Inventory is defined as a stock or store of goods. The term inventory refers to the goods or materials used by a firm for the purpose of production and sale. It is the management of inventory and stock. It also includes the items, which are used as support materials to facilitate production. A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.
There are three basic types of inventory: raw materials, work-in-progress and finished goods. Raw materials are the items purchased by firms for use in the production of the finished product. Work-in-progress consists of all items currently in the process of production. As an element of supply chain management, inventory management includes aspects such as controlling and overseeing ordering inventory, storage of inventory, and controlling the amount of product for sale. These are actually partly manufactured products. Finished goods consist of those items, which have already been produced but not yet sold. In inventory management, goods are delivered into the receiving area of a warehouse in the form of raw materials or components and are put into stock areas or shelves.
Inventory Management refers to the process of ordering, storing and using a company’s inventory: raw materials, components, and finished products. Inventory constitutes one of the important items of current assets, which permits smooth operation of production and sale process of a firm. The goal of inventory management is to minimize the cost of holding inventory by helping business owners know when it’s time to replenish products or buy more materials to manufacture them. Inventory management is that aspect of current assets management, which is concerned with maintaining optimum investment in inventory and applying effective control system so as to minimize the total inventory cost. So staying on top of ordering, forecasting and storage are key parts of good quality inventory management.