Inventory Management Techniques : Seven Keys to succeed

Inventory Management Techniques : Seven Keys to succeed


It’s not simple to choose the proper inventory management techniques & strategies for your company. The more quickly your company expands, the more complex inventory management gets. That is why laying a solid foundation from the beginning is so important. We’ll go through inventory management techniques, strategies, procedures, and best practices in this tutorial.

In the end, efficient inventory management is a delicate balancing act involving maintaining sufficient product to meet the requirement, But not overstocking to the point of incurring high costs and taking up valuable warehouse space.

We’ve covered some of the most popular inventory management strategies and best practices in this post. Which can help you maximize more, be more efficient, and save money. The most popular inventory management strategies employed by organisations of all sizes. As well as the inventory holding costs and potential income of the most recognized, will be discussed in this part.

Seven Inventory Management Techniques For Better Success 


Inventory Management Techniques-Top 7 inventory management techniques for better success
Top 7 inventory management techniques for better success

Shipments in bulk:

This strategy is based on the idea that buying and shipping products in bulk quantities are usually always less expensive. Large quantities shipment is one of the most used strategies in the business, and it may be used for items with a huge demand from customers.

The disadvantage of bulk shipping is that you will have to spend more money on storing the goods, which will most likely be balanced by the saved money from buying large quantities of things and reselling them quickly.


Advantages of bulk shipping include:
  • Revenue and profit potential is greatest.
  • Reduced shipping expenses resulting from fewer deliveries.
  • It’s ideal for items that have a steady demand and a longer shelf life.


The disadvantages of bulk shipping include:
  • Regulatory capital risk possibility at its highest
  • Warehousing prices have risen as a result of the increased maintaining charges.
  • Whenever demand varies, it’s difficult to respond rapidly.


Warehouse management by the ABCs:

ABC inventory management technique is an approach of categorizing items in order of significance, with A being the most important and C being the less important. Not all items are created equal, and increasing emphasis should be devoted to more successful commodities. ABC analysis relies on yearly consumption quantities, inventory value, and cost significance, however, there are no straightforward criteria. When selective control, budget allocation, and human resources are necessary, the key is to run each group independently.

ABC inventory management has a lot of advantages:
  • Analyzes a product’s popularity over time to aid demand forecasts.
  • Better opportunity for planning and resource management are possible.
  • Assists in the development of a multi-tiered customer service strategy.
  • Allows for inventory tracking.
  • Encourages smart marketing.


ABC inventory management has several drawbacks:
  • Could overlook goods that are just beginning to rise in popularity.
  • Interactions with other inventories techniques are common.
  • Duration and financial planning are available.



Backordering relates to a corporation’s choice to accept order information for out-of-stock items and collect the amount for them. It’s a dream come true for most firms, but if you’re not organised, it can also be a complete challenge. When there is only one out-of-stock product, generating a fresh purchase request for that item and telling the client when the backordered item will deliver is all that is required.

When there are tens or even hundreds of separate sales each day, issues start to arise. However, allowing backorders leads to higher revenue, so it’s a balancing act that several companies are prepared to do. If you’re a small business, overstocking may not be an option. In this scenario, you might name the individual item “Buy Now” button as “Pre-order” or “Get Yours” When It Returns in Stock.

However, some firms use a “no-stock” strategy, in which they only accept backorders until they have sufficient revenue to make a huge bulk purchase with a vendor.


Backordering’s Benefits:
  • Revenue and cash flow have improved.
  • Small enterprises will have more freedom.
  • Decreased storage costs and a reduced danger of overstocking.


Backordering’s drawbacks:


  • Consumer discontent is more likely.


  • Greater satisfaction.


Just in time (JIT)

JIT inventory management technique that allows a firm to have fewer stocks on board. Because you only buy inventory a few days before it can be required for redistribution or resale, it’s considered a hazardous strategy. JIT helps businesses save money on inventories carrying expenses by keeping stock levels low, and it minimizes deadstock, which is effectively frozen investment. Corporations must, however, be extremely nimble and capable of handling a significantly shorter manufacturing cycle.


