Purpose

The primary purpose of inventory is to:

• Ensure uninterrupted production and order fulfillment

• Meet customer demand on time

• Balance supply and demand efficiently

• Reduce stockouts and excess holding costs

• Support business continuity and scalability

Regulation

Inventory management is governed by a combination of accounting standards, tax regulations, and industry practices.

• Accounting: Inventory valuation follows standards such as IFRS (IAS 2) or GAAP

• Taxation: Inventory impacts GST/VAT, customs valuation, and income tax reporting

• Compliance: Certain goods may be subject to regulatory controls, batch tracking, or expiry monitoring

Internationally, inventory practices align with global accounting and supply chain standards, while local laws define reporting and audit requirements.

Types of Inventory

Raw Materials
Materials used in the production of finished goods.

Work-in-Progress (WIP)
Goods that are partially processed but not yet complete.

Finished Goods
Products ready for sale or distribution to customers.

MRO Inventory
Maintenance, Repair, and Operations items used to support operations but not sold.

Safety Stock
Extra inventory held to protect against demand fluctuations or supply disruptions.

Key Components

A standard inventory record includes:

• Item name and SKU

• Item category and description

• Quantity on hand

• Storage location (warehouse, bin, zone)

• Unit cost and total value

• Batch or serial numbers (if applicable)

• Expiry or manufacturing dates

• Reorder levels and lead time

• Supplier or source details

Why It Matters

• Enables accurate order fulfillment

• Reduces carrying costs and wastage

• Improves demand planning and forecasting

• Prevents stockouts and overstock situations

• Supports financial reporting and audits

• Drives operational efficiency across warehouses

Conclusion

Inventory is the backbone of warehouse and supply chain operations. Effective inventory management ensures product availability, cost control, and operational agility. With increasing supply chain complexity, businesses rely on accurate inventory visibility to make faster, smarter decisions and maintain a competitive edge.