Inventory:

The word inventory resembles the stock of any of the item or resources utilized in an organization. An inventory system is the set of policies and controls that monitors levels of inventory and determines what level must be maintained, when stock must be replenished and how large orders should be. The prime reason of inventory analysis in manufacturing and stock keeping services is to satisfy the following needs:

1. When items must be ordered, and

2. How large the order must be.

Mostly firms are engaged in longer-term relationships with vendors to supply their requirements for the entire year.