JIT’s Advantages
  • Merchandise keeping expenses are reduced.
  • The amount of money coming in has risen.
  • There will be less deadstock.


JIT’s drawbacks
  • Purchases aren’t being filled on schedule.
  • There is very little space for mistake.
  • Stockouts are a possibility.



The wholesalers place material in the hands of retailers on consignment but retain ownership of the goods until it is sold, at which moment the retailers acquire the spent inventory. Trading on consignment often entails a high level of demand uncertainties from the retailer’s perspective and a high level of confidence from the wholesaler’s perspective.


Marketing on consignment has numerous advantages for retailers, including the opportunity to:
  • Customers should be able to choose from a broader selection of products without having to spend more money.
  • Reduce the amount of time it takes to replenish items.
  • Exchange any unsold items for free.


Whereas the wholesalers bear the majority of the responsibility in selling on consignment, there is still a range of additional benefits for the vendor:
  • New goods should be tested.
  • Distribute marketing to retailers.
  • Obtain important information on the performance of the products.


If you’re thinking of selling on consignment as a retailer or wholesaler, be sure to spell out the following terms:
  • Exchange arrangements, transportation policy proposals, and insurance plans
  • When, how, and with whom is consumer information collected?
  • As a sales commission, the store will take a percentage of the purchase cost.


Cross-docking and dropshipping:

This inventory management technique method completely removes the cost of storage facilities. You may immediately pass client orders and shipment data to your manufacturer or wholesaler, who will subsequently ship the products if you have a dropshipping relationship.

Cross-docking is a technique similar to dropshipping in which products are unloaded immediately onto departing vehicles, containers, or rail trains from arriving semi-trailer vehicles or locomotive waggons. Generally, it means that products are transferred immediately from one shipping container to another with little or no storage. You may require intermediate rooms where inbound products are processed and held until the outgoing shipment arrives. For cross-docking to function, you’ll also need a large fleet and connectivity of vehicles.


Monitoring Inventories Cycles:

Measuring a little quantity of inventory on a given day without having to perform a full physical stocktake is known as cycle counting. It’s a sort of surveying that lets you check how closely your financial statements and inventory level match what you have on hand. This approach is used in many organisations’ inventory management methods since it ensures that consumers get what they want when they want it while maintaining inventories carrying expenses to a minimum.


Advantages of Cycle Counting:
  • It takes less time and money to perform a partial stocktake than it does to do a full stocktake.
  • It is possible to do so without disturbing operations.
  • Inventory holding expenses are kept to a minimum.


The disadvantages of cycle counting:
  • A partial stocktake is less thorough and precise than a full stocktake.
  • The seasonal variation may not be taken into consideration.


First in, first-out (FIFO):


First in, first-out (FIFO) is a distribution network standard protocol that relates to how inventories are registered and then despatched in a specified order. While the practical usage of FIFO is crucial for lowering outdated inventories, it is also a technique of inventory valuation, with many firms using it regardless of real inventory movement. After all, you must value your merchandise as precisely as possible.

It makes fundamental accounting and analysis of financial transactions easier and helps you to keep a better eye on your profitability. Consider that for a moment. Inventory prices are always rising, so the price you pay for one batch of items may change from the price you pay for a subsequent batch.

With this in consideration, the FIFO inventory technique helps you to more precisely match inventory costs with current valuation, decreasing inflation’s consequence. You most recently bought shares, in particular, can be defined as the amount that more accurately represents profit margin. However, that isn’t the only advantage of utilising FIFO.

You may also decrease the chance of merchandise destruction by shipping your oldest material initially. While FIFO is most often used to manage expiration dates – that is, things with limited shelf life, such as food and beverage – products that are stored for too long might corrode or get harmed. This is avoided by using the First in First out method.FIFO also assures that the oldest inventory levels are allocated to the cost of products sold, resulting in a smaller expenditure on your financial statements and a larger profit.

Must Read for better understanding: The Complete Guide To Inventory Types