What is the primary goal of inventory management?

The primary goal of inventory management is to minimize carrying costs while meeting customer demand. This involves maintaining an appropriate level of inventory that ensures products are available when customers want them, thus enhancing customer satisfaction. At the same time, effective inventory management seeks to reduce costs associated with holding inventory, such as storage, insurance, and obsolescence.

Balancing these two elements is crucial: having enough stock to fulfill orders promptly without overstocking, which can tie up capital and incur additional costs. This approach leads to better cash flow management and overall operational efficiency.

In contrast, maintaining maximum stock levels at all times can lead to excessive costs and waste, while limiting supplier options can reduce flexibility and negotiation power. Increasing production rates, while potentially beneficial, does not directly address the comprehensive goal of inventory management, which is primarily focused on cost efficiency and customer service.