Supply chain management is the management and coordination of a product’s supply chain for the purpose of increasing efficiency and profitability. The term supply chain management was coined by a consultant named Keith Oliver of the strategy consulting firm Booz Allen Hamilton in 1982. It combines processes of planning, implementing, and controlling the operations of the supply chain with the purpose of satisfying the customer requirements as efficiently as possible. It attempts to control or link the production, shipment and distribution of a product. This is done by keeping tighter control of internal inventories, internal production, distribution, sales and the inventories of the company’s product purchasers. It integrates supply and demand management within and across companies.
The inventory contains the raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for selling. Inventory represents one of the most important assets that most businesses possess because the turnover of inventory represents a primary source of revenue generation and subsequent earnings for the companies’ shareholders/owners.
However, possessing a high amount of inventory for long periods of time is not usually good because there are inventory storage, obsolescence and spoilage costs. On the other hand, possessing not enough inventory isn’t good either, because the business runs the risk of losing out on potential sales and potential market share as well. Inventory management forecasts and strategies, such as a just-in-time inventory system, can help minimize inventory costs because goods are created or received as inventory only when needed.
There are different theories that have developed. For example, just-in-time is a theory from managerial accounting that relates to just-in-time