7 Warehouse Inventory Management Techniques


Inventory management is the process in which an organization maintains its physical stock and controls the inflow and outflow of items from procurement to the point of sale. This offers inventory tracking by selecting and submitting a purchase order to fulfill sales and consider location efficiently.

In other words, the inventory management system entails purchasing, keeping, maintaining, and guaranteeing that the product is in stock when the consumer orders it.

Importance of inventory management

Inventory management is critical for a wide range of organizations, whether you are in the retail industry, logistical operations, shipping, or manufacturing. The nature of the business determines which inventory approach is necessary. To illustrate, a retail firm must track the location and quantity of things for sale, but a manufacturing organization must account for both raw materials and completed products.

There are seven inventory management approaches

Whether you are developing a new inventory management process or looking for the finest strategies to improve an existing one, the inventory management tactics described below will undoubtedly help your organization thrive.

  • First in, first out: As new manufacturing moves through your warehouse, the first in, first out approach is used. This strategy is commonly used by businesses that sell their outdated inventory first. The product in the warehouse must be the first item out the door when a client orders it. The stock is kept as fresh as feasible using this strategy. It is especially critical for perishable and expiring commodities.


On the other hand, the LIFO approach is diametrically opposed to the FIFO method, in which warehouse management service providers first out the item that was just received in inventory. This is a standard costing approach. However, it is being used in the perishable goods industry.

  • Minimal order quantity and economic order quantity: This strategy determines when to reorder items. The minimum order quantity focuses on preserving the smallest number of each sort of item that the supplier is willing to fulfill.


On the other hand, the EOQ technique is more frequent in manufacturing since it considers variable costs such as raw materials, fluctuating demand, and goods production. This strategy is intended to save costs by acquiring the least number of multiple production units feasible, resulting in the least amount of numerous production units required to reorder items individually.

  • ABC analysis: This approach will assist you in determining the profit amount of the items. This approach is classified into three groups. As the name suggests, A stands for the most valued things that cost the least to the shop in the long run. This product is primarily responsible for the company's earnings. B stands for medium items that are crucial to sales but produce little profit. The last C stands for modest priced products with a high turnover. Selling an item in Category C is less profitable than selling an item in Category A or B, but you will receive a large offer if you sell it for a large sum.


  • Demand forecasting: This strategy assists you in supplying specifics about the items you must have on hand to meet your customers' needs. Demand forecasting should be based on historical sales data to ensure your firm's success. Before their sales experience, new enterprises may have to rely on assumptions and industry statistics. 


Demand forecasting is critical for warehouse inventory tracking since it assists in determining the minimum amount of stock on hand and setting the reorder target when that number is reached. You should evaluate the demand prediction periodically to revise your minimum quantities and reordering objectives.


  • Safety stock inventory: This strategy is applied to your sales initiatives, and impacts reorder amounts. This is critical for your best-selling and most vital product. This stock exceeds the estimated demand; while over-ordering is not recommended, having a few more units than you anticipate using is beneficial, especially if the item is a big seller.


  • Cross-docking: This strategy is used to prioritize tasks properly. The delivery vehicle picks up your goods and delivers them to the consumer. This reduces the need for fresh products in your storage facilities and avoids the inventory management procedure. This strategy assists you in planning things, resulting in on-time delivery.


  • Dropshipping is receiving a client's order and having your supplier ship the items directly to the customer. This eliminates the requirement for a storage facility to store products on hand. It is ideal for reserving uncommon orders that cannot be accommodated in the warehouse; this immediately implies that your client satisfaction is solely in the hands of your supplier rather than your own company.
Rituraj Pankaj
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