The Procurement Glossary » Inventory

Inventory

Inventory & Logistics

Definition

The goods and materials a business holds for use, sale or production.

Explanation

Inventory ties up working capital and space but buffers against demand and supply variability. Managing it means balancing availability against carrying cost — enough to avoid stockouts, not so much that cash and space are wasted.

Example

The warehouse holds RM2m of inventory across raw materials, spares and finished goods.

Related terms

• Safety Stock — Extra inventory held as a buffer against variability in demand or supply, to reduce the risk of stockouts.
• Inventory Carrying Cost — The total cost of holding inventory — capital tied up, storage, insurance, obsolescence and shrinkage.
• Stock Keeping Unit (SKU) — A unique identifier for a distinct product or item, used to track inventory and sales.
• Inventory Turnover — How many times inventory is sold or used and replaced over a period — a measure of inventory efficiency.

Frequently Asked Questions

What is Inventory?

The goods and materials a business holds for use, sale or production. Inventory ties up working capital and space but buffers against demand and supply variability. Managing it means balancing availability against carrying cost — enough to avoid stockouts, not so much that cash and space are wasted.

Can you give an example of Inventory?

The warehouse holds RM2m of inventory across raw materials, spares and finished goods.

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