Concept Of Inventory Management System

Inventory management system has been practiced in many organizations from various industries. Given the diverse and multi-layered supply chains handling different inventories, organizations utilizing inventory management system can still manage efficiently and effectively their supply and demand flow within crucial transactional activities. In the following discussions, this paper examines the concept of inventory management, different inventory types and inventory management processes, and the function criteria to be considered when selecting inventory management system. Inventory is comprised of an ideal resource of any form that has potential economic value and regarded as locked up capital (Saxena, 2009). From the materials management perspective,

this reason does not apply to inventories that gain value over time) (Bidgoli, 2010; Narayan & Subramanian, 2009). Thus, in order to achieve this purpose, inventory management ensures continuity between functions of company 's strategic goals, sales forecasts, sales and operations planning, and production and materials requirement planning (Saxena, 2009).Scholars have indicated five main reasons supporting the need for an inventory: (1) innate fluctuations of supply and demand in which inventory serves as the cushion responsible for protecting against time lags; (2) inventory management allows the company to meet their seasonal demand and prevent unnecessary ccumulations; (3) inventories are maintained to serve as stock buffers against demand uncertainties that can potentially disable movement of goods; (4) enables economic transaction at large through bulk buying, efficient movement, and storage; and lastly, (5) certain inventories appreciate in value as it reach a desired point of consumption and/or production (e.g. cheese and brewing industries) (Saxena, 2009,

Inventory management software is, usually, tailored to the inventory functions needed by the organization (Saxena, 2009). Typical inventory management systems used include Vendor-Managed Inventory (VMI), Warehouse Management System (WMS), and Inventory Control Systems (ICS) (Bidgoli, 2010). Common features provided in the mentioned applications are: (a) order management that determines and automatically handles stock replenishments based on determined threshold; (b) asset tracking that allows tracking of materials via barcode or serial number once it is stored in a warehouse or storage facility; (c) service management that enables analysis of production phases and activities in terms of cost, time consumed, workforce needed, and other criteria; and (d) product identification that is enabled through barcode reading or radio-frequency identification (RFID) tags (Lang, 2009; Bidgoli, 2010). Organizations require the maintenance of their inventories to serve its unique function in the production chain. Inventories can be classified according to its functions, which in turn directs how these materials should be managed (Saxena,