What is inventory management?
Inventory management covers everything that happens to your stock: deciding what and how much to buy, receiving and storing it, keeping stock records accurate, and making sure it sells before it loses value. The goal is a balance between two costs: running out (lost sales) and holding too much (storage costs, tied-up cash and dead stock).
Core principle: Good inventory management means enough stock to meet demand, and no more than you need.
The main parts of inventory management
Planning and buying
Forecast demand per product, set a reorder point and safety stock, and place purchase orders in time to cover the lead time.
Receiving and storage
Check deliveries against the order, record batches and expiry dates, and give every item a fixed storage location.
Stock control
Record every movement, run cycle counts and fix differences quickly.
Why it matters: Inaccurate stock leads to overselling on your shop and marketplaces.
Stock rotation
Ship the oldest or shortest-dated stock first, using FIFO or FEFO.
Review and clean-up
Find slow movers, discount or bundle them, and stop reordering products that don’t sell.
Common methods
| Method | What it does | Best for |
|---|---|---|
| ABC analysis | Ranks products by value so you control the top items most closely | Large ranges |
| Reorder point | Triggers a new order at a set stock level | Steady sellers |
| Economic order quantity (EOQ) | Balances ordering costs against holding costs | Regular repeat orders |
| Just in time | Keeps stock low and orders often | Reliable, local suppliers |
| Cycle counting | Counts a small part of stock every day or week | Keeping records accurate without closing the warehouse |
KPIs to track
- Inventory turnover: cost of goods sold divided by average stock value. Higher means stock sells faster.
- Days of stock: how many days current stock lasts at the current sales rate.
- Stockout rate: share of orders or days when a product was unavailable.
- Inventory accuracy: share of locations where system stock matches a physical count.
- Dead stock share: value of stock that has not sold in, for example, 6–12 months.
Example: A fashion brand with 600 products finds that 80 of them make 75% of sales. It sets daily stock checks and safety stock for those 80, reviews the rest monthly, and marks down 120 products that haven’t sold in nine months. Stockouts on bestsellers fall and storage costs go down.
Inventory management when you outsource fulfilment
When you outsource fulfilment, the warehouse keeps the physical stock and the records; you stay in charge of planning and buying. With stock in a Waredock warehouse you see live stock per product and location. Running your own warehouse? Waredock WMS handles locations, counts and stock rotation.
Frequently asked questions
What is the main goal of inventory management?
To have the right products available when customers order, while keeping storage costs and the cash tied up in stock as low as possible.
What are the most common inventory management methods?
ABC analysis, reorder points with safety stock, economic order quantity, just in time and cycle counting.
How do I know if I hold too much stock?
Look at days of stock and inventory turnover per product. Products with many months of cover or no sales in 6–12 months are candidates for clearance.
Do I need software for inventory management?
Spreadsheets work for a small range. Once you sell on several channels or store stock in more than one place, you need a system that updates stock in real time.
