What is the role of inventory management in supply chain management?

Inventory management plays a crucial role in supply chain management primarily through the maintenance of optimal levels of stock. This involves ensuring that there is enough inventory on hand to meet customer demand without overstocking, which can lead to increased carrying costs and potential waste. Effective inventory management balances supply and demand, minimizes costs, and ensures that products are available when needed, thus directly impacting customer satisfaction and overall operational efficiency.

While forecasting future sales is an important activity within supply chain management, it primarily supports inventory decisions rather than being the core role of inventory management itself. Similarly, negotiating supplier contracts and designing product layouts are vital aspects of supply chain operations, but they fall outside the specific focus of inventory management. The central aim of inventory management is to optimize stock levels, making it essential for a smooth and cost-effective supply chain process.