Inventory management relates to the controlling of the levels of raw materials and finished goods as per production and consumer demands. Inventory management is an important element which determines the purchase of raw material. It includes the track record of the orders, shipping, handling and the related costs. Inventory management system software helps in keeping record of the inventory procedure systematically in the form of a data base and streamlines the various operations of the business processes.
Inventory management is important for many reasons. Some of these are:
- To stay in business, one needs to have a list of what the customer wants. This list is maintained with the help of inventory management system, which is an essential part of any business.
- It helps in keeping the various operations of the business running at the same time.
- The records of the time of placing the order as well as the receiving of the goods are effectively done by the inventory management system.
- Inventory records which are used as hedges are also maintained by the inventory management system.
- The inventory management system helps in the smooth running of the business operations and balances the demand and supply pattern in an orderly manner.
The environmental management or the new eco- friendly policies have affected the inventory management pattern now-a-days. The co-ordination among the various inventories is to be kept with respect to raw materials, finished products, and also the post consumer inventories like scrap management returned goods or re-usable goods. All this needs a better and more sophisticated inventory management system which can handle both the inventory systems and the co-ordination between them.
The supply chain management system has also affected the inventory management system in the sense that, the firm at the present time has to make inventory decisions that are more beneficial for the entire supply chain and not only for the profit motive of one individual firm or single element of the supply chain.