Different types of businesses adopt different types of inventory management

By Avishek Majumder on February 18, 2019

Inventory management in supply chain management is a function to efficiently manage stocks. Inventory management remains challenged by sudden excessive customer demands. The main purpose of supply chain inventory management is to keep products and make it available during high demands (Christopher, 2016).

Factors causing problems of inventory management comprise of ineffective execution, poor decision making and poor communication (Fahimnia et al., 2015). Poor execution involves delayed and improper stocking of products, not checking damages, confusing the sequence of customer demands and untimely delivery of products. Poor decision making leads to the aspects of overstocking and understocking of products (Hugos, 2018). This mainly occurs due to poor estimations and the inability to procure products at the right time.

Purpose of inventory management strategy

An effective inventory management system in an organization can improve profit and production rate effectively. Touboulic and Walker, (2015) state that the main purpose of inventory management is to offer an effective operation to on-going material supply thereby providing and meeting timely demands of the consumers as well as procurement of products. According to Hugos, (2018), inventory management helps to:

  • Ease and keep a proper track of sales and production rate.
  • Keep a track on the inventory of multiple products on the basis of categories, time, and place of distribution.
  • Keep track of suppliers and consumers.
  • Reduce the risks of product damage.
  • Improve the distribution of products.
  • Increase customer satisfaction and timely delivery .
  • Improve financially and organizational performance.

Types of inventory management

Type of inventories (Christopher, 2016)
Type of inventories (Christopher, 2016)

Raw materials type of inventories remain used in case of the food and beverage industries. In this type of inventory, companies use cold storages, temperature maintenance technologies, automated alert systems, and the internet of things technology for efficient management of inventories. Furthermore, bought-out-part type of inventory management is mainly used by industries dealing in light or heavy machines or equipment manufacturing or procurements (Fahimnia et al., 2015). This type of inventory management focuses on managing the standards of the shelf life of mechanical and electronic parts manufactured.

In addition, the most common management systems used comprises of regular quality checks, check for inflammability, automated systems and machines for packaging and handling, and technologies in reducing the chances of mechanical damages (Fahimnia et al., 2015). Whereas work in progress type of supply chain inventory management constitutes of efficient stocking of necessitated materials, components, assemblies or subassemblies undergoing different phases of production (Fahimnia et al., 2015).

Finished goods are the products that have undergone the final procedure of production, and purchased in its entirety but still not finally sold to the ultimate consumer or in retail stores (Schönsleben, 2016). This type of inventory commonly used by manufacturers of retail products. The manufacturers use:

  • prediction technologies,
  • data-based technologies,
  • damage management,
  • packaging systems,
  • management of shelf-life,
  • product rotation systems and,
  • efficient logistics (Hugos, 2018).

Furthermore, the term “MRO” implies maintenance, repair as well as operations (Hugos, 2018). In a case of procurement, this term refers to products along with equipment that supports a manufacturer to keep its operations running. This type of inventory management is useful for manufacturers, who have their own logistics, inventories, manufacturing and retail outlets. For instance, Carrefour, the French retailer has its own maintenance, repair and operations.

Inventory management strategy is different for different types of business

Inventory management is an important operation for any business. The types of inventory depending on the type of business and type of products. Each type of inventory focuses on a set of tasks and business process. Therefore, the purpose of management for each type of inventory is different with respect to their products (Hugos, 2018). However, the common purpose for all the types of inventories remains the same, which is cost-effective distribution of products.

However, various challenges make it imperative to face various setbacks and hence develop suitable strategies for the operational framework to tackle those challenges. These mainly include untimely delivery of products, lack of inventory tracking systems, lack of implementation of inventory management technologies and lack of knowledge on good practices of inventory management (Hugos, 2018). Therefore, it is imperative that the inventory management framework is modelled or adopted, not only on the basis of purpose but also on the type of businesses and their products.


  • Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
  • Fahimnia, B., Sarkis, J. and Davarzani, H., 2015. Green supply chain management: A review and bibliometric analysis. International Journal of Production Economics, 162, pp.101-114.
  • Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
  • Schönsleben, P., 2016. Integral logistics management: operations and supply chain management within and across companies. CRC Press.
  • Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.