Inventory management is about controlling the inventory in a business. It enables management to control cost of inventory and ensures the inventory at all times are adeqaute and not excessive. In addition, it enables management to make sound decsions regarding all aspects of inventory management. As well. it produces inventory reports at regular intervals so that managment can review all the decsions previously made and make necessary amendments if necessary if circumstances have changed in the demand patterns and other variables affecting inventory levels.
The inventory management system must make the following decisions:
Deciding of the economic order quantity model
Determination of minimum, maximum and reorder levels
Determination of internal controls and documentation
Determination of storage logistics, storage equipment, storage structure and location of specific inventory
Determination of the tracking system
In effect, inventory managment ensures that mmanagment must consider inventory management as a top prority in its financial managment policy. As well, they must implement a cost effective inventory control system, which meetes the financial objectives of inventroy managment within the overall objectives of a business organization.