inventory management strategies

What is the one thing that is common between large-scale and small-scale enterprises?- it is effective inventory management. It influences everything from customer satisfaction to overall profitability. Having proper inventory ensures that the business runs smoothly and the customers get the items on time. It also ensures proper storage and keeps track of stock supply and demand.

But how can companies and supply chains manage all of that? For that, enterprises need strategic measures that ensure that they never have an empty inventory. This guide will dive into eight inventory management strategies that ensure sustainability and growth for your enterprises. 

Whether you’re a small startup or a well-established corporation, optimising your inventory management practices is necessary. It can significantly enhance your business performance, streamline operations, and maximise your bottom line. Let’s see what they are. 

8 Inventory Management Strategies

1. Just-In-Time (JIT) Inventory Management 

This type of inventory management is a strategy that allows companies to receive the exact amount of inventory that they need. Such a strategy reduces waste and hence cost. It ensures that there is no dead inventory (stock that no one uses).

JIT only stocks and fulfils orders that the customers require. This process helps in optimising warehouse costs and optimising existing storage space more effectively. However, having so many stocks requires proper monitoring and safety. Let’s see what measures you can take.

2. Employ a Safety Stock Inventory

Employing this strategy ensures that business owners maintain a small surplus of goods on hand, providing a safeguard against unexpected spikes in demand that could strain existing product stock levels. This technique used to plan the inventory will ensure that there is enough stock when the orders come in so factories and storage facilities can avoid crises. 

3. Automate Your Inventory Management Systems

Switching to automated stock management systems offers increased efficiency, precision, time-saving benefits, and productivity compared to manual methods. Here are a few inventory management strategies for automation:

By automating inventory management, businesses can reduce costs, minimize errors, and enhance overall efficiency.

4. Utilise Data and Analytics

Harnessing data empowers business owners with accurate product information and sales forecasts in real-time. This allows for better prediction of product market demand, facilitating agile inventory scaling as needed. 

With access to inventory management strategies like real-time inventory data and advanced analytics, businesses can optimize inventory investment, improve customer service, predict future demand, and enhance profit margins by minimizing discounting or scrapping of old stock.

5. Use ERP Software 

Using ERP or Enterprise Resource Planning software is one of the best ways to manage inventory. -with growing inventory, using spreadsheets is not going to be enough. For that, companies need a proper management tool that allows them to track and monitor goods efficiently.

 By centralising data and automating processes, ERP empowers businesses to optimise inventory control, reduce costs, and improve overall performance in a dynamic business environment. 

While managing inventory is one thing, companies also need proper inventory management strategies that do the accounting for how products move through the warehouse. The next strategy does exactly that. Let’s have a look. 

6. FIFO vs. LIFO

When it comes to learning how to control inventory, FIFO and LIFO are the best accounting methods to assess how products move through the warehouse.

FIFO stands for First In and First Out while LIFO means Last In and First Out. 

These two methods help to maintain inventory. FIFO is extremely useful for businesses that sell the oldest inventory first. If it came first in the warehouse then it also should be the first out of the storage facility when someone orders that particular product. Such inventory management strategies keep any inventory as fresh as possible, which is essential for perishable or expiring goods.

LIFO is the opposite of FIFO. it ensures that the most recently received product is the first out of the door.  FIFO is the default costing method. However, LIFO makes more sense for businesses as it does not ship perishable goods. 

7. Demand Forecasting 

Sales projection or demand forecasting helps you to understand how much of each product you must have on hand at all times to meet customer demand. For established companies, demand forecasting should depend on historical sales data. Newer businesses can rely on assumptions and industry data until they have a sales history of their own. 

Forecasting demand is one of the crucial inventory management strategies as it enables you to ascertain the optimal stock levels of a product and establish reorder thresholds upon reaching those levels. It is advisable to review your demand forecasts every quarter to fine-tune your minimum stock quantities and reorder benchmarks accordingly.

8. Minimum Order Quantity Vs. Economic Order Quantity

Minimum order quantity or mOQ and economic order quantity or EOQ are two methods that businesses employ to determine when to reorder products. 

MOQ focuses on maintaining the minimum possible amount of each product type a seller is willing to fulfil. High-ticket items generally have a lower MOQ. Alternatively, lower ticket items have a higher MOQ.

It is crucial to take this into account when reordering products. The Minimum Order Quantity (MOQ) concept revolves around maintaining the lowest feasible quantity of each product type that a seller is prepared to fulfil. Typically, high-value items tend to have a lower MOQ, whereas lower-cost items often come with a higher MOQ requirement. When replenishing stock from suppliers, it’s vital to consider their MOQ for a specific product in relation to your sales forecasts.

On the other hand, the inventory management strategies like the Economic Order Quantity (EOQ) method is predominantly utilized by manufacturers, who must factor in variable expenses such as raw materials, production costs, and fluctuating demand. This approach aims to enable companies to minimise expenses by procuring the maximum quantity of various product units feasible, thereby inventory reduction and the necessity for individual item reorders. 

FAQs: 8 Inventory Management Strategies to Elevate Your Business Performance

What aims at optimising inventory levels?

Inventory optimisation can streamline stock levels to meet demand while minimising stockpiling or shortages. It uses strategies of demand forecasting, economic order quantity (EOQ), and just-in-time (JIT) to enhance efficiency and reduce costs.

What are the challenges of inventory management?

Some of the common roadblocks are incorrect demand forecasting, overstocking or understocking. They might also face inefficient warehouse management and poor inventory visibility. 

How can technology help improve inventory management?

By using software like RFID tracking systems, and automated replenishment system supply chains can streamline processes, enhance accuracy, and provide real-time visibility into inventory levels. Integrating these technologies can greatly elevate business performance.

How can businesses align inventory management with customer demand?

By utilising demand forecasting techniques, implementing flexible inventory strategies, and adopting agile supply chain practices, businesses can better anticipate and respond to fluctuations in customer demand, ultimately enhancing customer satisfaction and business performance. 


Effective inventory management strategies like the eight discussed above are pivotal for businesses of all sizes. JIT, safety stock, automation, data analytics, and ERP systems can optimise operations, minimise costs, and improve performance. Contact experts at Qodenext to address common challenges and enhance overall business performance in a dynamic environment.

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