The concept of inventory management, which is mentioned in the definition and its varieties, is carried out by businesses through multiple transactions. Inventory management, described as planning, organizing, and controlling, is defined as the optimum selection of obtaining the services and/or materials that businesses need to be able to produce, considering financial conditions. In clearer terms, inventory management is stated as obtaining the materials to be used in the production of relevant products optimally by considering the production and financial conditions of the businesses. The purpose of inventory management is expressed as ensuring that businesses keep the products they need for production ready at the necessary time and procure the relevant products at the most suitable level for the economic structure of the business. Through inventory management, businesses can continuously control the materials they keep on hand.
The most important point to note in inventory management is that it is known for providing the best service to its customers. In other words, to ensure that businesses provide the best service to their customers, they need to keep inventory continuously and prioritize inventory management to maximize profits. The size of businesses, the type of production undertaken, and the financial situation of the relevant business play a role in determining inventory management systems. To be more precise, businesses determine their inventory management based on their size, production methods, and financial conditions. Although inventory management has existed in the past, historically it was done through counting and visual control; today, inventory management is performed both manually and through computers.

What is Stock?

Inventory, an important concept for businesses, affects the production of firms significantly. The concept of stock is defined as the raw materials, assets, and semi-finished goods that businesses need to produce. More clearly stated, it is known as the total of raw materials, processed and/or semi-processed products required for production in any industry. In a different expression, stock is also defined as the total quantity of goods that firms keep in their warehouses, ready for sale.
Stock, also known as inventory, is one of the cost items in production firms, and it is significant for meeting sudden needs that may arise in businesses and ensuring that the production of relevant products is not interrupted. Inventory, which consists of raw materials, finished products, and semi-finished products, becomes an important concept due to the needs that may arise in the production phase and the additional orders that come after production is completed. As one of the cost items of manufacturing companies, inventory should be controlled to prevent the rise of alternative costs, just like other costs of firms.
The intent of controlling alternative costs refers to the ability of firms to respond to potential product demands while also reducing the costs that could arise for the product. If firms hold more stock than they should, excessive accumulation occurs in warehouses. Businesses facing this excessive accumulation situation should stop purchasing raw materials and assets or refrain from production for a while. Inventory, in other words, is an important concept in accounting, and there are different varieties within the field of accounting. The types of inventory, which are significant concepts for accounting and business, are as follows:
● Raw material stocks,
● Semi-finished product stocks,
● Finished product stocks.
For production businesses, it is important to maintain the raw materials needed for the relevant production. In semi-finished product stocks, it refers to products that are initially involved in production but cannot be finalized as end products, which have multiple stages. Unlike the previous type of stock, finished products are those that have been included in the production process and have been completed into their final product form. The final goods kept as inventory are also expressed as products that are ready for sale and/or delivery.

How is Inventory Management Done?

Inventory management, which has continued to exist from the past to the present, not only increases businesses' ability to respond to customer demands but also helps maximize profits gained. Inventory management can be done using developed computer software and Excel, as well as through the help of paper and pencil. Because inventory management is tracking-based, it can lead to errors outside of the developed software. Depending on the structure of the company, the method preferred for inventory management may vary. Paper and pencil inventory management is typically implemented by very small businesses. However, due to the human-centered nature of this method, it is limited by the capacity of the individual doing it.
Excel inventory management is generally preferred by small-scale firms. For small-scale businesses, using an Excel template for inventory management appears to be a cost-free method. As businesses' labor structures and production capacities increase, Excel templates can also lead to errors in inventory management. Computer software frequently preferred by large-scale businesses increases the speed of inventory management processes, thus saving time. Software that can facilitate inventory management is referred to as "Inventory tracking program" and/or "Warehouse inventory management program." The main features found in inventory tracking software are as follows:
● Defining the warehouse where the product will be held,
● Listing the materials and assets that businesses keep in stock,
● Grouping the materials and assets stored as inventory and making lists according to these groups,
● Entering and exiting products to the warehouse using barcodes,
● Tracking inventory,
● Reporting on inventory-related matters,

● Analyzing the inventory on hand. For businesses to conduct their inventory-related processes correctly and accurately, the inventory tracking program needs to include the above-mentioned features. Managing inventory through an inventory tracking program allows businesses to access a lot of data from a single point in the future. This is because the relevant programs help businesses clearly see the products they keep in their warehouses, the quantities of the products, when the products enter and exit the warehouse, and the unit costs of the materials in stock.

Why is Inventory Management Important?

