Table of Contents

Understanding Inventory Management

Inventory management is a system used to order, store, organize, and move inventory through the supply chain. It ensures that you have the right quantity of products in the right place at the right time.

The goal is to minimize the cost of holding inventory by knowing when to replenish products or purchase more materials for their manufacture. This helps maintain optimal inventory levels and minimize costs.

Types of Inventory Management

Retail inventory management involves managing the stock you intend to sell to your customers. The main goal is to ensure you have enough stock to fulfill orders and customer demand while avoiding overstocking your warehouse due to the associated costs.

Multi-location inventory management involves managing inventory across multiple stores, warehouses, or sales channels. It requires management at the location level to ensure you have enough stock everywhere you sell.

Benefits of Inventory Management

Inventory management can help your business avoid spoilage, dead stock, save on storage costs, improve cash flow, and optimize fulfillment.

Challenges in Inventory Management

While inventory management offers many benefits, there are challenges to overcome to achieve efficiency. These challenges can lead to costly problems such as too much inventory, not enough inventory, or lost inventory.

Some of the challenges include dealing with phantom inventory, shifts in demand, supply chain issues, difficult counting processes, and maintaining an organized stockroom.

Inventory Management Systems

An inventory management system (IMS) is a program that monitors and organizes all the elements involved in inventory management. This includes tracking orders from suppliers to customers. There are different types of IMS, including perpetual inventory systems, periodic inventory systems, and manual inventory systems.

Inventory Management Techniques

Implement Six Sigma, set par levels, follow the first in, first out principle, manage relationships, make contingency plans, conduct regular auditing, prioritize with ABC, practice accurate forecasting, apply the last in, first out (LIFO) method, try the just-in-time (JIT) approach, and outsource your inventory storage and fulfillment.

Inventory Management on Shopify

If you run your business with Shopify, inventory management is already built in. You can set up inventory tracking, view your inventory, and adjust your inventory levels in the Inventory area of your Shopify admin. You can also view the history of inventory adjustments and transfers for variants tracked by Shopify.

Future of Inventory Management

Technology continues to grow and develop at an incredible pace, and many of these new and emerging technologies have applications for inventory management. RFID, AI, and IoT devices can reduce the time it takes associates to find inventory by providing real-time location data.

With a proper inventory management system in place, you can help reduce holding costs, improve your bottom line, analyze sales patterns and predict future sales, and prepare for the unexpected. With proper inventory management, a business has a better chance of profitability and survival.