Inventory Management

This chapter elaborates on the objective of inventory management, which is to formulate policies that will result in an optimal inventory investment. The successful management of inventory minimizes inventory at all manufacturing stages while retaining cost-efficient production volume. This improves corporate earnings and cash flow. By operating with minimum inventory and with short production lead times, the company increases its flexibility. Other than reducing waste and cost from excess storage, handling and obsolescence, sound inventory management policies helps in reducing manufacturing delays. They help reducing the chance of inventory theft. They also help improving the customer service because materials are available. There should be periodic counts of inventory to check it on an ongoing basis as well as to reconcile the book and physical amounts. One must focus on the economic order quantity (EOQ), which is the optimum amount of goods to order each time so that total inventory costs are minimized.