The Role of Inventory in Supply Chain Management is of Managing customer and vendor relationships with a critical aspect of managing supply chains.
The Role of Inventory in Supply Chain Management is of Managing customer and vendor relationships with a critical aspect of managing supply chains. In many cases, the collaborative relationship concept has been considered the essence of supply chain management. However, a closer examination of supply chain relationships, particularly those involving product flows, reveals that the heart of these relationships is inventory movement and storage. Much of the activity involved in managing relationships is based on the purchase, transfer, or management of inventory. As such, inventory plays a critical role in supply chains because it is a salient focus of supply chains.
Perhaps the most fundamental role that inventory plays in supply chains is that of facilitating the balancing of demand and supply. To effectively manage the forward and reverse flows in the supply chain, firms have to deal with upstream supplier exchanges and downstream customer demands. This puts an organization in the position of trying to strike a balance between fulfilling the demands of customers, which is often difficult to forecast with precision or accuracy, and maintaining adequate supply of materials and goods. This balance is often achieved through inventory.