Inventory Management System: What You Need to Know

Inventory Management System: What You Need to Know

May 16, 2023

Tracking your competitor’s prices is vital to maintaining viability in your market. However, competitive pricing will be more effective when you provide products to your customers when they want them. This means you must also have the right tools to manage your inventory. 

Making sure your products are in stock, priced and categorized correctly, and appropriately tracked is easily achievable with a dedicated inventory management system. So, what is inventory management all about? Here’s everything you need to know.

What is inventory management?

Inventory management is the process of overseeing and tracking stock, and includes aspects such as storing products, managing orders, and adjusting the number of products for sale. Simply put, inventory management is all about making sure you have the right quantity of stock on hand when you need it. And where you need it – so it’s really crucial to the success of any eCommerce business.

The goal is to ensure that the right amount of inventory is available at the right time. If you are out-of-stock you will lose your customers without any doubt. That’s why it’s an essential part of the eCommerce business that carries stock since effective inventory management helps retailers maintain the optimal inventory levels. You can monitor stock levels and adjust inventory accordingly. 

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Types of inventory

Most inventory falls into one of three categories:

Raw materials: Any materials your business uses to produce your goods or services. For example, if you sell cupcakes, all the ingredients for your products would be considered raw materials.

Work-in-process: Any unfinished goods that are in the process of being completed. If you produce wooden furniture, this would be any furniture on hand that’s still being finished.

Finished goods: Any goods you have in stock that are ready to be sold.

Safety Stock: Critical inventory that manufacturers rely on to maintain expected production levels in case of emergency. It ensures that manufacturers don’t face any disruption in production.

Ready for Sale: Any goods sitting in the warehouse ready to be shipped by retailers.

Anticipation Inventory: Items that are designed for specific times throughout the year. Common anticipation inventory can be listed as seasonal holidays such as Christmas, Valentine’s Day, or Halloween. 

Inventory management best practices

Keeping your inventory on hand (also known as ‘holding inventory’) can help to prepare for spikes in demand and take advantage of deals from suppliers when they arise. But to reduce the risk of overstock and dead stock, it’s important to follow these inventory management best practices:

Order Fulfillment

After your customer makes a purchase, you need to complete the order fulfillment process precisely; packaging and processing. Remember that when it comes to product packaging, customer experience and durability are essential factors you need to consider. When you process the order and have shipped, you can send a confirmation mail to your customer that includes tracking information.

Stock control

Maintaining stock levels in optimal levels can help increase cash flow and decrease the cost of holding stock. However, there’s no one-size-fits-all approach, so stock levels should be determined using data on sales patterns, seasonality, and past turnover. That’s why you need to monitor and review your inventory levels on a regular basis with inventory management systems. The information you are gathering can help you identify current customer demand so that you can avoid overstock or under-stocking automatically.

Quality control

eCommerce businesses should have quality control procedures in place to ensure their product is up to standard. You should examine all goods for signs of damage, including leaks, tears, broken seals, or discrepancies in descriptions. If not, you can face lots of customer compilations and dissatisfactions. 

Build Strong Relationship with Suppliers

Strong relationships impact your inventory management process. It can increase your service quality, reduce costs, and minimize disruption. Choose suppliers that align with your values and ensure they understand your needs. You can give timely feedback so that problems you face can diminish on time.

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Conducting a Stocktake

Stocktake or cycle counting is the process of counting and categorizing inventory, and typically includes dividing stock by location, category, item, or value. Conducting a stocktake is critical in ensuring businesses have an up-to-date record of stock on hand. This step helps you to organize your inventory in the warehouse which can be super helpful for your warehouse team. 

Know your reorder point and safety stock level: Understanding when to order more stock (the “reorder point”) and reducing the risk of stock-outs by maintaining safety stock are key to retaining market share while keeping stock overheads down. Learn more about the reorder point formula and safety stock formula.

How an inventory management system can benefit your eCommerce business

Inventory Management System

The most obvious way a dedicated e-commerce inventory management system can benefit any eCommerce business is by making life easier. Inventory management software, such as TradeGecko, improves the accuracy of orders, facilitates a more organized warehouse through unique SKUs and recorded stock levels, and increases efficiency by cutting out manual processes. Ultimately, all of these factors help save time and money whilst positively contributing to the bottom line.


Inventory management is critical for any kind of eCommerce business to ensure that they have optimal levels of inventory. It involves monitoring and reviewing your inventory levels to find the current customer demand and also forecast for the future. You can work with inventory management systems to work efficiently and improve your orders.  

  1. John
    March 26, 2018

    I would recommend MRPEasy manufacturing (MRP) system and inventory management software. A great tool for small manufacturers!

  2. Nick
    October 12, 2018

    For one company, it was very hard to keep track of color concentrates, since they were ladled out of barrels, were kept out on the floor, and didn't cost all that much anyway. So, these and other similar items were placed on "two bin" order control and expensed, eliminating a whole class of inventory record problems with little more than a stroke of a pen.

  3. Maruticomputers
    January 20, 2021

    Its a great post! Thanks for sharing

  4. Prisync Team
    January 29, 2021

    Thanks a lot! We're glad to hear that!

  5. Eli Richardson
    April 5, 2021

    I'm glad you talked about the importance of managing your business's inventory. In my opinion, any company could benefit from optimizing its inventory process. In that way, I believe they could be sure their product's stock is regulated. Thanks for explaining to me the perks of an inventory management system.

  6. Jyoti
    June 27, 2022

    Hey, thanks for sharing a great content on Inventory Management. Please keep sharing.

  7. activesystem
    July 5, 2022

    I appreciate you giving all of these fantastic information. It is highly valued.

  8. Sheena
    April 12, 2023

    I appreciate you sharing all of these wonderful details about inventory management. Nice article!

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