Inventory Management

Abstract

Inventory management is pivotal for business performance and profitability. Efficiently handling inventory levels enhances operational efficiency and financial strategies. Poor management can result in financial losses, stock imbalances, delayed order fulfillment, and dissatisfied customers. This chapter discusses inventory management frameworks, focusing on objectives, techniques, and best practices. The primary goal is to balance overstocking and understocking, ensuring adequate working capital while optimizing costs. The chapter delves into various inventory management techniques, aiming to effectively control and manage inventory. It particularly sheds light on two pivotal techniques: Vendor-Managed Inventory (VMI) and Just-in-Time (JIT). VMI reduces inventory levels and improves fill rates, enhancing supply chain performance. On the other hand, JIT minimizes excess inventory and improves material flow. Both techniques present challenges and benefits. Accurate forecasting is highlighted as a best practice, aligning production with demand, reducing carrying costs, enhancing cash flow, and streamlining the supply chain. The literature is reviewed, emphasizing inventory management’s role in the broader context of supply chain management.