Inventory will consist of various range of products/goods which may be needed in excess or be used at certain moment. Manufacturers and retailers both will prefer to stock inventory for preventing disruptions in their production and sales.
Some operations may have capability of stocking inventory on site, but many prefer to use warehouses. When the need arises as a backup, product will be distributed or transported from the any off-site location.
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They will store mostly the following kinds of inventory.
- Raw materials
Raw materials can be commodity items like –
- Items like wheels, nuts, bolts or ball bearings.
All manufacturing facilities will use warehouses for storing raw materials to be used for production. Having supply of different raw materials, manufacturer can accommodate easily any fluctuations in their production based on orders.
If manufacturer suddenly gets a large order with urgent delivery date then they can do production forecast only based on delivery schedule of their supplier.
Therefore, excess inventory must be available in warehouse as backup inventory for raw materials, so that their production may not get delayed due to shortage of raw material for production.
- MRO inventory
All machinery in any large manufacturing facilities should be serviced on regular basis.
Due to machine malfunctions, production may stop until parts are replaced. So, spare part inventory must be kept in warehouse to have minimal downtime for production.
Spare parts and other items essential to keep production going are termed as MRO inventory. This means they are generally used in maintenance, operation or repair during the production process.
As an example, lubricants or oils used for service machinery are part of the production process but may not be part of actual finished products.
Often retailers may run risk of losing sales or dissatisfied customers if product is unavailable. Warehouse having backup inventory will allow retailer to continuously replenish merchandise on shelves of store.
Merchandise will also mean that items are purchased in bulk, that may achieve costs savings. Maintaining certain amounts of inventory, called inventory control, will minimize need to refuse order when there is order from customers.
This will result in streamlined selling process and also more satisfied clients.
- Finished product
Few manufacturers make products only based on orders, while others run production continuously to have products always available. After products are produced and inspected are transported to warehouse.
This warehoused inventory will be used to cater customer orders quickly. As the products are readily available, so they can be shipped directly from warehouse.