The operational efficiency and effectiveness of a business are often dependent on its inventory.聽An inventory of a business is its storage of raw materials, work- in-progress and/or finished goods.聽The inventory of a business is kept in its warehouse, store or with the resellers.

A warehouse is a physical storage place and the warehouse inventory is the inventory kept in that physical building. A warehouse, usually, does not deal with the end customer directly and performs the role of a distribution base. A warehouse may be different than the in-house store facility, which maintains small quantity of inventory, having on-hand availability, whereas, the warehouse has a proper system of taking the inventory from and stores large quantities of inventory.

Maintaining the correct level of inventory is critical to the functionality as well as the profitability of the business, which make inventory management a very vital and a critical system.

An inventory management system is a system that uses technology, in terms of both hardware and software, processes and other resources, like human resource, to manage and control the level of storage of raw materials, work-in-progress or finished goods.

Inventories are often marked and identified using the bar codes and audited using cycle counting or other methods. In addition, there are different accounting methods used (depending on the company鈥檚 accounting policies and standards) in the inventory management system for determining the worth of the inventory entering and leaving the warehouse, such as First in First out (FIFO), Last in First out (LIFO), Average cost method (AVCO). These methods provide the cost of the inventory for the evaluation and decision-making purposes. 聽

There are many benefits of maintaining an inventory management system, such as:

A warehouse management system (WMS) may be same as or an extension of the inventory management system. A WMS entails systems and processes to manage and maintain all the operations of a warehouse in terms of inventory coming in and out of the warehouse. In addition to managing inventory level, ordering, packaging and logistics are also managed through a WMS. The functions like packaging and logistics are not managed in the inventory management system but are part of a warehouse management system.

The similarity or the difference between the two systems, WMS, and inventory management system, depends on the organization鈥檚 design, nature and business practices.

For instance, if a production facility only maintains the level of warehouse inventory and not the inventory lying with the resellers, it might use only one system instead of two separate ones.

In addition, if a business is small, it might not want to maintain two separate systems and consolidate the two. Furthermore, some companies do not offer packaging services and only store inventories to sell them to the end customers. In this case, only inventory management system would suffice. Therefore, both systems can be present alongside, or in consolidated form or may even replace one another.

To maintain a warehouse inventory, many templates, applications or software are available which can be easily customised as per the needs and the requirements of an organization. However, a company can even use MS Excel or other programs to design its own templates for maintaining and managing its warehouse inventory levels as well.