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Inventory management covers ordering, storing, and shipping goods and materials. Follow these expert tips and techniques to keep your supply chain flowing.

Inventory management is the process of organizing stock on its way through a supply chain.

The goal of inventory management is to minimize the cost of holding inventory while maintaining consistent stock levels and getting products into customers’ hands faster.

Are you unsure where to start with inventory management? This walkthrough contains tips and techniques from inventory management experts for monitoring stock and keeping your customers happy.

What is inventory management?

Inventory management is the process of overseeing and controlling the flow of goods within a business. It involves tracking the movement of goods and materials, monitoring inventory turnover, and optimizing replenishment to ensure products are always available.

The goal of inventory management is to minimize the cost of holding inventory by helping you know when it’s time to replenish products or buy more materials to manufacture them.

What counts as inventory?

Raw goods:

Materials or substances used in the production or manufacturing of products. Raw materials include wood, metals, plastics, or fabrics used to create finished goods. They come from one or more suppliers and producers.

Work-in-progress (WIP):

A partially finished product awaiting completion. WIP represents production costs such as labor and machinery. Costs are transferred to the finished goods account and attributed to the cost of sales.

Finished goods:

This type of inventory refers to the number of products in stock available for customers to buy. Once a WIP is complete, it becomes part of the finished goods inventory.

Maintenance, repair, and operations goods (MRO):

Materials and equipment used in the production process but not as part of the final product. These include personal protective equipment, cleaning supplies, office supplies, and tech equipment.