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Definition: Inventory Management is the planning, organizing and controlling of the ordering, storage and use of the components that a company will use in its manufacturing process and of the finished products for sale.
A firm's inventory is one of its major assets and there are cost of capital associated with owning all of these items until they are sold or used in production. On top of that there are also costs to store, track and insure inventory. Furthermore inventories that not managed well can create significant financial problems for a business, including inventory glut and inventory shortage.