What is meant by the term 'inventory'?

The term 'inventory' refers to the stock of goods, materials, or products that a business holds for the purpose of resale, production, or other business activities. It encompasses all items that are ready for sale, in various stages of production, or are kept as raw materials for manufacturing. Managing inventory effectively is crucial for overall supply chain efficiency, as it directly impacts a company's ability to meet customer demands while minimizing holding costs and avoiding stockouts or excess stock.

Understanding inventory in this context is foundational for those involved in procurement and supply chain management because it influences decision-making regarding sourcing, purchasing, and logistics strategies. Organizations must regularly assess their inventory levels to ensure they align with market demands and operational capacities. This management is also essential to maintain quality control and optimize storage costs, adding to the importance of a well-managed inventory system in achieving ethical procurement practices.