At its most rudimentary, inventory management is essentially a
strategy for tracking products and components as they move through
production, suppliers, stock on hand, sales, etc. Many organizations
choose to incorporate increased analysis or forecasting into their
approach, but the heart and focus of inventory management is always
going to be the inventory itself.
How inventory management works is largely dependent on the size of
the business and the type of product being managed. For example,
organizations that deal in non-perishable products that are also
unlikely to become obsolete can simply store their goods for long
periods of time to wait out periods of low demand. However, for most
businesses, sitting on inventory is not an option; foods, fashions,
electronic devices, and more, each have an anticipated shelf life, after
which the value of the item drops significantly.
Inventory management works by cataloging and streamlining the
purchase or production of said products. It helps organizations better
calculate the optimal inventory size, as well as determine what stock
should be at what location at any given time. Inventory management also
helps manage any goods held in storage, and controls the amount of the
product for sale, pulling goods to fulfill orders, and ensuring that
customer shipments are handled correctly.