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What is inventory?
Inventory is a quantity or store of goods that is held for some purpose or use (the term may
also be used as a verb, meaning to take inventory or to count all goods held in inventory).
Inventory may be kept "in-house," meaning on the premises or nearby for immediate use; or
it may be held in a distant warehouse or distribution center for future use. With the exception
of firms utilizing just-in-time methods, more often than not, the term "inventory" implies a
stored quantity of goods that exceeds what is needed for the firm to function at the current
time (e.g., within the next few hours).

What is inventory management?

Inventory management is the process of efficiently overseeing the constant flow of units into
and out of an existing inventory. This process usually involves controlling the transfer in of
units in order to prevent the inventory from becoming too high, or dwindling to levels that
could put the operation of the company into jeopardy. Competent inventory management
also seeks to control the costs associated with the inventory, both from the perspective of
the total value of the goods included and the tax burden generated by the cumulative value
of the inventory.

Effective inventory management is all about knowing what is on hand, where it

is in use, and how much finished product results.
Balancing the various tasks of inventory management means paying attention to three key
aspects of any inventory. The first aspect has to do with time. In terms of materials acquired
for inclusion in the total inventory, this means understanding how long it takes for a supplier
to process an order and execute a delivery. Inventory management also demands that a solid
understanding of how long it will take for those materials to transfer out of the inventory be
established. Knowing these two important lead times makes it possible to know when to place
an order and how many units must be ordered to keep production running smoothly.

What is an inventory management system?

An inventory management system is a system the encompasses all aspects of managing a
company's inventories; purchasing, shipping, receiving, tracking, warehousing and storage,
turnover, and reordering. In different firms the activities associated with each of these areas
may not be strictly contained within separate subsystems, but these functions must be
performed in sequence in order to have a well-run inventory control system. Computerized
inventory control systems make it possible to integrate the various functional subsystems that
are a part of the inventory management into a single cohesive system.
In today's business environment, even small and mid-sized businesses have come to rely on
computerized inventory management systems. Certainly, there are plenty of small retail
outlets, manufacturers, and other businesses that continue to rely on manual means of
inventory tracking. Indeed, for some small businesses, like convenience stores, shoe stores,
or nurseries, purchase of an electronic inventory tracking system might constitute a wasteful
use of financial resources. But for other firms operating in industries that feature high volume
turnover of raw materials and/or finished products, computerized tracking systems have
emerged as a key component of business strategies aimed at increasing productivity and
maintaining competitiveness. An inventory management system combines the use of desktop
software, barcode scanners, barcode printers, and mobile devices to streamline the
management of inventory (e.g. goods, consumables, supplies, stock, etc.). Whether you are
tracking inventory used to perform a service or sold to customers, using a digital inventory
system provides staff accountability and reduces inventory shrinkage.

How does an Inventory Management System Work?

At its core, inventory control works by tracking two main functions of your stock room or
warehouse — receiving (incoming) and shipping (outgoing). The goal of inventory control is
to accurately know current inventory levels and automatically minimize understock and
overstock situations. By efficiently tracking quantities across stocking locations you’ll have
insight and be able to make smarter inventory decisions.
Common Inventory Applications
o Warehouses
o Stockrooms and supply rooms
o Distribution
o Offices and classrooms
o Facilities management
o Light manufacturing
o Work-In-Progress
Popular System Functionality
o Create purchase orders
o Receive, put away, relocate, adjust, and dispose inventory
o Create sales orders
o Pick
o Pack and Ship
o Physical inventory counts and cycle counts
o Create, run, schedule, and share reports
o Print barcode labels