Inventory management is the process of ordering, storing, using, and selling a companys inventory. It involves tracking inventory from manufacturers to warehouses and from these facilities to point of sale. The goal of inventory management is to understand stock levels and stock's location in warehouses. Proper inventory management is essential for a properly running supply chain, and it helps businesses minimize costs, improve cash flow, and boost profitability.
There are different types of inventory management, each with its pros and cons, depending on a company's needs. Four major inventory management methods include just-in-time management (JIT), materials requirement planning (MRP), economic order quantity (EOQ), and days sales of inventory (DSI) . Techniques used in inventory management include ABC analysis, which involves categorizing inventory items into three categories based on their value and importance.
Inventory management software is a tool to help efficiently manage stock. While the capabilities of applications vary, most inventory management applications give organizations a structured method of accounting for all incoming and outgoing inventory within their facilities. Organizations may save costs associated with manual inventory counts, administrative errors, and reductions in inventory stock-outs.
Inventory management is a crucial part of business operations, and it is the fundamental building block to longevity. It is the umbrella term for the procedures and processes that affect ordering, receiving, storing, tracking, and accounting for all of the goods a business sells.
