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What is an inventory management system? The Ultimate Guide

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A comprehensive guide on the inventory management process. Understand the steps of the IMS, learn the benefits of effective management, and tips to optimize it.

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Are you losing track of your inventory? Do you find yourself overwhelmed by the amount of data you need to keep in check? A good inventory management system is the answer to your woes. It will help you keep track of your stocks, manage orders, and ensure sufficient supplies are available at all times.

In this article, we’ll explore what an inventory management process is, how it helps your business, and the different types available. We’ll also discuss the benefits of having an inventory management system in place and provide tips on how to choose the right system for your company. By the end of this post, you’ll have the knowledge you need to make a well-informed decision and select the inventory processing system that works best for your business.

What is the process of inventory management?

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Inventory management is the process of systematizing the tracking of your inventory levels and stock items across multiple locations. The goal is to ensure that the right amount of inventory is available at the right time, in the right place, and at the right cost. How can that be achieved? Well, this is accomplished through planning, organizing, directing, and controlling the storage, movement, and usage of inventory. Inventory processes are an essential part of any business that carries stock since effective inventory management helps you to maintain the balance between having too much inventory, which can lead to wastage, or not having enough, which can cause customer service issues.

The inventory management process involves the tracking and recording of inventory across all locations and forecasting future inventory needs. Additionally, it also allows setting optimal inventory levels, monitoring stock levels, and adjusting the inventory accordingly. This includes ordering new items when the stock drops to a certain level and ensuring that customers receive their orders in a timely manner. Inventory management also involves ensuring that the warehouse is organized and that items are stored in the correct location. Furthermore, it also involves managing returns, damages and losses, as well as tracking the costs associated with handling inventory and maintaining accurate records.

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Techniques used in the inventory management process

So, how is it done? Inventory management systems and techniques are implemented to achieve these goals. You can install inventory procedures and systems that will allow you to keep track of stock levels and make sure they are properly organized. Some of these techniques are inventory control, forecasting, inventory optimization, cycle counting, order quantity calculations, and lot sizing among many others.

You can use various software solutions for tracking their inventories in real-time which makes it much easier to monitor stocks more accurately. Additionally, hardware such as barcode scanners or RFID technologies allows you to track items from the moment a product is on its way out of the warehouse until its final destination with consumers.

A successful inventory management process needs to be agile and responsive to market needs, as well as ensure that the right items are available at the right time. This requires understanding customer demand and predicting trends so that inventory levels can be adjusted accordingly. It also requires keeping accurate records and tracking all inventory-related transactions, such as purchase orders, invoices and returns.

The two most commonly used methods to track inventory are:

  • FIFO (First in First out) and LIFO(Last in First out): an accounting system used to calculate the value inventory.
  • Just in Time(JIT): JIT, or just-in-time, is a supply chain management strategy in which products are ordered from suppliers only when they are actually needed. The primary aim of this technique is to lessen the financial burden of stocking inventory and to speed up the rate at which stock is turned through.

There is no one “right” way to keep track of your inventory, and the system you install will be influenced both by your business’s size and the nature of your sector. However, inventory management is an essential tool for any business that is looking to remain competitive in the marketplace. By keeping track of inventory levels and stock items, you can accurately forecast demand and plan accordingly.

Inventory management vs. inventory control process

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Inventory management and inventory control processes may sound very similar, but they are actually quite different. Inventory management is the process of tracking and managing inventory items from acquisition to sale, while inventory control is focused on controlling the levels of inventory in the warehouse.

Inventory management is primarily concerned with ensuring that the right items are in stock and that those items are stored in the most efficient manner. This includes tracking orders, estimating demand, and scheduling deliveries. It also entails keeping track of stock levels, monitoring expiration dates, and setting up processes to ensure that items are replenished as needed.

Inventory control, on the other hand, is focused on making sure that inventory levels do not exceed a certain threshold. This involves tracking items in and out of the warehouse and determining the optimal amount of inventory to stock. The goal is to ensure that there is enough inventory to meet customer demand, but not so much that it becomes wasteful or inefficient.

Overall, inventory management and inventory control processes are both essential for maintaining inventory levels and keeping costs down. While inventory management is focused on tracking and managing inventory, inventory control is more concerned with controlling the levels of inventory in the warehouse. In order for a business to effectively manage its inventory, both processes must be in place.

