Inventory management refers to the process of overseeing and controlling the ordering, storage, and usage of components that a business holds in its stock. It helps ensure that companies have the right amount of stock on hand at all times to meet customer demand. A well-managed inventory policy helps reduce costs associated with purchasing, storing, and managing stock, as well as preventing lost sales due to out-of-stock items. By understanding and implementing effective inventory management policies, businesses can optimize their operations and maximize their profits.