refers to the goods or materials
used by a firm for the purpose
of production and sale.
Activities employed in
maintaining the optimum
number or amount of each
4. Inventory Management
is the process of efficiently
overseeing the constant flow of
units into and out of an existing
Involves creating a purchasing
plan that will ensure that items are
available when they are needed and
keeping track of existing inventory
and its use.
5. Things to consider in Inventory
1. Warehousing - Physical space
may cap the amount of material
2. Cost - Several cost factors influence
inventory management decisions.
6. 3. Delivery Time - Lead time
between order and delivery of raw
materials is an important factor.
4. Turnaround -Turnaround has
several definitions when
considering inventory. Where
finished goods are concerned,
turnaround refers to how long stock
sits before sale.
7. Three main types of Inventory
Raw Materials inventory - Raw
materials inventory are raw materials
that your business changes to
produce its goods and/or services.
Work-in-process inventory –
Work-in-process inventory is any
unfinished goods that your business
Finished goods inventory –
Finished goods inventory includes
any finished goods that are ready to
8. Importance of Inventory
1. The firm has to maintain
adequate inventory for smooth
production and selling activities.
2. It has to minimize the investment
in inventory to
enhance firm's profitability.
9. Inventory management helps in
maintaining a trade off between
carrying costs and ordering costs
which results into minimizing the total
cost of inventory.
Inventory management facilitates
maintaining adequate inventory for
smooth production and sales
10. Inventory management avoids the
stock-out problem that a firm
otherwise would face in the lack of
proper inventory management.
Inventory management suggests
the proper inventory control
system to be applied by a firm to
avoid losses, damages and
11. Inventory serves a useful purpose
in the supply chain. That said,
firms can help minimize the need
for inventory by carefully
managing those factors that drive
inventory levels up.