Inventories have to be kept in the logistics chain as part of supply chain management. Supply chain management addresses the management of materials and information in the supply chain. At one end, it is the suppliers or producers and at another the end, the customers. A supply chain by itself might be viewed as a multi-echelon inventory system because at any time, there are goods storage and movement in the system. There are good reasons to keep inventories in the supply chain because almost all organizations prefer to be aware of the future demand and be ready to meet them. Without inventory planning and management, organizations would suffer. Primarily, they are not able to meet the needed demands of their customers because of lack of goods in their stores. Secondly, they might overstock leading to wastage of goods, importantly perishables ones. Inventory and its management in this context are helpful as it will ensure efficiency of both the demand and stock functionality.
When maintaining inventory sales and operations planning and processes it is possible to support sales management and operations planning which is a strategic necessity for the firms to meet their consumer demand and avoid overstocking. Sales management and operations planning (S&OP) aim to combine two important functions of the firm. Primarily, the demand management functions in the organization such as sales forecasting, marketing etc. would be combined with the operations level functions of the firm such as manufacturing, supply chain, procurement etc. Firm’s on hand inventory and details are needed in a timely manner in order to assist in such strategic planning. Shifts in manufacturing could affect meeting consumer demand or alterations in procurement, or any other form of risk that could be managed well when inventory and management is connected with sales and forecasting. Given this background context, it can be understood that keeping inventories in the logistics chain alone does not guarantee productivity, but it is necessary to carefully manage them.