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What is Inventory Management?

Inventory management is the process of managing the goods that your business plans to sell. This includes acquiring, storing, organizing, and tracking these goods. Inventory management also involves keeping records of changes in your inventory over time.

The goal of inventory management is to accurately determine the quantity of stock that a business needs to hold and the reorder intervals to ensure that business operations continue without disruption. Any physical assets and the product itself involved in the production of goods or services in a business can be considered part of the inventory concept.

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Inventory management also involves keeping records of changes in your inventory over time. This helps you maintain the right amount of stock for each product or item to meet customer demand.

Sales forecasting is another major part of inventory management. If your inventory is too low, you may not be able to meet customer demand. However, if your inventory is too high, it will tie up your money and increase storage costs. You will also have to pay higher taxes due to the high value of your inventory.

Having a safety stock, also known as buffer stock, is often useful. This means holding slightly more goods than you expect to need. It comes in handy when demand is unusually high or when you need to replace a defective or damaged product. In other words, inventory is the product that businesses keep in excess of their needs to protect themselves from unexpected spikes in demand or supply disruptions.

Having more stock than necessary leads to high cost burdens, while having too little may result in unmet customer demands and cause the business to lose market power to its competitors.

To ensure that customer orders are met on time, inventory in the warehouse must be counted accurately, and stock control activities must be successfully managed to maintain reliable records.