Inventories

Inventory (American English) or stock (British English) is the goods and materials that a business holds for the ultimate goals to have a purpose of resale (or repair).

is a discipline primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials.

The concept of inventory, stock or work-in-process has been extended from manufacturing systems to service businesses and projects, by generalizing the definition to be "all work within the process of production- all work that is or has occurred prior to the completion of production." In the context of a manufacturing production system, inventory refers to all work that has occurred - raw materials, partially finished products, finished products prior to sale and departure from the manufacturing system. In the context of services, inventory refers to all work done prior to sale, including partially process information.

The scope of inventory management concerns the balance between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space, quality management, replenishment, returns and defective goods, and demand forecasting. Balancing these competing requirements leads to optimal inventory levels, which is an ongoing process as the business needs shift and react to the wider environment.

Inventory management involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling and related costs are kept in check. It also involves systems and processes that identify inventory requirements, set targets, provide replenishment techniques, report actual and projected inventory status and handle all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. It also may include ABC analysis, lot tracking, cycle counting support, etc. Management of the inventories, with the primary objective of determining/controlling stock levels within the physical distribution system, functions to balance the need for product availability against the need for minimizing stock holding and handling costs.

There are five basic reasons for keeping an inventory

All these stock reasons can apply to any owner or product.

Average Daily/Weekly usage quantity X Lead time in days + Safety stock

...
Wikipedia