Essentials of Inventory Management

If you are a small business owner or a large retailer, you need to know how inventory management works. Inventory management is the process of tracking and controlling your company’s inventory as it is purchased, manufactured, stored, and consumed. It controls the movement and flow of goods from the supplier to the storeroom to the consumer. In today’s competitive environment, inventory management is one of the core skills that will help your business thrive.

What Exactly is Inventory Management?

Inventory management is the process of tracking and controlling your company’s inventory as it is purchased, manufactured, stored, and consumed. It controls the entire flow of items, from purchase to sale, ensuring that you will always have the right quantities of the right item in the right location at the right time.

What is inventory?

The goods that your company handles with the goal of selling are referred to as inventory. It could be raw materials that you purchase and transform into something completely new, or it could be a bulk product that you disassemble and sell separately. It could even be something wholly intangible, such as software.

Different Types of Inventory

There are several types of inventories, and the ones you will deal with will be determined by the products you sell. Here’s a quick rundown of some of the most common:

• Finished goods or for-sale goods are the items you sell to customers.
• Raw materials are the inventory used to create final products.
• WIP: Essentially, unfinished items are inventory that is halfway through the production process.
• MRO merchandise: MRO stands for maintenance, repair, and operation. This is the inventory that you use to help with the production process.
• Safety stock: extra inventory kept on hand to deal with supplier shortages or demand increases.

Every business that deals with inventory will require some sort of proper inventory management system. Let’s look at how that works in practice.

What is the workflow for inventory management?

Inventory management works on a basic level by tracking items, components, and ingredients across suppliers, stock on hand, manufacturing, and sales to ensure that stock is used as efficiently and effectively as appropriate. It may go as far as you need it to, such as studying the distinction between dependent and independent demand or predicting sales to plan. But, in the end, it all comes down to your stock.