Inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production, or utilization. It is a major asset for any company and is recorded as a current asset on the companys balance sheet. There are three general categories of inventory, including raw materials, work-in-progress, and finished goods. Raw materials are supplies used to produce finished goods, work-in-progress refers to partially finished products, and finished goods are those that are ready for sale. Inventory management is a discipline primarily about specifying the shape and placement of stocked goods.
There are five basic reasons for keeping an inventory: to meet anticipated customer demand, to smooth production requirements, to decouple operations, to protect against stockouts, and to take advantage of order cycles. Inventory control involves using systems to accurately determine whats in stock and safeguard it from damage, theft, or other loss. It is important to manage inventory strategically to ensure that a company never has too much or too little stock, both of which can damage the bottom line.
In summary, inventory is a crucial asset for any business, and inventory management is a discipline that involves specifying the shape and placement of stocked goods. There are three general categories of inventory, including raw materials, work-in-progress, and finished goods, and there are five basic reasons for keeping an inventory. Inventory control involves using systems to accurately determine whats in stock and safeguard it from damage, theft, or other loss.