Benefits of an Efficient Inventory Management System

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An efficient inventory management system(IMS) is essential for any business. Having an up-to-date, accurate inventory system allows for smoother operations, better customer service and increased profits. Here are some of the key benefits of an efficient inventory management system:

  • Accurate stock count: With an efficient inventory management system, you can easily track and monitor your stock levels and get accurate data on what’s available at any given time. It will prevent situations such as stranded or deadstock. This also helps you avoid overstocking and restocking, saving you time and money.
  • Higher customer satisfaction: With an efficient inventory management system, you can accurately track customers’ orders and ensure that they get their products on time. This leads to higher customer satisfaction, which means more sales and more profits.
  • Better forecasting: An efficient inventory management system allows you to forecast the demand for your products accurately. This means you can plan ahead and ensure that you always have the right stock levels to meet customer orders.
  • Improved efficiency: An efficient inventory management system can save you time and money by streamlining processes, reducing paperwork and eliminating errors. All of this can be achieved with inventory management tools such as Sellbery. It works as a central control unit allowing you to automatically list products, multichannel selling and more. This helps to speed up the entire order process, from receiving and stocking to shipping and delivery.
  • MultiChannel selling: Inventory management tools such as Sellbery allows multichannel inventory sync which enables you to do business on different platforms simultaneously without having to worry about updating inventory data manually.
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These are just a few of the many benefits of the inventory management system. The process of inventory management is an important part of your business’s operations. It enables you to manage the acquisition, storage and use of inventory, from raw materials to finished goods, in a cost-efficient manner. Implementing a well-managed inventory system will help you to ensure that your business has the right products in the right place at the right time, enabling you to meet customer demand and maximize profits.

Step-by-step inventory management process

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Inventory management is a crucial part of any business that deals with physical products or services. An efficient inventory management process ensures that the right amounts of stock are available at the right time, while minimizing costs. It also helps to ensure that customers receive their orders in a timely manner and that they are satisfied with the product or service they receive. Let’s

What is the first step of inventory management?

Procuring and receiving goods from the supplier is the first stage in inventory management. In order for the subsequent procedures to work as intended, it is essential that this step be performed correctly. After receiving an order, the first step is always to check the contents for defects. Perform an inventory count and make sure that the quantity of goods matches your order, verify to check product code, and serial code are all accurate. You also need to check that everything is in good shape and that perishables were handled correctly.

Step 2. Arrange and store inventory process

After confirming and verifying the received goods, it’s time to arrange and store them. It’s important to think strategically about product storage at this point, there are a lot of options available. Techniques utilized in warehouse slotting, such as arranging items in accordance with their SKUs and the categories in which they fall, might prove to be advantageous. It is also essential to keep best-selling items in easy-to-reach locations so as to cut down on the amount of travel time required to reach them.

Step 3. Monitoring inventory level

The next step in the inventory process is to set up an inventory control system. This system should include the procedures and processes that are used to track and monitor inventory. These methods of inventory control will allow you to monitor and review inventory levels on a regular basis. You can also adjust inventory levels as needed to ensure that their stock is accurate and up to date. The available information will also help you to accurately predict customer demand and avoid overstocking or understocking. Additionally, the system should include safeguards to prevent any inaccurate or fraudulent transactions. Furthermore, the process of inventory control can be used to identify any inaccuracies or discrepancies in the inventory count, identify any damaged or outdated items, or any other issues that could be affecting the inventory levels. Once the problems have been identified, you can take any necessary corrective action.

Step 4. Order fulfillment

After a buyer has made a purchase, the following step is to precisely and quickly complete the order’s fulfillment requirements, which include packaging and shipping it. It ought to not be too difficult to search the specific product ordered from the storage if the second and third stages of the inventory procedure are optimized. When it comes to the product’s packaging, the customer experience, durability, and sustainability are all very significant factors to take into consideration. When you are done processing the order and have shipped the parcel, you can send a confirmation mail to the buyer that includes the tracking information.

Step 5. Update and restock inventory procedure

The last step in the inventory management process is to update inventory information and replace it. If you have Inventory management softwares installed, it will automatically update the inventory data after the sale. You can then use the information to place an order with the supplier to restock.

Potential Inventory Management Challenges

Inventory management is an important part of any business operation. In order to ensure that products move quickly and customers remain satisfied, businesses must develop efficient processes for managing their inventory. However, there are a number of potential challenges that can complicate the inventory management process.

One of the most common issues faced in inventory management is identifying the right inventory levels. Businesses must set their inventory levels carefully in order to ensure they have enough stock to meet customer demand, but not so much that it ties up capital unnecessarily. To properly manage inventory levels, businesses must have an accurate understanding of their current stock, their expected sales, and their ordering process.

Another challenge associated with inventory management is keeping track of inventory data. In order to effectively manage inventory, businesses must have accurate and up-to-date information about their products and their suppliers. This requires the use of tracking systems to monitor the flow of inventory, as well as regular audits of inventory levels.

