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 organisations 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, organisations 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 cataloguing and streamlining the purchase or production of said products. It helps organisations 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 fulfil orders, and ensuring that customer shipments are handled correctly.