Inventory – The Definition
Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.
It is evident from the above definition that:
- All organizations engaged in production or sale hold inventory in one form or the
- Inventory can be in complete state or incomplete state.
- Inventory is held to facilitate future consumption, sale or further processing/value addition.
- All inventoried resources have economic value and can be considered as assets of the organization.
Different Types of Inventory
Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds following types of inventories :-
- raw materials and consumables required for production.
- semi-finished goods at various stages in the plant
- Finished goods inventory is held at plant, FG Stores, distribution centers etc.
- spare parts to service the products.
- Defective products, defective parts and scrap also forms a part of it
In any business or organization, all functions are interlinked and connected to each other and are often overlapping. Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function..
Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures.
Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review.
Inventory management and supply chain management are the backbone of any business operations. With the development of technology and availability of process driven software applications, inventory management has undergone revolutionary changes. In the last decade or so we have seen adaptation of enhanced customer service concept on the part of the manufacturers agreeing to manage and hold inventories at their customers end and thereby effect Just In Time deliveries(JIT).
An effective ERP like FINSYS, helps you manage your inventories in a way to suffice your Production needs, as a result leading to reduced cost implication of the same.
We help you Plan your Production based on the Demand from your Customer and subsequently plan the Inventories accordingly, thus making your process more Effective, Robust and Profitable.