The word “inventory” has been defined in different ways. One definition that has been chosen and seems to be more suitable, “Inventories refer to stockpiles of raw materials, components, supplies, work in process, and finished goods that result at various points throughout the production and logistics channel of a company (Muller, 2003).
A proper inventory management is of great importance n any business organization. The future of business organizations relies on how the top management specifies and takes into account inventory management in relationship with the objectives of the company. Some of the primary reasons why business organizations hold inventory include:
- Because the production requires some in-process inventory.
This paper will, therefore, evaluate the value of holding inventory in order to provide a particular level of customer service.
Customer service is one of the most critical motivations for holding inventory in the sense that it allows to decide in proper terms the customer’s wants and needs in order for them to be positively answered or met. Managing inventory is an important task that requires a suitable knowledge in order to efficiently and effectively responds to the expectations of customers. According to Jaber (2009), Customer service requirements control the structure of the inventory management, including production and logistics, and understanding such requirements is an important step for the design of a customer service strategy that meets customer satisfaction.
Jaber (2009) added that the primary value of managing inventory is to make room for customer requirement in a cost effective way. An example of a multinational corporation that is successful in managing its inventory effectively to meet its customers’ needs and wants is the Apple Inc. The American multinational corporation that deals with the consumer electronics is successful in satisfying its customers because of several reasons with the key among them being able to manage its inventory properly.
All organizations are concerned with inventory management; a specific emphasis has to be put on it. A proper inventory management implies the coordination of strategic functions (production and logistics) of the company with the purpose of meeting customers’ needs and wants. Therefore, inventory management has a big impact on customer responsiveness, and this implies that an effective inventory management results to high level of customer satisfaction.
Jaber, M. (2009). Inventory management. Boca Raton: CRC Press.
Muller, M. (2003). Essentials of inventory management. New York: AMACOM.