Inventory Management

Why do business hold inventories?

• Allow the production of the products and supply to the customers

• It is necessary to have inventory

• Inventory is a way manage finances

• Create order and clear flow of finance in the business

Inventory management is best defined as:

• The process of identifying costs and profits

• A way to keep materials and goods well

• The process of ordering, storing and using a company's inventory

• The process of keeping the necessary data for the business

This is widely used to monitor a firm's inventory position. These charts record, over time, the number of goods held, inventory deliveries, buffer levels and maximum inventory.

This represents a minimum inventory level that should be held to ensure that continuous production is possible should delivery delays occur or output increase.

This is the time between ordering new supplies and their delivery.

• Re-order quantity

• Lead time

• re-order level

• buffer inventory

The way to calculate this level is to add the economic order quantity (EOQ) of each component to the buffer level for that item.

The optimum or least cost quantity of stock to re-order taking into account delivery costs and stock-holding costs.

• Buffer inventory

• Economic order quantity

• re-order quantity

• Lead time

The level of inventory that triggers a new order to be sent to suppliers.

The network of all the businesses and activities involved in creating a product for sale, starting with the delivery of raw materials and finishing with the delivery of finished products.

• Inventory management

• Just-in-time inventory

• Buffer inventory

• Supply chain

Aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and completed products are produced to order.