Inventory Management: 17 Tips to Get Your Inventory Optimized

Inventory management

Inventory management is an art form that businesses need to perfect if they’re looking to optimize their business processes. 

The practice itself has been prevalent for so long we’ve lost count. The end goal is always to deliver the goods at the right location at the right time. 

For modern businesses, looking to gain a competitive edge, this is even more important. 

Learn how you can optimize your inventory with these eighteen tried and tested methods. 

What is inventory management?

Inventory management

Inventory is the most important part of your supply chain process. 

It’s the place where all the stock quantities are tracked, accounted for, and managed within your warehouse.

In the distant past, inventory management was done through physical ledgers. It’s a practice that’s now been abandoned in the face of modern inventory management systems. 

These B2B ecommerce systems ensure that the inventory levels are neither in a shortage nor in a surplus. 

These digital systems are present to help you manage your inventory correctly. 

With the introduction of AI and smarter computing, companies have now moved towards real-time tracking for improved accuracy.

A lot of people confuse an inventory management system with an ERP system. 

In simple terms, the first one focuses on one aspect of the supply chain process, while the other focuses on the entire breadth of a business operation. 

This is not to say that an inventory management system works in a silo. 

It is integrated with the ERP, and other systems present within a website to ensure that the goal is met.

Why inventory management is so important?

Inventory management system

If you’re running a business operation, you don’t want too much baggage. 

The ideal scenario is a smooth business operation with no stock shortages nor a surplus. 

A rise in both situations means you’re losing profits by either incurring storage costs or customer dissatisfaction because you don’t have the product that they want. 

A failure to maintain an economic balance can result in damages to your reputation or worse, outright marketplace suspension.

Poor management doesn’t help. But being proactive does. 

This post is aimed at highlighting all the strategies and tips you can use to optimize your inventory management processes. 

The end goal of this post is to provide you with enough information to help you get more business and reduce costs at the same time. 

Inventory management techniques

Inventory management techniques

As discussed above, modern inventory management systems are very smart. Whether you opt for an out-of-the-box solution or a customized one, there’s so much you can do with it. 

“You”, is the keyword here. These systems work on human input and are only as powerful as you make them.

To get the most out of your inventory management systems, it’s important to invest in training programs or going through the knowledge base of the software. 

This ensures you’ve learned the best practices of the software and can utilize it to its maximum potential. That’s the point where you’ll get the maximum return on investment.

That said, let’s look at some ways you can optimize your inventory management with the help of these tips and techniques.

1. Have safety stock present

Customer demands and seasonal trends are unforeseen events that you must be prepared for. 

To ensure maximum customer satisfaction, you need to have safety stock present. 

It’s essentially extra inventory that you keep around to fulfill customer demands during a period. It’s also nice to have if you haven’t forecasted correctly.

2. The Just-In-Time (JIT) inventory technique

Just in time (JIT) is an efficient inventory practice that connects the production schedule with the sourcing of raw materials. You have raw materials present just before the production begins. This can come in quite handy since you would only need to source raw materials when you’re producing and not have any remaining inside the warehouse where it is prone to spoilage and worse off, becoming dead stock. This doesn’t mean that you eliminate the prospect of having a safety stock, while also keeping production schedules aligned.

3. Conducting an ABC analysis

The ABC analysis is a three-pronged analysis technique that splits the products of your business into three distinct categories.

Category A is the high-value products. Ones that contribute the most to your business in terms of profits and overall sales.

Category B is the mid-tier products. These are products that don’t contribute as much as the first category but they are still essential products to have.

Category C is the lowest-tier product. They are there because they bring somewhat of a profit but aren’t important to the overall profits of the company.

4. The FIFO and LIFO method

One of the most traditional methods of inventory management, FIFO and LIFO have their uses within a supply chain.

If you have regular products with not too quick of an expiration date, then you can always use the FIFO method to keep your inventory fresh and organized.

The LIFO method is a more fast-paced method of supply chain management that quickly takes the product that comes in and pushes it to sell it out. This process is used best for keeping inventory fresh.

5. Lean manufacturing.

Lean isn’t a supply chain practice in general, it’s a management practice. However, its applications can extend towards inventory management as well. It takes away the unnecessary out of your operations, giving you only slimmed out operation management. 

If you’re looking to eliminate wastefulness within your business operation, then lean manufacturing is your best bet.

6. Consignment inventory.

Consignment inventory is a technique that’s quite effective if you’re looking to sell products quickly and effectively. In simple terms, what happens is that you send your products to a consigner (a retailer or wholesaler) to sell the goods without them paying for it. They are only paid when they sell the products. If you’re looking to get your name out to the public, this can prove quite effective for both parties since it gets your products out to the market, while also making sure an adequate inventory supply for the wholesaler.

7. Dropshipping.

The dropshipping model is in full swing nowadays since this is an inventory management method that doesn’t keep the products that are sold in stock. When an order is placed in a dropshipping store, only then the product is bought and the order fulfilled by the end-user. The seller of the products never physically sees the product itself.

8. Reorder point formula.

Another efficient method to manage inventory is the reorder point formula. Simply put, it’s a method based on the business’ own sales cycles that varies from product to product.

9. Demand forecasting.

One of the best uses of an inventory management system, a demand forecasting technique that utilizes historical data to make business decisions. For regular demands, this is a quite effective method and helps you keep an adequate level of inventory for a particular part of the year.

10. Bulk shipments.

Shipping products in bulk helps saves money while also helping you ship more at one time.

11. Lean six sigma.

Lean six sigma is similar to lean manufacturing but with some enhancements. It improves the standardization procedure and helps improve the flow of the business process.

12. Batch tracking.

If you’re having issues with quality assurance, then batch tracking can prove helpful. Essentially, it’s a method that quality assures bulk inventory with similar traits. This helps track it effectively and quickly while keeping the quality assurance steps the same.

13. Perpetual inventory management.

Perpetual inventory management is counting inventory the moment it steps in the warehouse. It’s one of the older tricks in the inventory management industry. You can even check for inventory in this manner using a pen and a ledger. Most small businesses in the third world record in this manner while some still use spreadsheets to count.

14. Economic order quantity (EoQ)

EoQ is an economics formula for calculating what a company needs to purchase. With variables like production costs, demand rates, and other factors, it helps to give an estimate of the total cost of purchase for inventory.

The goal of using EoQ is to reduce costs. The formula helps identify the maximum number of units required for purchasing.

15. Minimum order quantity.

This is done on the supplier end. Minimum order quantity refers to the least amount of stock a supplier is willing to sell the product. If the MoQ cannot be purchased by a retailer, then the supplier won’t sell the product.

16. Six sigma.

The six-sigma method is applied to reduce inefficiencies within the inventory and general management cycle. It leads to only the barebones skeleton that is extremely effective.

17. Cross-docking.

Cross-docking is essentially a part of the JIT process discussed before in which the trucks immediately unload the materials to the outbound trucks.


This was an exhaustive, yet short list. We hope you liked the post. B2BWoo is an industry-standard B2B eCommerce solution that handles all your B2B related tasks on WooCommerce.

If you’re a WooCommerce B2B store owner and want to enhance your productivity, then B2BWoo is the best option for you. It’s a one-stop-shop for your every WooCommerce B2B eCommerce solutions.

Technical writer by day, focusing on all things WordPress, programming, and B2B eCommerce. On the down-low, I like to read historical non-fiction or watch movies, depending on my mood.