Inventory management is an interesting subject and is an effective process used in almost all industries, companies and organizations in every field. From manufacturing organizations to IT sectors, inventory management is used and it indeed pays an important role in the company or industry. The inventory management can be defined as the management that will help us to use the things in hand effectively by giving out the details on how to use it and by describing the end results of a finished product. Inventory management can be defined as the effective process that will help us oversee the flow of items into the inventory and the flow of the items out of the inventory. The process of inventory management is to control the transfer of the units so that we can prevent the inventory from becoming large or high which can make the operation work wrongly. Inventory management is also used to control an inventory cost which means that the total value of items and generated tax is managed.
Fundamentals for Inventory Managements
A balanced inventory management is to be adopted. To do so, we need to focus on three man aspects in an inventory. Those three main aspects in an inventory are the following:
- Time: time is the first aspect in the inventory which is considered as an important factor. From the aspect of total inventory, this factor means understanding the time it takes by a supplier for processing an order and delivering it. The time aspect also considers the time taken to successfully transfer the materials put into the inventory out of it. By considering the above things, we will know when to place an order and the quantity of the order to be placed.
- Buffer stock calculation: buffer stock calculation is also a key factor of inventory management. The buffer stock represents the extra units and minimum units that are in the inventory. These are considered to maintain proper production levels. For example, we can keep two or three extra units just in case so that they can be used in emergencies.
- Operation stages: not only time and buffer stock plays an important role in inventory management, stages in which an operation is performed is also considered as an important factor in inventory management. Tracking good and bad materials in the inventory is also important factor.
All these factors and records are to be maintained accurately so that they can finish appropriate number of units and can ship them. Adding new items to inventory and deleting the shipped items from the inventory are to be monitored properly.