The overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale is called Inventory Management, also known as Inventory Control. A business’s inventory is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold. It also costs money to store, track and insure inventory. Inventory that is mismanaged can create significant financial problems for a business, no matter whether the mismanagement results in an inventory glut or an inventory shortage.

Successful inventory management involves creating a purchasing plan that will ensure that items are available when and as they are needed (but that neither too much nor too little is purchased) and keeping track of existing inventory and its use. Two common inventory-management strategies are the Just-in-time method, where companies plan to receive items as they are needed rather than maintaining high inventory levels, and other strategy is materials requirement planning, which schedules material deliveries based on sales forecasts.

The objective of inventory management is to provide uninterrupted production, sales, and/or customer-service levels at the minimum cost. Since for many companies inventory is the largest item in the current assets category, inventory problems can and do contribute to losses or even business failures.