Inventory management is a science primarily about specifying the shape and percentage of stocked goods. It is required at different locations within a facility or within many locations of a supply chain network to precede the regular and planned course of production and stock of materials. Inventory Management is of paramount importance to any business organization and must tie together the following objectives, to ensure that there is continuity between functions:
The objective of inventory management is to provide uninterrupted production and sales of the goods. There are several types of inventory management systems:
Raw Materials: Necessary for the production of finished products raw material inventory forms the basic constituents of a product.
Work-in-Progress: Work-in-progress inventory is in which materials and components have undergone some change but still incomplete.
Finished Goods: Products which are completed and ready for shipment or sold either to customers, wholesalers or retailers, fall under this form of inventory.
Buffer Inventory: Also known as safety stock, the idea of Buffer Inventory or safety stock is to be in readiness for contingencies or the sudden fluctuations of demand and supply in the market.
Cycle Inventory: This form of inventory is important if one or more stages in the process cannot supply all the items produced simultaneously. The need to produce products in batches and the amount of it depends on volume decisions resulting in cycle inventory.
De-coupling Inventory: De-coupling Inventory helps the process of production to work smoothly.
Anticipation Inventory:When goods are accumulated to meet future demands or problems in supply it is designated as Anticipation Inventory.
Pipeline Inventory: Transportation cannot immediately take place from the point of supply to the point of demand; this is where Pipeline Inventory is helpful.
Mismanaged inventory means disappointed customers, too much cash tied up in warehouses and slower sales. Hence, an effective inventory management system that each business organization incorporates will vary from one organization to another. Depending on the type of business of an organization, an inventory system management which is best suited with minimum expenditure and convenience should be opted for so as to prove beneficial to the organization.
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