Inventory management is often misunderstood as a routine operational task — a matter of counting stock, managing warehouses, and reordering items when needed. But in reality, it is one of the most foundational capabilities in any supply chain. Without it, many of the higher-end capabilities organisations pursue — like inventory optimisation, advanced planning, or digital transformation — are simply out of reach.
According to the SCOR Digital Standard (SCOR DS), HS.0058 Inventory Management is defined as “the ability to formally manage the timing and quantities of goods to be ordered and stocked so that demand can always be satisfied without excess expenditures.” That’s not a task — it’s a strategic capability, and it sits at the very heart of supply chain performance.
Inventory Management Is the Ground You Build On
If inventory is unreliable, none of your advanced supply chain processes — no matter how sophisticated — will deliver the value you expect. Forecasts become guesses. Planning becomes reactive. Warehouse teams spend more time fire-fighting than improving.
Inventory accuracy and governance form the ground truth of the supply chain. You can’t balance supply and demand effectively (P1.4), create reliable source or transform responses (P3, P4), or generate credible fulfillment plans (P5) if the inventory data behind them is incomplete, outdated, or disconnected from reality.
Where Inventory Management Connects Across SCOR DS
The power of the SCOR model is how it shows the interdependence of capabilities. Inventory management shows up everywhere — not just in storage and replenishment, but in planning, execution, sourcing, and returns. Here’s how:
Planning and Response Alignment
Inventory management supports the ability to aggregate and balance requirements and responses across plan, source, make, deliver, and return processes:
- P1.4: Balance market signals, requirements, and response
- P3.3, P4.3, P5.3: Balance requirements and responses across source, transform, and fulfillment
- P3.5, P5.5: Feed back source and fulfillment decisions to the overall supply plan
If the inventory data is inaccurate or incomplete, these planning cycles generate plans that don’t reflect reality — leading to shortages, overstocking, and firefighting.
Execution and Control
Warehouse processes like staging, picking, put-away, and issuing stock (F2.3, T1.3, T3.6) must align with upstream decisions. If there’s no reliable link between planned demand and physical inventory movement, execution diverges from strategy.
Returns and MRO (R1–R3) processes also rely on strong inventory visibility and disposition logic — without which reverse logistics becomes costly and chaotic.
Enabling Processes
Inventory performance is also supported by enabling capabilities in SCOR DS:
- OE3: Performance and Continuous Improvement
- OE4: Data, Information, and Technology
- OE12: Segmentation
- OE13: Circular Supply Chain Management
Data quality, segmentation strategies (e.g., ABC, life-cycle based, service-level aligned), and warehouse performance monitoring are essential for turning inventory into a controllable, value-generating resource.
Inventory Capability in Practice
This capability spans more than just systems. It involves:
- Processes for planning and execution (replenishment logic, safety stock setting, handling returns)
- Practices like ABC classification, min-max planning, consignment, and item rationalisation
- Experience with ERP, WMS, and the daily discipline of inventory control (cycle counting, discrepancy resolution, performance monitoring)
- Training and development in forecasting, material requirements planning, regulatory compliance, and inventory valuation
Without this ecosystem of knowledge and practice in place, most planning or digital initiatives quickly stall.
From Foundational to Transformational
By strengthening inventory management first, organisations create a stable base from which to improve. That means:
- Trustworthy data for planning and performance analysis
- Reduced firefighting and better collaboration across functions
- Confidence to segment inventory strategies by product or customer
- Readiness to adopt advanced tools like inventory optimisation, DDMRP, or predictive analytics
Ultimately, SCOR DS shows us that no capability operates in isolation — and inventory is a key connector across the entire model.
Closing Thought
Inventory management may not be the most exciting area of supply chain capability — but it is among the most critical. It’s where strategy meets execution. It’s where plans are tested against reality. And it’s the capability that enables nearly every other supply chain function to work.
Before you optimise, digitise, or transform — check your inventory. Make sure it’s a capability, not just a function.
