What Is Inventory Management In The Supply Chain?

by Management Published on: 01 July 2021 Last Updated on: 25 October 2022

Inventory management in supply chain

Successful inventory management allows the users to meet its customers’ demands with requisite supply. If the inventory is not effectively managed, there will be an excess, which will likely result in a shift in the customer order, and risk of product spoilage. Raw materials, WIP, MRO, and finished goods are the four major types of inventory. 

It is mainly essential for companies with a complicated supply chain, and that is why they use inventory management to ensure client needs are met. In addition, it can increase customer loyalty because if the inventory is managed successfully, customers can know which products are available for them and which ones are not.

What Is Inventory Management In Supply Chain?

What Is Inventory Management In Supply Chain?

When a company’s products are sold to a customer to make a profit, it is known as inventory management in the supply chain. Starting from overviewing and controlling the purchases of both customers and suppliers to control the total amount of product sales, everything falls under the inventory management category.

For managing a successful inventory in the supply chain, one needs to purchase an inventory first. It can be a warehouse where the raw materials that are recently bought will be stored. The next step is keeping. When the essential components are stored in the warehouse, they will be there until a need arises. When needed, these raw materials are transferred to production sites, transformed into finished goods.

Optimizing the way raw materials are stored and transferred to production can help in boosting productivity and improving turnaround times. In this regard, maintaining a warehouse inventory cycle is something that most businesses should look to follow. Whether you are a manufacturing business, or an Ecommerce company, managing your inventory well can yield rich dividends.

Once the finished goods are in place, then they are taken back to the stock areas. There, they are packed and are made ready for final shipment. Again, inventory management in the supply chain can control the amount that is eligible as the product for sale, and then the finished goods are pulled to complete the orders when a customer orders them.

What Are The Benefits Of Inventory Management In The Supply Chain?

What Are The Benefits Of Inventory Management In The Supply Chain?

Inventory management is a good process because it makes the entire procedure of managing an inventory throughout the year a whole lot easier. In addition, with the fluctuating stock conditions and the constant shifts in customer demand and product supply, this technique can automate the business process by reducing human errors

For a business with online supply chains, overselling always remains a threat. However, with inventory management help in the supply chain, those businesses can keep the selling mechanism in control and satisfy their customers.

It can synchronize the orders across all marketplaces and online platforms to automatically adjust the stock levels whenever there is a sale. In addition, the inventory metrics and reporting features available in this tool help make strategic business decisions

Inventory management in the supply chain is a cost-saving technique because businesses have to spend a lot of money to manage their inventories, mainly due to human error. Now, with inventory management, the supply chain will be more in control, and with its automation facility, the scope of extra costs will be eliminated. As a result, companies can make better decisions with more profit with this technique. 

Inventory management will grant a business better product traceability, and that will improve its business negotiation. When inventory management is applied in the supply chain, it becomes easier for the owners to understand which supply chains are profitable and which ones are not. Moreover, if one needs to recall the product list, they can also take help from the inventory management in the supply chain. 

Drawbacks Of Inventory Management

Drawbacks Of Inventory Management

Despite its potential to improve business negotiations and acquire more profit margins, inventory management is also not without its flaws. However, it is the flaws of inventory management that make the tool a more interesting one. 

It is an expensive tool, so every company can’t afford it. This software management makes the business more efficient, but small and medium-sized companies cannot afford it. Thus, it maintains the competitive edge of large companies.

Inventory management indeed improves controlling the supply chain but only when one figures out how to use it. This software management tool is not at all easy to run, and it comes with various complexities. People need time, concentration, and intense effort to learn its operating mechanism, but it can ensure a smooth business operation when it is known.

Even after applying this complicated and expensive software management, the businesses using it remains exposed to many market risks. For example, the supply chain risks go far beyond overselling and lack of order synchronization, and the inventory management does not assess those risks. 

Essential Remains Features Of Inventory Management

Essential Remains Features Of Inventory Management

Inventory management in the supply chain can raise the alarm if the stored items are below a certain threshold. It also presents a warning if the stocked items are over the prescribed limit, so order management in the supply chain can be controlled with inventory management.

The following important feature of inventory management is asset tracking. If there is any particular requirement of raw materials, then human eyes cannot find it immediately, which is why we need inventory management. It saves a lot of time and effort for the people responsible for taking care of the inventory.

Service management is another prominent feature of inventory management. With its help, we can track the cost for each raw material, and that we can easily include that cost with the total service cost for gaining a better insight into the inventory. 

Finally, inventory optimization is the ultimate feature of this tool that enables companies’ supply chains to be far more efficient and controlled. In addition, it sends a reminder to the responsible people about when the stocks should be replenished. Thus, in case of an emergency, there will not be any product shortage in the inventory.


Inventory management in the supply chain is undoubtedly a tremendous advantage for business owners. The actionable and improved inventory analysis, including its interfaces and integration, all are essential features and benefits of this technique that allows a smooth operation in the supply chain.

Therefore, we would recommend you use this software management tool because if you learn how to use it and can afford it, there is no better way to control your inventory than inventory management.

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Mashum Mollah is the feature writer of Search Engine Magazine and an SEO Analyst at Real Wealth Business. Over the last 3 years, He has successfully developed and implemented online marketing, SEO, and conversion campaigns for 50+ businesses of all sizes. He is the co-founder of Social Media Magazine.

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