INVENTORY MANAGEMENT PRINCIPLES IN THE MARKET
Inventory management, or inventory control, is an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding inventory.
WHAT IS INVENTORY?
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.
OBJECTIVES OF INVENTORY MANAGEMENT
There are three main objectives of inventory management, as follows:
Provide the desired level of customer service. Customer service refers to a company’s ability to satisfy the needs of its customers. There are several ways to measure the level of customer service, such as: (1) percentage of orders that are shipped on schedule, (2) the percentage of line items that are shipped on schedule, (3) the percentage of dollar volume that is shipped on schedule, and (4) idle time due to material and component shortage. The first three measures focus on service to external customers, while the fourth applies to internal customer service.