Inventory Huong Vu September 15, 2023


Inventory Definition 

Inventory refers to products or materials that are stored for some ultimate purpose such as retail or production. Inventory can be considered a primary and fundamental asset in every retail business. However, the problem of inventory balance may challenge many retailers.

The need for keeping inventory

Avoid problems originating from the supply chain process

Due to unexpected reasons, products from suppliers may not arrive on time which causes a lack of in-store products. As a result, retailers should maintain proper amounts of inventory to use in those situations.

Fulfill seasonally demand

Customer demand varies periodically. In order to prepare for short and special holidays, retailers usually calculate and keep a proper amount of inventory based on the anticipation of future consumption.

Tackle uncertainty in demand

Retailers keep inventory so that they are able to timely deal with the sudden demands of products.

Gain profit from price increase

If the market price is expected to rise in the future, retailers can increase the number of raw materials bought in bulk and hold inventory as an efficient way to maintain the selling price.

Types of Inventory

There are various types of inventory and each type will fit in with certain product attributes.

  • Raw materials: Contain materials used for stages of production.
  • Work in process: Contain partially finished goods and in the process of completion.
  • Components: Somewhat similar to raw materials, however, only contains materials needed in the finishing process such as screws.
  • Finished Goods: Contain ready-to-sell items
  • Maintenance, repair, and operations goods: Contain items that support produce or maintain products.
  • Packing and Packaging Materials: Contain three sorts of materials: primary packing materials (first protection of products), secondary packing (packaging, labels, product information), bulk packaging (for transporting).
  • Good for resales: Contain salable returned goods.
  • Stocks in transit: Contain stocks in transit between suppliers and distributors