Methods of Inventory Management in 2020 - Dash101 Blog

5 Methods of Inventory Management to Save Time and Costs

Inventory Management
Man warehouse worker checking goods at warehouse.

Inventory forms one of the most important aspects of eCommerce. It is what represents your brand in front of the customers. Your inventory is your biggest asset in your business. It can directly make or break your business. Whether you are sourcing your inventory from a manufacturer or creating items to sell at your home all by yourself. Inventory is something you can’t choose to neglect. For this reason, it is important to know the methods of inventory management for your business.

Managing your inventory has more benefits than you can think. It can take your business to the next level. At the same time, it can help you reduce the time taken for conducting your business activities. 

Regardless of your business size, you must take the time to manage your inventory. Most small sellers make this mistake and don’t adopt methods for inventory management. This leads to disruption in their business over time. Remember that as an eCommerce business, you will always want to maximize your profits. In other words, you will want to sell more. 

Therefore, whether you started from your one-room apartment or a large warehouse, your customers will come back to you when they like your products. Over time, you have to stock up more of your inventory and create a business plan for expansion. If you’ve been neglecting inventory management from the time you started your business, you will have to get your hands dirty now. 

On the contrary, if you have been investing in methods of inventory management you will be excelling right from the start. There will be minimum wastage or unwanted expenses to bear. Moreover, you will be able to provide a higher level of customer satisfaction. If you’re interested in knowing more, you’re in the right place. Take a look at the best methods for inventory management below-

What are Methods of Inventory Management?

Inventory management is a technique by which eCommerce sellers manage their inventory effortlessly. It means keeping a track of your inventory. When you’re running a business here are a few things that happen-

  • Inventory flows out of your business as you receive more orders
  • New inventory comes into your store 
  • You pick, pack and label your inventory to send it to your customer’s doorstep
  • You keep your inventory in proper places on your warehouse

These are only a few activities that you do when you’re selling online. The list only grows as you scale your business. The point is that all these tasks involve money and require an investment in time. As a result, it raises your overall business costs. For a small business owner, this can mean a lot of burdens. Since you are already running your business with as little investment. Moreover, you grow your business with the profits that you make. Various methods of inventory management will focus on reducing your business costs and helping you gain an edge with your customers. 

Inventory management also manages several key aspects of your inventory. For example, the weight, dimensions, amounts, location, and several other parameters define your inventory. Therefore, when you adopt methods for inventory management, all these are taken into account. It helps you know when you have to replenish your inventory as well as when you have too many stock units. 

Why You Need Methods of Inventory Management?

Now that you know what is inventory management, you might want to understand why you should manage your inventory. You might be selling from a small apartment. Or you might be a homemaker selling to your neighborhood. So, what is the need for inventory management in this case?

The answer is simple- inventory management is your added to eCommerce growth. It helps you take your business from a room to the world. You will have the capacity to sell to all across the world by adopting efficient inventory management practices. Moreover, you will be able to do a lot more with a lot fewer investments. Here are a few things that you can do-

  • Save time spent on picking sorting inventory for your orders
  • Spend least on managing inventory, disposing of stocks, and keep them in good condition
  • Keep your stock units up to date
  • Do not lose out on selling opportunity due to out of stock units
  • Avoid inventory going bad and prevent it from any spillage

Top 5 Methods of Inventory Management

Portrait of warehouse worker carrying a cardboard box

Inventory management can seem like a tough task, but not if you take the right measures. For this reason, you need the right methods of inventory management. Take a look below-


It is one of the most popular methods of inventory management. Your stock comes in from your supplier or manufacturer. Similarly, they go out of your business as you ship orders to your customers. But deciding which inventory to pick and ship can be a tricky affair.

 And Yes, there’s a rule for that! FIFO or the first-in-first-out inventory management practice tells you that the inventory that comes in first goes out of the business first. If your goods are of perishable nature, practicing FIFO is a great idea. Similarly, if you’re struggling with boxed just sitting in your inventory, you need to adopt this method of inventory management. To execute FIFO in your business you’ll need to organize your warehouse so that tasks can be carried out seamlessly. 


Another popular method of managing your inventory is LIFO. It is the opposite of FIFO. LIFO stands for Last in first out. In this inventory management technique, you get to send the inventory out that came in last in your business. It means that your newest stock goes out first and then your oldest stock.

Using LIFO you get rid of your newest inventory first. LIFO is a great method for non-perishable items. You can’t process your perishable inventory using LIFO because it will mean that the inventory that is already with you expires or becomes no longer edible by sitting in your warehouse. 

Demand Forecasting

Demand forecasting is one of the fundamental methods of inventory management. While businesses have been doing it intuitively for the longest amount of time, things need to change. The demands of the customers are ever-changing. Due to this, there needs to be a scientific method where you can predict the demand for a particular stock in the future. 

This will help you prepare your inventory well enough in time. Moreover, you will not risk losing a sale opportunity due to an out of stock condition. Predicting inventory can be tricky. For this reason, you must use a reliable tool or take the assistance of a 3PL service. 

Regular Auditing

Regular auditing is very crucial for managing your inventory. It is one of the important methods of inventory management. For most of the time when we talk about managing inventory we talk of digital methods but auditing your inventory is where you’ll have to take the physical step. Take a visit to your warehouse if you are running a large business. This will help you understand your inventory in more detail.

For example, you will come to know-

  • Which of your stocks are defective or damaged
  • If you have perishable inventory, which of your inventory need special care
  • Which of your inventory is just sitting in your warehouse without selling more often

Instead of doing a complete end to end auditing of the inventory, a smart practice is to do cycle counting. This means start reconciling your inventory throughout the year. This will not leave any burden on your business at the end of the year.  

Reorder Point Formula

This is an important formula in inventory management. A reorder point formula tells you about your stock and when you should be ordering more. It is one of the crucial methods of inventory management that keep you updated about the future stocks you might be needing. 

Most businesses either order too much of an inventory and just sit on an existing inventory for the long. Alternatively, they also run out of some inventory too quickly and lose sales. AS a result, the customer experience gets disturbed. To avoid all of this, businesses can simply use the reorder point formula.

To calculate the reorder point formula, you need the following parameters with you-

  • Average daily unit sales
  • Average lead time in days
  • Safety stock

Once you have these, you the below formula for the calculation-

Average daily unit in sales *  Average lead time (days) + Your safety stock units

This will give you the units of a product you need to order in advance. Use this method to verify your demand forecasting software. 

Let your Inventory Take Your Business to New Heights

Grow with inventory management. Instead of relying on intuition, trust the hardcore facts and data that you receive from your inventory management software. If you find managing your inventory overwhelming, you can take the assistance of a third-party logistics provider. Once your inventory gets sorted out, make sure you ship with a reliable courier company. Dash101 is a trusted partner that will help you ship at the lowest costs and take care of your inventory efficiently. 


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