Inventory management involves overseeing and controlling a company’s stock, storing, ordering, and selling goods and services. Therefore, businesses today that have incorporated inventory management are more likely to succeed than those without.
Good inventory management practices require that goods be tracked from when they are raw materials through the entire manufacturing phase to obtaining the final product.

For a business looking to increase efficiency and attain profitability, embracing inventory management is essential. This means they can track and balance supply and demand to prevent the company from overstocking or running out of stock. By doing so, a business can improve its cash flow, Increase profitability, and meet customer needs.
Key Concepts in Inventory Management
Below are some key concepts to guide you in understanding the flow of your inventory:
Types of Inventory
What are the three classifications of inventory? Inventory is categorised into three main types: raw materials, work-in-progress (WIP), and finished goods. Raw materials are all the incoming materials in your business that will be used to manufacture the final products. They are usually the basis of any manufacturing process. On the other hand, WIP refers to raw materials that are currently being worked on, but the product is not yet finished. Lastly, finished products are all items ready to be sold to your customers.

The role of inventory in mold manufacturing and production processes can not be understated. Each inventory type we discussed has a role in the manufacturing process. For example, Raw materials are needed for the production process to begin. WIP inventory contains items in various processing stages that then proceed to be finished goods ( Manufactured Molds ) ready to be sold.
Inventory Turnover
Now that we have an idea of the various types of inventories, the next question one would ask is about inventory turnover. In simple terms, Inventory turnover is the rate at which inventory stock is sold, used, and replaced in a measured timeframe. Businesses can calculate their inventory turnover ratio. It is simple to divide the cost of goods sold by the average inventory value during a given period. See the formula below:
Inventory Turnover Ratio = Cost of Goods Sold(COGS) / Avg. Inventory
Where:
- Cost of Goods Sold (COGS): The costs associated with producing goods and raw materials to be distributed to consumers.
- Average Inventory: This is the inventory available at a specific period.
You can expect two values: a high or low inventory turnover ratio. The first simply suggests that the company generates enough sales from its stock by ensuring a good balance between supply and demand. On the other hand, a low inventory turnover ratio could signify overstocking or sluggish sales.
Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ) is a valuable tool in inventory management, developed in 1913 by Ford W. Harris. Its primary purpose at the time and today is to find a company’s optimal quality for any given product. It balances ordering and holding costs to minimize the total inventory cost. Here:
- Ordering costs: It is expenses related to placing and receiving an order
- Holding costs: These include the costs of storing and maintaining inventory,
So, in a real sense, EOQ helps businesses avoid overstocking or understocking their inventories. It is concerned with having the proper inventory per demand to minimize costs.
Inventory Management Techniques
For a new business, having inventory is optional, but as orders start coming and you start stocking, the need for inventory becomes evident. One way businesses can account for inventory is to familiarise themselves with the various inventory management techniques. There are four significant types of inventory techniques, they include:
Just-In-Time (JIT)
Just-In-Time (JIT) inventory management technique associated with reducing waste and costs. How? It allows businesses to order only needed goods, thus reducing holding costs. If the company has enough stock to meet the demands of its customers, they do not need to worry about the burden of carrying excessive inventory. When applied in Mold manufacturing, JIT brings in so many advantages. It allows a smooth flow of operations and facilitates good communication with customer needs.
ABC Analysis
ABC analysis is a robust inventory management technique that focuses on the value of your inventory based on the item’s importance. The idea is to rank items in inventory based on their value and usage frequency. Here, the demand, Costs, and risk of the items in the inventory are considered.
Items are classified into three categories:
- A: These are high-value items that require close monitoring and tight control.
- B: These medium Value items fall between A and C and require moderate control and attention.
- C: These are low-value items that require minimal control. They require less human supervision and are primarily managed using automated systems.
Safety Stock
Safety stock is another vital inventory management technique focused on ensuring that there is extra Stock to meet user demands in case a product is out of stock. Enough Safety stock helps businesses prevent stockouts and maintain production flow.
Having a safe Stock is essential to avoid losing sales. Proper calculation is also needed to avoid having too much of it, as it can incur numerous expenses, such as higher holding costs. At the same time, the risks associated with having a low safety stock can also result in turning away customers or losing sales.
Reorder Point (ROP)
The reorder point (ROP) is a specific level in your inventory that indicates when to place an order so you won’t run out of stock. The purpose is to ensure that your business always has enough inventory to meet demand while the new order is being fulfilled.
If you are a business owner, understanding when to reorder helps maintain optimal inventory levels and prevent disruptions. You may not want to order while you have enough stock or when you also have zero stock. Both scenarios can negatively affect your sales. To know a suitable ROP for your business, you can use the formula below:
ROP = (daily average usage x lead time) + safety stock
Where:
- Lead time: Number of days it takes your vendor to fulfill your order
- Safety stock: The amount of extra stock recorded in inventory to ensure sales continue
- Daily average usage: The number of Average sales made for the item you are looking to Restock

Different types of inventory management techniques illustration (Image Source: cleartax)
Inventory Control Systems
Technology has also revolutionized inventory management across all industries. Inventory control systems allow companies to manage their inventory efficiently. They are available in two primary types: perpetual and periodic.
Perpetual Inventory System
The perpetual inventory system provides real-time updates on inventory levels. It uses technologies such as barcode scanning and RFID tagging to track every transaction and ensure that every inventor’s record is accurate and current. The benefit of perpetual systems is that they remove the need for manual counting. At the same time, they can have limitations, such as frequent software updates, some softwares is just too expensive to buy, etc.
Periodic Inventory System
As expected, the periodic inventory system is the opposite of Perpetual Systems. Instead of being fully automated, it relies on physical counts conducted at specific intervals, such as monthly or quarterly, to update inventory records. While software for periodic systems is not available, it also has limitations compared to perpetual systems. For example, since a human is involved with inventories, the chances of making errors are higher than the automated systems.
Inventory Management Software
Inventory management processes have changed over the years as technology has swept through various industries. Today, various inventory management software programs help automate inventory. These software programs are readily available on your favorite browser. Just do a simple search and find the one that satisfies all your business needs.
Remember that not all inventory management software offers the same functionalities. Some might have more features, while some might have limited features. Therefore, consider features like barcode scanning, real-time inventory tracking, demand prediction, etc.
If you are in the mold manufacturing business, use software that can easily integrate with mold design and manufacturing systems. It will let you know what the entire production process entails.
The Role of Inventory Management in Mold Manufacturing
Inventory management is vital to any business environment, no matter the size. This is also true in the mold manufacturing business. It plays the following roles.
Material Availability
The availability of raw materials is a vital component of any production process. Without it, the manufacturing process can not occur, and the final product will not be sent to consumers on time. Therefore, inventory management plays a crucial role in mold manufacturing to ensure enough stock of materials so that the final product is delivered on time to meet customer demands.
Inventory in Mold Design
Inventory management is crucial not just in manufacturing a Mold but also in the design phase. It is mainly concerned with managing the materials inventory for prototyping, testing, and design iterations. However, it’s essential l to balance material costs with design requirements.