Inventory and Supply Chain Management

Inventory and SCM play a significant role in the growth and profitability of a company. Without having a proper strategy for SCM and inventory, it is difficult for them to manage it and they would incur a lot of capital resources for it. The incurrence of the cost would decrease the company’s profitability because of stock wastage. Today, we’ll discuss inventory and supply chain management; their definitions separately, and strategies.

Implementing optimum inventory and SCM strategy allows you to deal with the challenges; decrease the risk factor and cost by making sure the growth of your business in the long term. Effective management of inventory and SCM would help you to make better decisions in the long term. However, it allows you to better respond to the needs and demands of customers relevant to the changing market trends.

What is Inventory Management? 

Inventory is the products and goods of the company that it plans to sell to the customers on profit. Inventory management (IM) is the process of tracking inventory stock from the production unit to the warehouse and the retail store. However, it is one of the key areas of SCM and the objective of IM is to stock the right product at the right time in the right place. Some of the main steps involved in the process of IM are as follows;

Procuring Inventory

As the name implies, it comprises buying ready-made goods, delivering them to the warehouse and to the retailer and end consumer.

Storing Inventory

The purchased stock requires storing until its sale. You have to transfer your products and goods across your fulfillment network until they are ready for shipment.

Profiting from Inventory

It is the method of controlling the amount of goods and products; pulling finished goods and products to fulfill orders, and then shipping products to the end consumers.

However, inventory outlines the following;

  • Merchandise
  • Finished goods
  • Goods-in-process
  • Raw material

What is Supply Chain Inventory Management? 

Businesses and companies should have sufficient inventory to meet customer demands while dealing with challenges and disruptions. SCIM makes sure that you don’t have an understock or overstock of goods and products, and delivers them to the customers after significant delays; regardless of disruptions and challenges like natural disasters, cyber-attacks, and pandemics.

On the other hand, supply chain management is the process of managing the flow and movement of goods and products from the raw supplies, manufacturing facility, and warehouse to the end consumer. Some of the elements of SCM are as follows;

  • Planning
  • Sourcing
  • Production and manufacturing
  • Logistics and delivery
  • Returning

Inventory and Supply Chain Management – Strategies 

Some of the main strategies for inventory and supply chain management are as follows;


The FIFO (first-in and first-out) strategy comprises selling the old stock first to avoid the product expiry dates. Businesses and companies in the food industry employ this strategy, rather it is applicable to all types of products and goods that would become damaged over time. However, it requires you to constantly monitor and analyze the stock dates, and shelf spacing, and bring the old stock on the fresh shelves.


Dropshipping is the online business model where you don’t have to manage inventory, and you sell the stock of goods and products that you don’t own it. Here, sellers market and promote the products and goods of manufacturers, receive orders and payment and establish relationships with customers. But they don’t engage in the process of logistics and shipping. However, it is useful business model for e-commerce and online stores.

Replenishment on Order

It is advisable to restock your order when it is nearly impossible to know the sale of the company in the particular season. However, it is also difficult to make accurate sales forecast. You can’t make the accurate and right forecast of sales. When you place different orders at different times, then this method would respond to the changes in consumption. It is significant to beware of the availability of products and goods in stock.


JIT (just in time) is a SCM strategy and it requires you to define the minimum stock level in advance. As soon as the stock reaches the minimum level, then it triggers the replenishment order. However, you determine the timing of the order based on the delivery timing and stock level.

It is a very effective and useful approach for such products and goods that their sale is difficult to predict. It is also good for such products that their optimization and storage cost is very high. However, it provides various automation opportunities to decrease the time spent on inventory.

Replenishment Method

It comprises placing restocking orders continuously by defining the stock level status of the product. Here you define the quantity difference between the existing stock and the optimum stock level. However, the ISCM is a very costly and expensive approach for such products that have a short expiry date like food items.

ABC Analysis of Stock

The ABC Analysis of Stock is the process of dividing your products into 3 categories

  • A Class: 20% of the goods that contribute 80% of the profit, and their inventory evaluation is highly significant
  • B Class: 40% of the goods that contribute 15% of the profit; it is important to make sure their availability
  • C Class: 50% of the goods that generate 5% of the profit, and need replenishment infrequently

Conclusion: Inventory and Supply Chain Management 

After an in-depth study of inventory and supply chain management; we have realized that SCIM is highly significant for the growth and profitability of your business. If you are learning about ISCM, then you should keep in mind the abovementioned strategies and key elements.

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