Inventory management

Inventory management is the planning and control of stock held by an organization, including when and how much to replenish. It balances product availability against the costs and risks of holding inventory.

Economic order quantity: A formula for choosing an order size that balances ordering costs against inventory holding costs. It gives a classic way to balance replenishment frequency against the cost of carrying stock.
Lead time: The time between initiating an order or process and receiving its usable output. Long or variable supplier lead times require earlier replenishment and often larger buffers.
Just-in-time manufacturing: A production approach that supplies materials close to when they are needed, minimizing work-in-process and stored stock. It limits buffers and depends on dependable replenishment and production flow.
Lean manufacturing: A production philosophy that seeks to reduce waste and improve flow through ongoing process improvement. Lean methods treat excess inventory as waste, while buffers can protect against disruption.
Working capital: The funds available for an organization's day-to-day operations, commonly measured as current assets minus current liabilities. Inventory ties up cash that could otherwise support operations or investment.
Reorder point: The stock level at which a replenishment order should be placed to avoid running out before new stock arrives. It turns expected demand and lead time into a trigger for replenishment.
Stock keeping unit: A distinct product and variant identified for tracking inventory, such as a particular size or color. Inventory records and decisions are usually maintained separately for each SKU.
Vendor-managed inventory: An arrangement in which a supplier monitors a customer's stock and takes responsibility for replenishment decisions. It shifts some inventory monitoring and replenishment authority to the supplier.
Theory of Constraints: A management approach that improves system performance by identifying and managing its limiting constraint. It uses inventory buffers around bottlenecks to protect throughput rather than minimizing all stock.
Bullwhip effect: The amplification of demand variability as orders move upstream through a supply chain. Ordering rules and batch replenishment can magnify small demand changes into large stock swings.

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