Inventory Management

Abstract

Inventory‘ and ‗stock‘ are often used to relate to the same thing (Wild, 2002); yet when inventory management is mentioned, there is however a slight difference with stock. Stock is usually an amount of goods that is being kept at a specific place (in a warehouse for example), sometimes referred to as inventory. Conversely, inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is necessary at different locations within an organisation or within multiple locations of a supply chain, to protect (the production) from running out of materials or goods. The scope of inventory management is broader than stock. Basically inventory management can be defined as the ―management of materials in motion and at rest‖ (Coyle et al., 2003). The following activities all fall within the range of inventory management (Wikipedia, 2009): control of lead times, 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. Inventory management basically serves two main goals (Reid & Sanders, 2007). First of all good inventory management is responsible for the availability of goods. It is important for running operations that the required materials are present in the right quantities, quality and at the right time in order to deliver a specific level of service. The second goal is to achieve this service level against optimal costs. Not all items can be held in stock against every cost for example and therefore choices have to be made.