Cambridge O Level Business Studies · Syllabus 7115 · Operations Management
Inventory
What is Inventory?
The stocks of materials and products a business holds at a point in time, made up of raw materials awaiting use, work in progress that is part-finished, and finished goods awaiting sale. Inventory protects production and sales against uncertainty, but it ties up cash, occupies storage space and carries the risk of damage, deterioration and obsolescence.
This definition is part of the Operations Management chapter in Cambridge O Level Business Studies.
Common mistakes with Inventory
- “JIT means the business holds no inventory at all.” Correction Just in time minimises inventory. It does not guarantee zero inventory in every circumstance, and it works only where suppliers are reliable, quality is dependable and demand can be forecast.
Questions students ask about Inventory
Does just-in-time mean a business holds no inventory at all?
Not necessarily. Just-in-time minimises inventory by timing supplies and production close to the moment they are needed, but it does not guarantee zero inventory in every circumstance. It only works where suppliers are reliable, incoming quality is dependable and demand can be forecast accurately, and it leaves the business with little buffer against disruption.