The process of managing the timing and the quantities of goods to be ordered and stocked, so that demands can be met satisfactrorily and economically. Inventories are accumulated commodities waiting to be used to meet anticipated demands. Inventory control policies are decision rules that focus on the trade-off between the costs and benefits of alternative solutions to questions of when and how much to order for each different type of item.
Why is inventory management important within your context - whether that is industry, military, or government?
Inventory management, within my context (based on my experiences in bakery production, consumer goods wholesale, and food retail) is vitally important because it promotes the wise use of assets and contributes effectively to cost control. Quality inventory management, for example in a retail business, ensures the business entity has the proper merchandise assortment and suitable inventory level on hand to meet consumer demand.
One significant benefit of good inventory management is the increased cash flow that results. In essence, a business makes sure they stock only the amount of inventory they need to meet current consumer demand, with an emergency buffer of inventory in case of greater than expected demand. However, based on past sales trends and their experience in the business, a well run enterprise will ensure that they are not overloaded with inventory even as they strive to have that "just right" level on hand.
Consequently, they only spend money on necessary inventory. They don't buy too much inventory, which results in stock stored in their backrooms and/or warehouses, where it sits for long period before it sells. This "sitting" inventory is money on the floor, so-to-speak, that is not producing sales for the company. Increased cash flow from money saved (from not buying too much inventory) can be used for other company programs and initiatives.
Another reason that inventory management is important is that it cuts down on waste and shopworn goods. For example, the Produce Department of a supermarket cannot overstock on lettuce, for example. Too much on hand will result in spoilage and lost dollars - waste. In addition, too much inventory in a furniture company's backroom or warehouse can result in this inventory collecting dust, being bumped into, and knocked over - and consequently nicked, scratched, dented, and even severely damaged. This results in lost dollars and lost sales, as well as lost profits.
Furthermore, proper inventory control/management means a business is focusing on their customers. They are on top of things ensuring they have the right amount of stock of the right goods that their customers' desire. Their customers can count on them to supply the goods they need because company management understands what the latest shopping trends are - therefore, they ensure the right quantity of these on trend right products are always on hand.