What Is Inventory In Business?
What is the meaning of inventory? In this post, we’ll answer this vital question for you, as well as let you in on different types of inventory, touch upon the topic of inventory management, and cover the main functions of top-level inventory management software.
Without a proper inventory, the company may be unaware of how many goods (or services) they have at their disposal and thus, won’t be ready — or even capable — of completing their clients’ orders. Let’s say you’re a retail store owner, and a client comes in on the prowl for new ankle strap sandals. If you ran out of ankle strap sandals yesterday, the client may decide to head elsewhere. It’s natural. So, keeping tabs on your stock and restocking timely is vital in this sense.
What is the inventory?
How inventory is defined depends on the niche in question. Business-wise, it entails all the goods and products a company has on sale, along with any materials its staff uses for making those products. Naturally, inventory differs from one company to another. If, for example, we’re talking about coffee shops, their inventory includes such ever-changing items as coffee, milk, cupcakes, and the like.
If, for example, your coffee shop uses a car to deliver custom cupcakes to your clients, only the cupcakes will be considered inventory. The car will be treated as an asset. We hope that clarifies the inventory business definition in detail for you.
While there’s a multitude of different types of inventory, the 4 paramount ones are as follows:
- raw materials and elements: they are used by businesses to create the product they sell. For instance, if you sell coffee, the raw material inventory includes coffee, milk, and various sauces;
- stuff in production: if you’re a manufacturer, then this type of stock includes products that are currently in the process of being crafted;
- finished products & maintenance: this is pretty self-explanatory, i.e. ready-to-be-sold products, along with the upkeep-friendly stock;
- repair and operating supplies: the stuff the company utilizes to transform the goods into a completed product. Coffee shop-wise, that would include coffee brewing machines.
Examples of inventory
Because we’ve already covered stock examples, let’s switch to inventory management. Now, what is inventory management in business? It’s a vital element in the supply chain and the process that aids companies in monitoring their stock. Basically, it’s ordering, storing, utilizing, and selling a company’s raw materials, accessories, and finished items.
What is the purpose of an inventory management in business? It’s simple: ensuring there are enough goods and materials to meet demand without over- or understocking. So, if you feel the need to refine your item ordering, stocking, storing, and processing, that’s where top-level cloud-based inventory management systems like ORTY come into play.
Inventory management best practices
The benefits of inventory management cannot be overlooked. First and foremost, it ensures effective order completion and thus boosts your revenue flow. Also, it saves your time, and money, enhances customer satisfaction rate, and generally allows you to automate and streamline most of your business processes.
No doubt, one of the best ground-breaking decisions you can make to skyrocket your stock management to stardom is switching from Excel to a quality cloud-based inventory management system. With a solid platform at your fingertips, you will only pay for the functionality you need based on a single, straightforward package fee. If you’re seeking the best inventory management examples out there, all of them suggest using such type of software.