Noriza Mae O. Omapas MNGT 413 MWF 3:30PM 2018.01.

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What is Inventory Management?

Inventory management refers to the process of ordering, storing and using a company's inventory: raw materials,
components and finished products. Inventory management is the management of inventory and stock. As an element of
supply chain management, inventory management includes aspects such as controlling and overseeing ordering inventory,
storage of inventory, and controlling the amount of product for sale. Inventory management is the process of efficiently
overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the
transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the
operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with
the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the
cumulative value of the inventory.

Why is inventory management so important?

The bottom-line is that an organization heavily into goods and products cannot really survive without a good
inventory management system.

 Meeting demands steadily: A well planned inventory of goods will enable a business to fulfill the demands – and that
the key to earning revenue is the optimum capitalization of demands.
 Economy of operations: A well-managed inventory management enables a business to cut costs.
 Avoiding Stock-outs: An efficient inventory control system tracks how much product you have in stock and forecasts how
long your supplies will last based on sales activity. This allows you to place orders far enough ahead of time to prevent
stock-outs.
 Overstock Hazards: The longer an item sits unsold in inventory, the greater the chance it will never sell at all, meaning
you'll have to write it off, or at least discount it deeply. And excessive inventory has to be stored, counted and handled,
which can add ongoing costs.

What are the principles of inventory management?

In fact, much before an enterprise even begins its selling, the profit and loss can be partially determined by how well it
is managing its entire inventory.

 Demand projection: This is a specialized skill. An enterprise must be able to project demands for specific goods and
products at a specific time of the year. The enterprise must design its inventory system based on the demands.
 Monitoring system: An inventory must have the mechanism of monitoring the amount of stock of goods at any point in
time. The enterprise must be able to exactly find out the amount of inventory at any particular point in time.
 Quality of warehouse: The warehouse must be able to keep the stock in good condition. Wasted materials amount to
lost revenue opportunities.