What is the role of inventory in supply chain management?

The main role of inventory in the supply chain is to order the optimal quantity at the right time in which the total cost including holding cost will be minimized and customer needs will be met.

support customer service

support sales plan (fluctuated/seasonal demand)

support finance statement

increase production efficiency 

support operations in case of raw materials

decoupling raw materials form suppliers

decoupling shortage (stock out) from production (buffer)

Managing customer and vendor relationships is 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.

The inventory has main role in supply chain management like in a warehouse without inventory you cannot monitor outgoing or incoming, that will effect your budget of warehousing also. Secondly without inventory you cannot monitor that whatever you have in warehouse and outgoing also so that incase of emergency you cannot cover it. Without inventory you cannot judge your materials. Every single job is based on inventory.

Follow up through the system the items min./max levels and order the items that reached min. levels with enough time to cover management approvals and shipping time. also should contact the users if we touched high consumption for some items to increase min./max.   

The supply chain is a system coordinated by organizations, humans, activities, information and resources involved in the movement of a product in a physical and virtual manner from the supplier to the client. The activities from the supply chain transform raw materials and components in a product that is delivered to the consumer or to the user. The inventory, together with the transport, the location of the production spaces and of the storage represent an important factor that influences the performance of the supply chain. Inventory contains the raw materials, the work in process and all the finished products of a supply chain. The changes of the inventory policies can lead to a dramatic alteration of the supply chain’s efficiency and responsiveness. The managers of the firms that build up a supply chain have to identify the main categories of inventory and the way that they can be dimensioned. In every company we can identify cycle inventory, safety inventory and seasonal inventory and we can calculate a series of indicators that can offer an image of the inventory. Traditionally, in the management of supply chain processes, inventory management is challenging because it directly impacts both cost and service. Uncertain demand and uncertain supply make it necessary to hold inventory at certain positions in the supply chain to provide adequate service to the customers. As a consequence, increasing supply chain process inventories will increase customer service and revenue, but it comes at higher cost.

Managing customer and vendor relationships is a critical aspect of managing supply chains. In many cases, the collaborative relationship concept has been considered the essence of supply chain management.

INVENTORY IS RESULT IN KEY PRODUCTIVITY FOR SCM CONCEPT.

INVENTORY=ACCURACY+PROCESS EFFECTIVENESS

The most important role of the inventory in SCM is to balance the demands and supplies of any company with out affecting the cash flow. 

There are3 things that flow in supply chain

1. Inventory

2. information

3. Money

Hence inventory is one of the three important elements of a supply chain. Any supply chain is designed by considering the elements of these three factors.

Inventory is the key in supply chain management as it helps to ensure continuous flow of finished goods. Suppose there is an immediate demand for products in excess then if the company doesn't have suitable inventory of finished goods, it cannot meet those demands. But excess of inventory can lead to wastage and will also increase need for more storage space in warehouses. So inventory should be managed optimally.