In tandem with strong supply and demand planning, inventory management enables supply chain organizations to effectively track stock as it moves in and out of a given warehouse or warehouses. But what is inventory management? As products and goods are used or sold, an inventory management system updates itself so that organizations always have accurate numbers to go by. From replenishing stock to meet trending demands, inventory management is key to ensuring that there is always the right amount of product — not too much, and not too little — at any given time.
When inventories contain a surplus of product, it creates a disruption to the overall flow and knocks the supply-demand balance out of order. If there isn't enough product, the end customer suffers. If there’s too much product, the warehouse isn't able to take in other products that carry a demand, and the organization faces a disruption to its cash flow. This also spills into logistics (as well as concerns surrounding environmental sustainability), as deliveries may become more sporadic if inconsistent product counts are being shipped unnecessarily.
In addition, the Securities and Exchange Commission (SEC) requires all public companies to track their inventory, and the management of these processes must be documented in order to remain in compliance with SEC guidelines. This calls for a robust inventory management system to be implemented in order to both fulfill regulatory requirements and maintain organizational inertia.
There are 13 different types of inventory that supply chain organizations deal with that call for a robust inventory management system. These include:
Unprocessed materials such as metals, plastics, and oils that aren't recognizable after product completion.
Screws, bolts, hinges, and other parts that are recognizable on their own before and after product completion.
Products currently in production that may include raw materials, parts and components, packing materials and more.
Completed items that are ready to be distributed and sold.
Supplies used either in the manufacturing of products or to maintain the business or organization.
Primary, secondary, and tertiary packaging that protects products during the fulfillment process from manufacturer to end user.
Backup, safety or anticipation stock includes products, raw materials or inventory that an organization carries in order to cover any unexpected or sudden events or to take advantage of sale pricing.
Spare items or works in progress that are kept at production line stations in order to eliminate any work stoppages.
The amount of inventory required to meet customer needs (normal demand) at any given time.
The number of services that can be provided within a specific timeframe.
Products or items that are currently in transit either from a manufacturer, a warehouse or a distribution center.
The minimum amount of stocked products that an organization needs to facilitate an entire process without needing to wait.
Unsold or unused products that aren't expected to sell but need to be kept in storage.
Working through the challenges can be cumbersome at times, but earning an APICS Certified in Planning and Inventory Management (CPIM) designation can help supply chain professionals better navigate the nuances of inventory management and decipher best practices that lead to increased productivity, improved cost efficiency and enhance the overall strategy of their organization's inventory management processes.
Inventory management and supply and demand planning go hand in hand. When coordinated correctly, they also complement each other to help organizations achieve balance in their fulfillment processes. Supply planning enables better understanding of the challenges associated with bringing in new inventory without overstocking or running short supply; demand planning helps forecast the number of products that will be sold within a specific timeframe. Inventory management fits in right in the middle: By tracking all inventory that comes in and goes out, organizations always have access to accurate information to help with forecasting.
Inventory control focuses on the movement of products within a specific warehouse, while inventory management is the process of tracking inventory across an entire organization that may have multiple locations and warehouse facilities. While there are many processes that make up inventory management, inventory control is one that takes place at the warehouse level instead of the organizational level.
In 2019, power-management technologies company Eaton partnered with ASCM in order to develop and implement an enhanced learning process that would enable its employees to better address the challenges that come with inventory management. Eaton's main objective was to improve and optimize the flow of information and materials through its supply chain.
To learn more about earning your CPIM designation and becoming a pillar of supply chain knowledge within your organization, visit our product page.
