In brief
Inventory management covers the planning, control and monitoring of stock in order to ensure availability and keep tied-up capital low.
Contents
What is Inventory management?
Inventory management operates within the conflict of objectives between service level and costs. Stock levels that are too high tie up capital, occupy storage space and become obsolete; levels that are too low lead to stock-outs and, in the case of spare parts, to plant downtime. The task is to hold the right quantity of each item at the right time. The requirements differ considerably depending on the type of item, for example between production material, consumables and spare parts.
The tools include classifications such as ABC and XYZ analysis, planning parameters such as reorder point, safety stock and order quantity, and KPIs such as inventory turnover, service level and days of supply. Control is either consumption-based, according to historical values, or requirement-based, according to planned orders, for example from maintenance plans. Added to this are stocktaking, inventory valuation and the clean-up of items no longer needed.
Spare parts follow their own rules. Many parts are rarely needed but are indispensable for operations. Here, criticality, the number of installed units, replenishment lead time and obsolescence risk determine stockholding more than consumption does. In addition, consignment stock, vendor managed inventory or framework agreements can keep stock at the supplier. The costs of a possible downtime also feed into this assessment.
In practice: maintenance and procurement
A clean master data basis is the prerequisite: duplicate items with different descriptions for the same part drive stock levels up unnoticed. Regularly comparing spare parts with the current asset base shows which parts are still needed and which can be run down.
Synonyms and abbreviations: stock management · inventory control · inventory planning
Frequently asked questions
What is the aim of inventory management?
The aim is to keep the required materials available in sufficient quantities while limiting tied-up capital, storage costs and obsolescence risks. In practice, this means setting an appropriate service level for each item and choosing order quantities and order times so that this service level is achieved economically.
Which KPIs are used in inventory management?
Commonly used are inventory turnover, average storage period, days of supply, service level or fill rate, stock-out rate and the share of items without movement over a longer period. For spare parts, it is also revealing how many downtimes or delays were caused by missing parts.
What is the difference between inventory management and warehouse management?
Warehouse management deals with the physical side: putaway, storage locations, picking and stocktaking. Inventory management decides which items are held at all, in what quantity, and when to reorder. The two interlock but address different questions.