Inventory Meaning

April 19, 2020  



Inventory Meaning

If you have a business then there are many things which may impact your business may be in a very positive way and may be in a very negative way, in of the most important things is business is Inventory.

Inventory plays an important role in whatever business we are doing be it manufacturing, ecommerce and any other.

Every business house want they inventory has to be full with whatever they need to run the business successful and there are many concepts are being implemented by businesses to manage the inventory in an effective way. If there is no inventory than there will be no day to day business activity that’s why most of the business keep the inventory on surplus so that they won’t face any issue related to the same. Let’s understand the inventory meaning from the business point of view.

What is Inventory?

Inventory is a term from the goods point of view; those goods can be in various stages

  • ·         Raw Material
  • ·         Complete Goods
  • ·         Work in Progress

Inventory is one of the most important asset in the business inventory helps the business to run smoothly and effectively. We can say that inventory is one of the main sources of earning high revenue. Managing Inventory is a very crucial and important part of every business. In a nut shell we can say that better inventory management helps in achieving the better result in business.

Why Inventory Management is Important?

Inventory Management is equally important like the other important activities of the business process. Let’s understand why inventory management is so crucial and important.

  • ·         High Revenues

Every business has a motto to earn high revenue; through effective inventory management you can earn good revenue. Inventory Management helps in maximize the uninterrupted production and good production leads to the good revenue.

  • ·         Less Storage Cost

If inventory is managed properly then we can manage the production effectively so we don’t produce or store more, which leads to the more storage cost and wont leads to rot the inventory. If we know our demand in the market than inventory management is easy and saves a lot for us.

  • ·         Enhanced Product Quality

Inventory Management helps in improving the product quality or the production quality, understanding the importance of inventory and the cost of the inventory we try to improve the product quality and production quality as well, in one go we want to make the accurate product which saves the lots of inventory to go waste.

  • ·         Better Business Forecasting

IF inventory is managed effectively than forecasting in term of inventory or overall business forecasting is easy and improved. We know how much inventory is required for better and smooth production, inventory forecasting helps in saving money and man power as we can use these 2 important factors in some other part in the company.

  • ·         No Delay in Delivery

While running the business company wants their order must complete on tie and customers get the finished goods at the right time. This can be achieved by good inventory management. If we have an idea about the accurate inventory than we can complete the production target on time and our finished goods will be delivered on tie as well.

Types of Inventory

Mainly there are 3 types of inventory, such as

  • ·         Raw Material

Raw material is very important as with this we produce our finished goods and send the goods in the market for sale. If we are into bag production than cloths, designer cloth, threads, chains are the raw material and what we get a bag in the end is all of this raw material. So now it’s easy to understand the why inventory is important.

  • ·         Finished Good

Finished goods are the last stage of the production, and we send finished goods in the market for sale. We send the finished goods in the market after all stages of production is completed and all the quality checking is done.

  • ·         Work in Progress

When we finished the goods and it cleared all the quality checks than it is call as work in progress as the product is waiting for the packing and getting ready to reach the market.

Importance of Inventory in Ecommerce

Inventory plays a crucial role in any industries however it plays the most important role in eCommerce Industry. Lets take a look why inventory is important in eCommerce

  • ·         We know what to sale more due to availability
  • ·         Inventory management is easy by using inventory management software
  • ·         Better data management
  • ·         More efficient business process
  • ·         Easy to manage dead and waste stock
  • ·         Re-order management is easy to manage
  • ·         Effective supply chain management
  • ·         Better planning and forecasting
  • ·         Expanded customer loyalty

Famous Terms in Inventory Management

Now we will discuss the 2 most used terms in inventory management, if we know the concept of these 2 terms than managing inventory is more easier

  • ·         LIFO

LIFO means, last in first out. This concepts plays in an important role in inventory management, which says sell the product first which was produced last.

  • ·         FIFO

FIFO means, first in first out. This concept says what we produce first must be sold first.

These 2 concepts has different way of working and what you need to implement is totally depends of what kind of products you are manufacturing. Effective use of LIFO and FIFO will help you to manage the inventory very efficiently.


Like many other aspects of the business was managed effectively by the business owner in the same way inventory also has to be managed effectively as inventory also plays an important role in the growth and helps in established the brand effectively.

Inventory management is very important, if not managed properly we may lose the business and the customers as well which will leads to lose the revenue as well, too much of inventory also leads to loss as inventory might get damaged and outdated.

So manage inventory efficiently and business will flourish and you will get the desired result. 

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