Finally, you must also be aware of the cost of inventory management. Inventory management requires significant resources, from staffing costs to software and hardware investments. If you are not careful with your inventory management, you can easily find yourself in a situation where you have spent more money than you have earned.

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Tips to optimize your inventory management

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We can’t stress enough how important it is to optimize your inventory management process. It is an essential part of any business to understand and track the inventory workflow. Having good inventory procedures in place helps to ensure that there are enough products available to meet customer demand and prevent wastage. In order to optimize your inventory process, there are several tips and techniques you can use.

Tip #1. Track your inventory

Firstly, it is important to track inventory levels accurately at all stages. An effective inventory management process will help you to reduce costs, improve customer service, and increase profits. By closely monitoring inventory levels, you can identify and address potential problems early on, preventing unnecessary waste and ensuring that customers have access to the products they need.

This includes tracking what items are being received and used, as well as what is being sold. By doing this, you can ensure that you are able to accurately predict future stock levels and order stock accordingly. So, how can you do that more effectively? By using inventory management softwares, barcode scanners and other tools you can automate the tracking of your inventory. These tools in combination will make these tasks more easily.

Tip #2. Priority sorting

If you’re selling on B2C or B2B eCommerce platforms using ABC analysis is an efficient way to assort your inventory. It is an inventory sorting method based on product popularity and turnover rate. It will allow you to streamline inventory workflow for seasonal and top-selling items by reducing the time to move goods from warehouse to buyers. You can review your stock levels frequently to analyze and identify items that are popular and have been selling well. You can use this information to make adjustments and store your inventory accordingly. For instance, if you store merchandise in warehouses according to regional preference, you will be able to offer low shipping rates to customers and address cart abandonment. Additionally, it will allow you to tabs on stock levels of popular goods and use it to make sure that your inventory is always up to date and accurate.

Tip #3. Make information sharing easier

Thirdly, it is important to be able to communicate inventory issues easily. This can help you resolve any issues quickly and prevent any customer dissatisfaction. There are tools available that improve communication between teams, departments, and other stakeholders. This will make your day-to-day task, planning, and decision-making easier.

Furthermore, it will allow you to improve relationships with suppliers. With a solid communication channel in place, you can identify and communicate any issues with suppliers and adjust your ordering process to reduce any delays.

By optimizing their inventory levels, businesses can ensure that their suppliers are always able to meet demand, resulting in a smoother and more efficient supply chain. In addition, businesses can take advantage of bulk ordering discounts and other cost savings opportunities that can only be achieved with an effective inventory management process.

Tip #4. Adapt and Adjust

Innovation is the name of the game! Frequently reviewing and updating your inventory management system will help you to make it more efficient and streamlined. ECommerce is a $4.3trillion market on its own and there a lot of players in the arena. By doing this, you can keep up with industry standards and stay competitive. You can review your inventory procedures quarterly or yearly and find new ways to reduce the time and money that is required to manage your inventory. Keep in mind while reviewing that your goal is always improving customer satisfaction by ensuring that orders are fulfilled quickly and correctly.

Tip #5. Implement the right system and tools

There is no perfect system that fits all businesses. You will have to go through trial and error to figure out which system and tools suit your operational requirements. The right tools will make inventory procedures more efficient, for example, cloud base based software will allow you to perform tasks and share information without getting disrupted by power cuts and tech issues. However, if your warehouse is in a remote location without a stable internet connection, you won’t be able to extract the performance from this system.

Inventory management process flow chart

The inventory management process flow chart is a visual tool used to keep track of inventory throughout a supply chain or production system. It’s a critical component of inventory management and helps ensure that stock is available to meet customer demand. This flowchart can be used to show how inventory is ordered, stored, and used in the production process. It can also be used to identify potential issues with the supply chain, such as inventory shortages or overstocking.

Additionally, the flow chart is an important tool for identifying areas in which processes can be improved. For example, it can help production teams identify areas where processes can be streamlined or made more efficient. A well-designed inventory management process flow chart will provide managers with a clear view of the entire process, allowing them to make decisions that will help ensure that inventory is accurate and up-to-date.


In conclusion, inventory management is a critical process for any business to help ensure that it has the right amount of inventory at the right time. It involves forecasting, ordering, receiving, storing, and tracking inventory levels and can have a major impact on the success or failure of a business. By integrating effective inventory processes and techniques, businesses can stay on top of their stock levels and order the right amount of inventory to meet customer demands.

Inventory management includes tracking inventory levels, ordering new stock when needed, controlling costs, tracking product quality, and managing supplier relationships. By using technology such as bar code scanning, radio frequency identification (RFID), and software such as Sellbery, you can streamline their inventory processes and reduce the time spent on manual tasks.

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