Part 3: Inventory Management

3.1. Definition and Importance Inventory management involves controlling the storage, movement, and
flow of goods within a business. Effective inventory management ensures that there is enough stock to
meet customer demand without overstocking, which can lead to increased costs.
3.2. Objectives of Inventory Management
 Availability: Ensuring that products are available when needed.
 Cost Reduction: Minimizing costs associated with storing and managing inventory.
 Order Efficiency: Streamlining the ordering process to reduce lead times.
 Waste Reduction: Reducing spoilage and obsolescence by managing inventory levels.
3.3. Key Strategies for Inventory Management
 Reorder Points: Establishing reorder points to maintain optimal inventory levels.
 Economic Order Quantity (EOQ): Determining the most cost-effective order size to minimize
inventory costs.
 Safety Stock: Keeping additional stock to mitigate risks of stockouts.
 Just-in-Time (JIT): Reducing inventory by ordering just enough to meet demand.
 Use of Technology: Employing inventory management software to track stock levels and
automate ordering.
3.4. Challenges in Inventory Management
 Overstocking: Leads to increased storage costs and potential obsolescence.
 Stockouts: Can result in lost sales and customer dissatisfaction.
 Demand Variability: Fluctuations in customer demand can complicate inventory management.