The terms inventory management, inventory management and inventory control are closely intertwined. In terms of a definition of inventory management, however, it could be stated that the process deals with how a balance can be achieved between the sometimes contradictory requirements.
A functioning Inventory management system lays the foundation for good inventory management because if you manage the former carefully, you can use the data to create demand forecasts. Changes in demand can thus be predicted or at least better estimated. The inventory can therefore be managed with greater efficiency, ie targeted inventory management can be implemented.
Every retailer knows that not every article is constantly in demand to the same extent. Often the demand depends on the season or certain circumstances. Ideally, you should determine exactly how much you should have on hand for each item in your inventory. Also, you will know when to place your orders to get the most advantageous cost-benefit ratio. So it is always beneficial to understand and apply the inventory system in your activities.
Customers receive their orders promptly because the relevant products are in stock. Of course, this leads to greater satisfaction and, as a result, to fewer returns. Nevertheless, unnecessary storage costs are not caused by a smooth relationship between warehouse inputs and outputs. Another advantage lies in the better ability to plan cooperation with logistics companies.
Inventory management tries to strike a good balance between
- an adequate inventory
- a high level of service orientation: fast packaging, dispatch and delivery
- and the lowest possible storage costs.