The principles of effective inventory management

Aug 22


Aaron H. Prather

Aaron H. Prather

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Principles, tools, and methods in effective inventory management.


Proper inventory management is all about having sufficient inventory to cover your actual or anticipated demand.  Inventory management is the combination of knowledge,The principles of effective inventory management Articles process, measures, and reporting that together maximizes availability while minimizing investment.  Efficient inventory management allows the management of sales, purchases and payments.  Inventory management is a vital function to and organization and helps insure the success of the manufacturing and distribution companies.

Inventory management is common factor to businesses in all industries.  Inventory costs money and carrying too much inventory is an unnecessary expense.  Inventory management affects organizations' internal operations through their cost accounting techniques, while inventory control is concerned with minimizing the total cost of inventory.  Inventory is often seen as ‘set and forget’ asset, once inventory levels have been optimized it is not needed to revisit it again.  Problems in inventory control are usually associated with the use of poor processes, practices, and outdated support systems. 

Inventory management plays a central role in the supply chain in order to satisfy the customers, by helping to ensure that a proper inventory is maintained at all times.  Inventory management can help make it so that a company has the exact supply needed to meet demand.  Inventory management is also an effective method to keep track of exactly what products a company carries.  Although inventory management appears as an asset on the company’s balance sheet, it also ties up money.

Millions of dollars on software and inventory management systems are spent by companies in an effort to maximize their return on investment from inventory.  Proper inventory management is essentially a management discipline, by forecasting what quantity of stock is needed and when it is needed, as well as accounting of the stock so that you can keep track of it in the system.  Manually conducting inventory management can be burden for most organizations, but through the use of automation, a business can improve their inventory management without a lot of additional cost.  A successfully implemented inventory management system will carry just enough of each item to meet demand at any given time, and as a result reduce the cost of storage of extra stock or causing delays by not meeting demand.  This Just In Time manufacturing method incorporates this idea into an inventory management system that industries, like retailing, have used with great success.

Proper inventory management is a delicate maintenance of the balance of supply and demand by maintaining the appropriate level of stock in a warehouse.  Basically inventory management is about keeping two things in mind: don’t run out, and don’t have too much.  Having the delicate balance of supply and demand firmly mastered, is what effective inventory management is all about.