Inventory management involves tracking a company's inventory levels and balancing supply and demand. It includes determining how much to order, when to order, and when to replace inventory. Maintaining inventory provides benefits like quality control, speed of fulfilling demands, and flexibility, but also incurs costs of carrying, ordering, and stockouts. The objectives of inventory control are to maximize customer service while minimizing costs. Key aspects of inventory management include sales forecasting, production planning, and inventory reduction techniques.

1. Inventory Management
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Arti Saxena

2. What is Inventory?
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1.A physical resource that a firm holds in stock with the
intent of selling it or transforming it into a more
valuable state
1. Purpose of inventory management:
•How many units to order
• When to order
• When to return or replace

3. Reasons We Keep Inventory
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Adding value through inventory:
Quality – Inventory can act as a buffer against poor quality.
Speed – Location of inventory can have a significant
impact on fulfilling customer demand
Flexibility – Location and level of anticipatory inventory
directly effect the firm’s flexibility to meet
demand
Cost – Direct effect: purchasing, delivery,
manufacturing Indirect: inventory holding costs,
stockouts

4. • Raw materials
• Purchased parts and supplies
• Work-in-process (partially completed) products
(WIP)
• Items being transported
• Tools and equipment
Types of Inventory
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5. What is Inventory Management?
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Inventory management is the process of keeping track of inventory, and
having the delicate balance of supply and demand firmly mastered.

6. The basic building blocks of inventory management
are:
Sales Forecasting/Demand
Management Sales and Operations
Planning Production Planning
Material Requirements Planning
Inventory Reduction
Inventory Management
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7. Objectives of Inventory Control
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Maximize the level of customer service by avoiding stockouts
Promote efficiency in production and purchasing by minimizing
the cost associated with providing an adequate level of
customer service

8. Inventory Costs
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Carrying cost
cost of holding an item in inventory
Ordering cost
cost of replenishing inventory
Shortage cost
temporary or permanent loss of sales when
demand cannot be met

9. Sales Forecasting/Demand Management
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Accurate sales forecasting allows a company to effectively control
inventory, production facilities, labor, inventory levels and logistics, and is
the base of which most all other operations within the company function.

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Inventory Reduction
• Inventory reduction is about eliminating excess inventory, improving inventory turn rates,
increasing inventory turnover, and meeting on time delivery.
• Excess inventory ties up money and needs to be reduced in order to free up cash for
investment in revenue-growth activities.

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