Definition: Inventory management refers mainly to when a firm strives to attain and uphold an optimal inventory of goods while also taking note of all orders, shipping and handling, and other associated costs.
Note: in the e-conomic application, inventory management is called 'Stock management'.
Inventory management is mainly about identifying the amount and the position of the goods that a firm has in their inventory. Inventory management is imperative as it helps to defend the intended course of production against the chance of running out of important materials or goods.
Inventory management also includes making essential connections between the replenishment lead time of goods, asset management, the carrying costs of inventory, future inventory price forecasting, physical inventory, available space for inventory, demand forecasting and much more.
By balancing these competing requirements, a company will discover their optimal inventory levels. This is an ongoing process, as the firm will need to shift and adjust as it changes and expands.
Push, pull
Simply put, inventory management is driven first by the customers who pull goods out of the inventory, and second by the company who push the goods out of inventory due to orders and demand.