Overview

Inventory management can be approached informally or formally depending on the scale and complexity of operations.

• Informal Systems: Suitable for small companies with limited inventory items. Decisions are made intuitively, often without structured analysis.
• Formal Systems: Essential for enterprises managing a wide variety of inventory items with varying usage rates. These systems reduce costs and prevent production disruptions.

As inventory complexity increases, informal methods tend to result in:

• Higher operational costs
• Frequent stockouts or overstocking
• Interruptions in production flow

A formal inventory management system incorporates structured policies, data-driven decisions, and optimization techniques to ensure efficient inventory control.