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How to Manage Inventory Stock-1
6 min read

How to Manage Inventory Stock for Improved Efficiency

Effective inventory management can drive the success or downfall of your business. Consider that with proper processes in place, teams can determine how much stock is needed and at what time, identify and respond to trends, ensure that orders can be fulfilled in a timely manner, and that there are no impending shortages. When done correctly, teams can quickly convert inventory into revenue. Moreover, the more inventory a business has, the more money, space, and dedicated personnel are needed to manage it. 

Since inventory stock is crucial to a company's profitability, the question for businesses becomes what is their team's plan to manage it. While an inventory management software tool is often the first step, other complexities including the amount of safety stock and the reliability of larger suppliers will feed into the overall decision. Teams that leverage the right tool, one that offers visibility into all these factors, will gain benefits including tracking inventory in real-time, forecasting demand, and automating complex processes, thereby saving valuable employee time.  

However, a tool is only part of a larger solution to managing inventory stock. To learn where the selection of an inventory management tool fits into the rest of the puzzle, we look at the surrounding procurement process in greater detail below.  

1. Determine the Top Priority Within Your Inventory  

First, teams are required to prioritize their inventory into groups to help them understand which items will be ordered most often and most frequently. In warehouse management, it is not uncommon to see categorization done into three main categories - the A, B and C groups, with A being the highest-cost item and C being the lowest and, most likely, the fastest-moving stock. Since businesses don't want to buy too much inventory, especially with no confirmation that it will sell, understanding which items might be kept on the shelf longer will help to limit the funds tied up in stock. 

2. Manage Your Records  

Hand in hand with categorizing your inventory, teams are encouraged to keep accurate inventory records. These records should include SKUs, barcode data, manufacturing lot and details about the supplier, considering the cost of an item over time while also providing the foundation to prevent teams from potential inventory errors and inefficiencies.  

3. Analyze Supplier Performance  

As teams manage their records, supplier data can provide many useful insights. Over time, suppliers may develop a habit of being late on deliveries or being unable to fulfil an order. When these cracks begin to expand, teams may have no choice but to seek out other suppliers to help manage certainty in their stock levels and avoid the possibility of running out of inventory.  

4. Optimize Your Inventory Receipt Process  

Managing your inventory starts at the beginning, with receiving. First, consider that a standard process everyone follows becomes crucial in determining how employees receive and process stock. Even the smallest inaccuracies about how new stock is taken in can result in high costs down the road, as evidenced by numbers that don’t line up on Purchase Orders.  

5. Conduct Regular Audits  

Next, teams face the task of auditing. Although it may vary by industry or business type, most teams will conduct their comprehensive audit annually. While the exact frequency may differ, what matters at this stage is that your records match what is on the floor. 

6. Choose an Inventory Technique That Makes Sense for Your Business  

The intention behind these steps is that businesses will be able to remove as much human error from the inventory management process as possible. Therefore, teams will often adopt one of the following inventory control techniques to maximize their processing abilities.  


Starting with the most basic inventory management method, teams may choose to count inventory as soon as it arrives and update totals in real-time. Small businesses will often employ this method by using a pen and paper or an Excel spreadsheet, whereas larger teams will use a handheld device to scan product barcodes. It is worth noting that where teams often face the most difficulty is when items are moved between warehouses and people lose track of where items are.


In addition to counting how much stock your team has on hand, teams must be prepared for the unknown. For this reason, businesses are encouraged to hold a set amount of safety stock (extra stock) to ensure that stockouts don't occur and any increases in customer demand can be met without any revenue losses.  


Just-in-Time (JIT) inventory management is a method where companies receive inventory on an as-needed basis. The benefit of doing so is that teams never worry about ordering too much and risking unused stock. For reference, teams may traditionally keep up to two weeks of safety stock on hand, whereas under the JIT model, teams might only keep two days worth on hand.

Since less safety stock is kept on hand, tighter coordination becomes crucial to ensure that orders are fulfilled. In the simplest use case, a supplier is restricted to a tighter schedule of small shipments. Then, only if a purchasing organization requires a larger order, will teams need to conduct an emergency order agreement for orders that need to be fulfilled with tight parameters.  


In a more traditional model, businesses will sometimes look to demand forecasting. By following this process, teams must estimate the number of goods and services customers will likely purchase. Using historical sales results, teams will use these predictions to stock their inventory accordingly.  Although this example describes a retail use case, it is worth noting that the application is similar for manufacturers, with the exception of the process occurring earlier on and requiring longer lead times.


In a vendor-managed inventory setting, businesses follow a consignment model, where a vendor or supplier agrees to give the retailer goods without paying upfront. Effectively, this means that the business providing the inventory still owns the goods up until their sale date.

Although very similar to JIT, under this model a max/min model is incorporated in which a supplier takes on the responsibility of reordering stock to ensure that supplies remain in between these two values. The supplier then has the freedom to decide when they will provide supplies. Similarly, under a consignment model, a supplier may continue to own the stock until the buyer uses it, in a process that is very similar across the retail and manufacturing use cases. 

7. Choose a Technology Solution That Makes Sense with Your Strategy  

With many moving parts, a technology stack that includes more than inventory management software will become necessary. For example, tracking specific stock might come down to using mobile barcode scanners that are easy to use by warehouse staff. In addition to having these scanners, teams will need to consider how these tools can transfer their data from one system to another, ensuring that they can create accurate inventory counts. 

8. Measuring Results 

After implementing an inventory management technique, teams must measure how it contributes to their goals. Therefore, in combination with choosing a strategy that aligns with what the team is hoping to achieve, teams must implement a solution that will help them track their progress. By comparing data and Key Performance Indicators (KPIs) from before and after, teams can determine if there have been notable improvements, such as out-of-stock or dead stock.  

These efforts will result in improved cash flow and a stronger bottom line. To learn more about how to manage your inventory stock for increased efficiency, we encourage you to check out a first-hand example of a team that was able to build a best-in-class warehouse automation system. 

Operational Procurement Model