7 Steps to Optimizing Your Inventory Management

Numbers play a pivotal role in the success of any company. They provide knowledge of the number of goods sold or the number of services being offered. You can even quantify the number of clients attended to and the number of goods in stock. All of these can influence the trajectory of your business as time goes on. Accurate knowledge of these numbers can increase the possibilities of survival in your industry.


This is especially true when it comes to keeping tabs on your inventory. As mentioned above, poor inventory management can fail a business. Its far-reaching effects can include late delivery and reduced customer trust in your brand. 34% of companies have shipped out orders late. This is because they failed to monitor their inventory and sold goods that were not in stock. This fact, coupled with the pandemic’s impact on the supply chain, necessitates businesses paying attention to their inventory.


Proper inventory management is, without a doubt, essential for business success. But many business owners do not know how to optimize their inventory management. In this guide, you will learn seven steps to achieve this, but first, what is inventory management?


What is inventory management?

Inventory management includes organizing, keeping, using, and selling company stock. This process is also known as stock management. It is important to manage your inventory before it becomes too complex. There are some apparent advantages to properly managing your inventory; some of these advantages are:


  • Inventory management improves the accuracy of your data, helping you make better business decisions,
  • Proper inventory management reduces the time needed to assess your stock and respond to customers,
  • It improves customer service. When your inventory is well organized, there will be little delay in responding to customers,
  • It reduces cost as you are less likely to make errors that have a costly impact on your business,
  • It helps you plan for the future of your business better.


7 actionable steps to ease your inventory management

If you are having trouble optimizing your inventory management, these 7 steps will help you manage your inventory better.


1. Data collection and categorization

Before making changes to your inventory management process, collect all necessary data. Many businesses have stock going in and out and do not monitor or categorize their inventory. This can be done manually or through an ERP.


Besides collecting this data, your inventory should be properly categorized. Not all of your stock falls within the same category. Knowing their differences and the scale of each item’s importance in your inventory will help you better manage it.


2. Choose a minimum stock level

Sometimes, a manufacturer can be caught off-guard by an order. This is because it is out of stock in their inventory. Setting up a minimum stock level will help you deal with this problem.


After proper stock-taking and data collection, you can review each item in your inventory. This knowledge will be useful for determining a bottom benchmark for your inventory. This way, once you reach that threshold, you will know exactly which items to restock.


3. Include automation tools in your process

Automation in business saves time, improves output, and helps ease inventory processes. After you collect the necessary data and determine what thresholds you will keep as bottom benchmarks, automation tools can make tracking of these changes easier. The suitable ERP has a lot of functions that make tracking inventory changes easy.


With automation, you can better collect data, be reminded when your stock hits low, and organize your processes to make inventory management easier.


4. Create better storage systems

What is a good inventory management system without a good storage system? A good storage system can help keep your inventory organized and help you minimize waste. If done properly, it can make access to your inventory and customer deliveries easier.


Depending on the type of goods you deal with, your storage system should accommodate various product types. This will include raw materials, finished goods, work tools, and the like. Storage options should be varied but functional.


5. Create backup plans for your pipeline inventory

eCommerce businesses lose a lot of money in the area of pipeline inventory. The merchant has little control over the merchandise; therefore, any problems will frequently need to be resolved by outside parties. This is particularly true with imported goods that are transported across borders.


For this reason, it’s crucial to have a backup plan that minimizes the effects of missing orders, sluggish inventory, delayed delivery, manufacturer mistakes, and more. Some solutions include safety stock, agreements with other couriers, and strategies to lessen consumer displeasure, such as discounts.


6. Create replenishing strategies

Businesses must develop effective replenishment procedures to avoid overspending. Prices will vary with each item. Use inventory data to compare and contrast various purchasing strategies and identify the most cost-effective options. Evaluate your suppliers’ performance and prices throughout this period as well. This will determine how profitable your relationship with them is. You can also take note of any other factors, including speed of delivery and material conditions upon delivery.


7. Periodic inventory audit

Once your inventory management system is in place, you’ll have better control over the inflow and outflow. Just remember to set up a fixed periodic audit. This will help you occasionally evaluate the effectiveness of your system and determine how to improve it. Schedule these audits using an automation tool.



Properly optimizing your inventory management might seem stressful and may be a bit costly. In the long run, you are sure to reap huge benefits. Using the right tools and checking the competition properly can bring out the best results for your business.