Inventory Management
Inventory Optimization: What Are the Best Practices to Follow?

Inventory Optimization: What Are the Best Practices to Follow?

Inventory Optimization: What Are the Best Practices to Follow?

Inventory management is not simple work. It needs lots of skills and understanding the requirement. Effective inventory management practices are accomplished through a nonstop improvement, binds every activity to client esteem.

When you are client esteemed you need to use the best technology to achieve sustainability in your business. Most organizations have a lot of territories to improve, particularly in their stockrooms. By following stock management best practices, you'll run a proficient and compelling business.

Yet, if you don't start the way toward overhauling and smoothing out your business activities now, you'll effectively fall back into terrible behavior patterns, wasteful practices, and a significant expense of stock.

Below we have mentioned inventory optimization and management best practices that can help your business. But first of all, let us know the basics of inventory management!

What Is Inventory Management?

Inventory management is the management of stock. It includes planning for inventory such as how much inventory will be required in your business. How much demand you are getting for purchasing or creating inventory from your clients or employees.

Inventory can be consumable or product for selling. Inventory can be raw material, finished product, or some MRO (maintenance repair operations) parts.

Also Read: Best Inventory Tools That Help in Inventory Control

In simple words, inventory management is a systematic approach for storing, ordering inventory. The purpose of inventory management is to avoid wastage of inventory and save unnecessary expenses overall inventory optimization.

According to Global Market Insights the market of inventory management,  “Inventory Management Software Market size crossed USD 3 billion in 2019 and is estimated to grow at a CAGR of over 5% from 2020 to 2026. The increasing manufacturing output due to the adoption of Industrial IoT (IIoT) is supporting the market growth.”

What Are the Effective Inventory Management and Optimization Practices?

Effective Inventory Management and Optimization practices are as follow:

Effective Inventory Management and Optimization Practices

1. Eliminating Spreadsheets

The spreadsheet is used for maintaining data however they are prone to errors. You cannot keep track of changes that have been done in data there.

Furthermore, in a spreadsheet, there is a security risk of data because anyone can make changes that mean data can be changed intentionally or unintentionally.

Information stored in the spreadsheet is not accurate and when you rely on spreadsheet data your decisions are also inaccurate. A few years back organizations do not have any other option than the spreadsheet.

Inventory management software will collect all your information into a predictable and promptly serviceable arrangement - saving you a great deal of time and drawn-out work. It provides information in a centralized manner.

2. Prioritize Inventory

Inventory can be of various types especially in a retail shop or indoor shopping center where there are lots of inventory some are very costly and some are not expensive at all. Therefore, every inventory must be given priority in order to manage inventory efficiently. You can categorize each asset with ABC Analysis. With the software, you can easily do ABC analysis. It allows you to categorize your inventory into 3 categories.

Also Read: 5 Top Features That Help in Effective Inventory Management
  • Category A - You can put those inventories which are too much in numbers and need regular reordering & they are not expensive.
  • Category B - You can put those inventories which are expensive compared to category A and do not need reordering regularly. But profit margin is better than category A inventory.
  • Category C - Inventory is expensive compared to all categories and selling is less frequent but profit margins are good. They do not need regular re-ordering.

3. Set Reorder Level

For inventory optimization, this is one of the best features and most required features for effective inventory management. Lots of people think that they can manage their inventory but they end up making a lot of mistakes and errors resulting in chaos!

Organizations need to set a re-order level it will help them before the stock is finished. It avoids the loss of potential customers. How does stock reorder work?

With inventory management software all you need to do is define a level for re-order whenever the inventory goes below that level the system alerts the team and the inventory manager or responsible person will start the inventory refilling process.

4. Control Inventory Quality

Maintaining quality is a very important part of the business. For instance, in your business when inventory arrives it is important that you check inventory is sealed or there is no loose bottlecap.

The manager also needs to ensure that there is not broken inventory at all. If that is found you can return those inventories. Furthermore, the inventory shall be also checked for expiry dates.

Managers need to ensure that inventory is as per the purchase order so that the quality is not compromised. With this software, you can put vendor information and you can keep data of vendor's performance such as quality provided by vendor and delivery on time or not and so on! It will help in maintaining the quality of inventory.

Make Informative Decisions

Lots of organizations suffer from loss due to the lack of inventory optimization. The reason is either they buy too much stock or too little stock. In order to avoid this impact, the best practice is to make decisions based on information.

Analyze previous data and trends to know which inventory performs better in which season. You will know how much stock you will require. It will save you from unnecessary expenses.

This software also provides numbers and analytics that can help in forecasting demands. Inventory management software provides accurate data that is very significant when you are making a decision.


Inventory optimization & management cannot be done manually especially if you are a medium or big size organization. An automated inventory asset management software provides accurate data, it alerts and notifies responsible persons so that business productivity is maintained.

Furthermore, inventory management software is cloud-based which means you can access it from anywhere makes a necessary change from anywhere. Furthermore, your security expenses are also saved as cloud service providers keep data secured in an encrypted way.

Also Read: Why an Inventory Management Software Is Beneficial for Organizations?

Frequently Asked Questions (FAQs)

1. What are the benefits of Cloud-based Inventory Management Software?

Cloud-based software provides several types of benefits such as data security, accessing data from anywhere, Better control, real-time visibility, saving expenses, regular updates, etc.

2. What is batch tracking in inventory management?

Batch tracking is a tracking group of similar items. Batch tracking is used to track the information of batch related to their expiry dates or those items which are defective.

3. What are the various techniques of inventory management?

1. First in first out (FIFO)
2. Last in first out (LIFO)
3. Just in time (JIT)
4. Reorder point
5. ABC Analysis
6. Minimum order quantity
7. Safety stock level

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