Healthy inventory management that can be carried out through an inventory tracking program provides businesses with various advantages from different perspectives. So what advantages does inventory management offer to businesses? The advantages of inventory management are as follows:
● Inventory management ensures that the production carried out by businesses is continuous and regular. More clearly stated, businesses that manage inventory do not experience interruptions in the production process due to a lack of raw materials.
● What is needed for the production that businesses plan to carry out in accordance with the goals they have set is accurately and completely determined through inventory management. Additionally, due to the correct and complete procurement of the relevant materials, taking into account the business's financial possibilities, financial management is also effective.
● With inventory management, the procurement of necessary resources for product manufacturing and the sales of products are also organized in a certain order. ● Cost accounting is easily maintained in businesses that manage inventory.
● The production process carried out by the businesses is close to reality, and the management of the production process becomes easier.
● In businesses that manage inventory, the loss of materials and products to be used in production is also minimized. In other words, businesses that manage inventory experience less product and/or material loss compared to other businesses.

What Should be Considered in Inventory Management?

Businesses that will engage in inventory management through paper and pencil, Excel templates, and/or inventory tracking programs need to pay attention to various matters. So, what are the points that businesses should consider when managing inventory? The first issue that businesses should consider when managing inventory is to differentiate between the products that must always be in stock and other products. To clarify, after performing inventory management, necessary products for businesses and special situation products are separated from each other. Another point that businesses should be aware of regarding inventory management is that the product sold should also be available in stock.
In other words, businesses should not put any product that is not in stock for sale. This is because it is very important for customers that the product's availability is high. With inventory management, which is important for both production and sales, businesses receive a warning if their stocks fall below a serious level. Moreover, products that are out of stock are automatically removed from the sales section for businesses managing inventory. Inventory management affects customers' trust in the brand and business and ensures that businesses are aware of their stock levels.

What is the Use of Inventory Management?

If done regularly and accurately, inventory management brings various conveniences to businesses. It prevents the excessive stock that causes accumulation in the warehouses. With the correct management of stocks, businesses can also take precautionary measures against fluctuations in demand for their products. By correctly identifying the necessary materials and assets for the business, financial efficiency is also achieved.
Costs incurred for the procurement of products and product sales are minimized through effective inventory management. Thus, inventory management significantly impacts the profitability of businesses. It also eliminates the risk of losing the materials and/or assets kept in stock. Inventory management, which provides benefits to businesses from different perspectives, also ensures that customers can quickly reach the product they demand, while also eliminating the risk of losing incoming demand for businesses. The necessary process of inventory management varies according to the unique characteristics of each business.

What is Inventory Cost?

Two types of costs stand out as inventory costs; it is also known that businesses manage inventory to balance these related costs. The types of costs that businesses face regarding holding inventory are as follows:
1. Holding Cost,
2. Non-Holding Cost.
In the first type of inventory cost, known as holding cost, businesses bear costs such as warehouse rent, electricity and water bills, insurance, and warehouse expenses due to holding the relevant products. The other type of inventory cost is referred to as non-holding cost. Businesses that do not hold inventory may delay their customers who request products and/or lose them. Both costs need to be balanced by businesses. Because holding excessive inventory can significantly increase their costs, while businesses that do not hold inventory lose the revenue they would generate from sales. Conversely, businesses with sufficient stock in their warehouses may encounter situations where they have to sell out their products due to sudden developments. In this regard, when insufficient inventory is maintained, the demand from customers will exceed the supply of the business, leading to stock-out costs. Businesses need to manage their inventory management processes well to balance both costs. In the inventory management process, businesses track every detail, from the purchase of the materials needed for the relevant production to the sale of the final product.

Who Manages Inventory?

Inventory management can generally be defined as the process conducted by a person or team responsible for managing product stocks in a business. This operation is generally carried out by the purchasing and supply chain manager, warehouse manager, or inventory management manager. Inventory management aims to regularly monitor the quantity, cost, turnover rate, and other factors related to product stocks, to reduce the costs of the business and increase customer satisfaction.

What Methods are Used in Inventory Management?

Many different methods are used in inventory management. If we were to mention some of them:
• FIFO (First-In First-Out): The principle of the first products entering being the first ones to leave
• LIFO (Last-In First-Out): The principle of the last products entering being the first ones to leave
• AVG (Average Value): Using the average cost value of stocks
• CE (Last Purchase Price): Using the most recently purchased price for the stocks
• ABC Analysis: Classifying products to ensure prioritization in inventory management
According to the goals of the business, its processes, and other factors, the most suitable method is selected and implemented.

What is the Main Purpose of Inventory Management?

The primary purpose of inventory management is to find and ensure the most efficient and effective way to meet a business's requirements for materials, products, and services. This process includes timely procurement of the necessary materials to reduce costs, lower stock levels, increase customer satisfaction, and improve the overall performance of the business.