The inventory function involves the activities that support the planning, maintenance and reporting of goods and materials held in stock to meet the manufacturing and operational needs of the business.
Inventory address a variety of related subjects including item costs, replenishment and supply lead times, inventory valuation, physical inventory at multiple locations, quality management, lot tracking, returns and forecasting.
Too little inventory results in unfulfilled orders, customer frustration, loss of sales and corresponding loss of revenue. If the situation continues it may result in loss of customers and market share.
Too much inventory results in misallocated funds that could be used elsewhere, aging inventory of reduced value and possibly outdated products that cannot be profitably sold to customers.
There are three (3) primary reasons for maintaining inventory:
Inventory is need to meet the needs of the business and anticipate any lag or delay in the supply chain.
Inventory needs to be maintained to protect against uncertainties in demand.
Economies of scale can result from purchasing larger quantities of inventory and holding them until needed.
Inventory management addresses the balancing of these three objectives within the context of the overall business marketing, sales, manufacturing and customer service environment.
Profit can be maximized by either increasing revenue or decreasing cost. Inventory represents a significant potential cost if it is not of the correct size to support manufacturing and sales of products. For this reason inventories are intentionally kept as low as possible.
The Inventory model provides a comprehensive data architecture to support the inventory management and reporting function:
|Item Reporting||Inventory Metrics|