The document discusses various internal and external factors affecting inventory management, including financial considerations, consumer demand, supplier reliability, product types, technological tools, lead time, and external economic conditions. It emphasizes the importance of adapting inventory processes based on these variables to avoid shortages and excesses, ultimately ensuring customer satisfaction. A conclusion reinforces the significance of awareness and regular assessment of these factors for effective inventory management.

1. Prepared by: Jamshid Raqi

2. While managing your inventory processes, there are a
various of factors which you need to consider.
Both external and internal factors can affect inventory
management in different ways, and it is important to be
aware of these variables.
Let’s look at the main factors that can affect inventory
processes.
Introduction

3. FACTORS AFFECTING INVENTORY
MANAGEMENT
o Financial Factors
o Consumer Demand
o Suppliers
o Product Type
o Managing tools and technology
o Lead Time
o External Factors

4. FINANCIAL FACTORS
Factors such as the cost of borrowing money to stock enough
inventory can greatly influence inventory management.
The tax costs associated with stocking inventory is another factor
that can influence inventory management.
Other financial factors like; the expenses associated with warehouse
operations and transportation costs can also influence the inventory
management.
So changes in these factors may require you to alter your inventory
management processes accordingly.

5. CONSUMER DEMAND
Since our main goal is to have satisfied customers, so Consumer
demand is also important for inventory management.
Suppose you’re a Producer of toothpaste and toothbrush;
Imagine, customers buy a huge amount of toothpaste, but minimal
amount of toothbrush. It means that, in case if we are stocking equal
amounts of both goods, we will face to a shortage of toothpaste, but
excess inventory of toothbrush.
To avoid negative financial effects on your business – you have to
track customer demands and product sales, and order inventory
accordingly.

6. SUPPLIERS
Suppliers can have a huge influence on inventory control. Successful
businesses require reliable suppliers in order to plan spending and
arrange production.
An unreliable or unpredictable supplier can have huge negative
effects for inventory control.
So its required for every business to have an approved list of
suppliers that in case one can not provide you materials on
time you should have the second option.

7. PRODUCT TYPE
Inventory management must take into consideration the different
types of products in stock.
For example, some products may be perishable and therefore have a
shorter shelf life than others. In this case inventory must be managed
to ensure that these items are rotated in line with expiration dates.

8. MANAGING TOOLS AND
TECHNOLOGY
Another factor affecting inventory management is technology.
Modern technology can save both time and money as well as
improve the efficiency of inventory management processes.
Tools like barcode scanners, label printers, mobile computers, etc.
along with a good inventory management software can double or
even triple the speed of your inventory processes.
 Also, the new technologies will help you to implement counting,
recounting, receiving, picking and other processes more efficiently.

9. LEAD TIME
Lead time is the time it takes from the moment an item is ordered to
the moment it arrives.
It directly affects your total inventory levels. So The longer your
lead time the more stock you will need to hold in your inventory.
Outsourcing manufacturing processes to other countries due to
lower production costs may result in longer waiting times.
Producing the same goods locally may cost more but take less time,
and therefore you may need to adjust your stock levels accordingly.

10. EXTERNAL FACTORS
There are multiple external factors that may affect inventory
control.
For example, economic downturns may occur and this is something
that you will generally have very little control over.
Other factors like the extent of local competition also impact our
inventory management system, and These factors are also largely
out of your control, so it is a good idea to assess the external
climate regularly in order to stay prepared.

11. CONCLUSION
As you can see the number of variables that can affect inventory
management are numerous.
So, it’s always important to be aware of these factors in order to
maintain a smooth and seamless inventory management all the time.