Managing Inventory 101

Managing and optimizing your inventory levels can be a challenge — whether you’ve had inventory for decades, or are just starting out with a new product. Here are some tips for managing your inventory like a pro, regardless of your current situation.

Tips for Managing Your Inventory

Categorize Your Inventory

Inventory categories may shift over the years, or you may add/remove products without evaluating the categories impacted. Thoughtful grouping of your inventory is one of the best things you can do to simplify inventory management. The rest of the suggestions here will work better with properly categorized inventory.

Also, take advantage of sub-categories and classifications to provide further segmentation and make reports easier to read.

When choosing categories, think about the types of assets you want to track as a company, and how the sales associated with those assets will be reported and measured.

Automate Wherever Possible

You want to automate everything possible, including: allocation of inventory as orders are released, reduction of inventory as orders leave the warehouse, addition of inventory when products are received, etc.

Re-ordering inventory is another opportunity for automation.

Demand Forecasting

Some industries/products are easier to forecast than others. If you have sales history for 1-3 years, there are tools that will forecast future demand based on this past history. But for new or highly-seasonal products, forecasting based on past sales can be tricky.

If you have a forecasting tool, the best approach is to feed sales data into the forecasting tool at least daily. The software will then use the daily sales in combination with past sales to forecast future demand.

Interested in forecasting, but don’t have a software solution? This post covers Enterprise Forecasting and lists several vendor tools.


Using a UPC product barcode and/or printing barcoded labels as products enter the warehouse makes it possible for additional automation around picking, packing, transfers, work-orders, and other warehouse processes. It’s also an excellent way to embed quality control into most of your warehouse processes.

Inactive Inventory

Keeping on top of inactive inventory will save you inventory carrying costs – whether you have the product in your warehouse or with a third-party.

Most inventory control systems will report on inactive inventory, but you may need to understand how the system defines “inactive” – is it simply no shipments for the past X months? How are receipts factored into the definition? Do work-orders and transfers impact the “inactive” status?

Cycle Counts

Ideally, the amount of inventory recorded in your inventory control software matches (exactly) the amount of inventory in the warehouse or on the shelf. When the software-to-physical counts get out-of-whack bad things happen, such as lost sales, backorders, or excess inventory.

Cycle counts help keep the software-to-physical counts in sync. Typically, you’ll want your software to tell you when to count each product, based on activity levels. In other words, count the active products more often than the inactive products. It’s also best if your software allows for cycle counts as part of the normal daily warehouse processes (for example, while picking), rather than requiring a completely separate process for counting.

Inventory Visibility

You can’t manage what you can’t see, so web reporting portals and scheduled reports are a must-have for inventory owners. It’s also helpful to set automated alerts around specific inventory-control conditions that require special attention.

How can we help?

If you are in the market for an experienced, scalable fulfillment partner, contact EchoData to discuss your business objectives. We have been supporting the needs of the fulfillment and supply chain industry since 1983. Visit us at or give us a call at 800.511.3870.

Posted June 17, 2016