Inventory Management

Meaning, concept and definition of Inventory:
Inventory is stores of goods and stocks. In manufacturing, items in inventory are called stock keeping items, held at a stock [storage] point. Stock keeping items usually are raw materials, work-in progress, finished products and supplies. It is the stock of any item or resource used in an organization.
Inventory control is activities that maintain stock keeping items at desired levels. In manufacturing, since the focus is on a physical product, inventory control focuses on material control. In the service sector, since the focus is on a service [often consumed as generated], inventory control focuses less on materials and more on supplies.
For service organizations that are not highly labor-intense, inventories assume more importance. Transit systems maintain inventories of equipment and replacement parts. Local department stores maintain inventories of merchandise. Production/ operation management focuses on conversion of inputs into outputs of goods and services. This conversion process is reexamined to emphasize material input. Note that there may be stock points at the input [raw materials], conversion [work-in-progress], and output [product] stages. By convention, manufacturing inventory generally refers to items that contribute to or become part of a firm’s product output. Manufacturing inventory is typically classified into raw materials, finished products, components parts, supplies, and work in progress. In services, inventory generally refers to the tangible goods to be sold and the supplies necessary to administer the service.
Objectives of Inventory:
All firms (including JIT operations) keep a supply of inventory for the following reasons: 1) To maintain independence of operations. 2) To meet variation in product demand. 3) To allow flexibility in production scheduling.