Question

What are the major processes around inventory and what is its critical role in the supply chain? Provide details of specific situations when a company should carry inventory.

Answer 1

The major processes around invebtory are procurement of material, storage of goods, planning of production and related activities, dispatches and transportation of manufactured goods and orders taken and given . Inventory is the reference point to all these processes as the company depends on inventory to analyse how much material to procure, produce and dispatch . It is also used in planning of activities. In a supply chain inventory is the point where raw materials and stored to be used and finished goods are stored to be dispatched. Hence it is the start and end of a process and hence plays an important role in the planning and management of whole supply chain . For example a company has N number of customers and it takes orders from them on weekly basis.A production plan is prepared and the production and dispatches are carried out accordingly. In order to plan these , a record of how much material we have and how much needs to be produced is necessary and also a place is necessary to store the raw material and the finished goods for the whole week , All these necessities can be satisfied by having an inventory and hence a company should carry inventory .