What are the concepts of inventory management?

Inventory management is the process of overseeing and controlling the inventory of a business. Effective inventory management helps businesses maintain optimal inventory levels, which can minimize waste, reduce costs, and increase profitability. The following are some key concepts related to inventory management:

Inventory control: This involves setting up systems and procedures for managing inventory, including ordering, receiving, storing, and tracking inventory levels.

Inventory accuracy: This refers to the degree to which the inventory records of a business match the actual inventory levels.

Economic order quantity (EOQ): This is a mathematical formula used to calculate the optimal order quantity for a given inventory item, taking into account the costs of ordering and holding inventory.

Safety stock: This is additional inventory that a business keeps on hand to ensure that it has enough stock to meet unexpected demand or supply chain disruptions.

Just-in-time (JIT) inventory management: This is a system in which inventory is ordered and received just in time for it to be used in production or sold to customers, minimizing the need for large inventory holdings.

ABC analysis: This involves categorizing inventory items into three groups based on their importance and value to the business, with “A” items being the most important and “C” items being the least important.

Lead time: This is the amount of time it takes for an inventory item to be ordered, delivered, and made available for use or sale.

Stock keeping unit (SKU): This is a unique identifier for a specific inventory item, used for tracking and inventory management purposes.