Contributed by: Tendekai Dzinamarira
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What is Inventory? Meaning
Inventory (INV) refers to a stock or store of goods or services kept for use or for sale in the future. INV includes raw materials and supplies/purchased parts, partially completed goods that is work-in-progress (WIP), finished goods and goods-in-transit (GIT).
Motives for holding INV include transactional motives, precautionary motives, speculative motives, seasonal and dead stock holding.
Inventory versus Stock
The terms are sometimes used interchangeably. However "inventory" refers to all finished products, work-in-progress products, and raw materials. "Stock" typically refers only to finished products (that could be sold in any form to a customer). Note that "company stock" can also refer in a financial sense to shares of a company that are held by owners and investors.
What is Inventory Management? Meaning
Inventory Management (INVM) is an umbrella term for all processes, methods and approaches for ordering, replenishing, storing, holding, organizing, and using a company's inventory at optimal levels with the objective of achieving satisfactory levels of customer service while maintaining INV costs at reasonable bounds. Again, INVM includes the management of raw materials, components, finished products, as well as warehousing and processing items.
INVM is also referred to as "stock management". This term likewise refers to methods that are used to keep INV at optimal levels without stockouts and excesses.
In business terms, INVM means keeping the right stock, at the right levels, in the right place, at the right time, and at the right cost as well as price. It also involves the development and administration of INVM policy systems and procedures which will minimize costs related to INV decisions and related functions such as production scheduling, purchasing and transportation.
INVM should be considered as a main part of logistics management.
Origin of Inventory Management. History
Archaeologists discovered the use of clay tokens which dates back to approximately 4000 years ago. These tokens included symbols backed into clay which were used to count or record things especially livestock.
Another early form of INVM can be found in the story about Adam and Noah in the Bible, when Adam named all the animals and when Noah counted the clean and unclean beasts for the Ark.
INVM developed into slightly more accurate systems of accounting and record keeping in the Greek and Egyptians times.
Prior to industrial age, INVM was basic with little in terms of accuracy. During that era, people used the tally method to count.
A breakthrough was achieved in the 19th century industrial age when the first modern automatic computation machine known as the tabulator and sorter machine was developed by Herman Hollerith. The machine recorded information using punch cards which later developed into computer technology invented by IBM.
In the late 1940s, Norman Woodland invented the Barcode which became industrys primary INVM tool.
In the 1970s, Radio Frequency Identification (RFID) technology was invented.
Use of Inventory Management. Applications
Steps in Inventory Management. Process
The INVM process varies by industry, by size of the company, etc. The following is a highly simplified version of the actual process which is far more complex and non-linear:
Benefits of Inventory Management? Advantages
Disadvantages of Inventory Management? Limitations
Inventory Accuracy and Control Methods
Inventory Planning/Forecasting Approaches
Compare with: Bull Whip Effect | Vendor Managed Inventory | Cross-Docking | RFID Technology | CPFR | 3rd Party Logistics (3PL) | Logistics Management | Last-In First-Out (LIFO) | First-In First-Out (FIFO)
Return to Management Hub: Supply Chain & Quality
This ends our Inventory Management summary and forum.
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