” and “how many to order” to “when” and “how many to deliver”.
