Tools and techniques of Inventory management - Dash101 Blog

Save Efforts with the Tools and Techniques of Inventory Management

Inventory Management
Interior view of a large distriubiton warehouse showing a mototized converyor system to move

For the first time sellers, inventory management might sound like a scary term. If you are one of them, you might feel like it is something that only big businesses do. In most cases, you will continue to do your usual business without paying attention to inventory management at all. But, what I told you that managing your inventor can turn your business into an overnight success! All you need are the tools and techniques of inventory management for your online business.

34% businesses ship late because their inventory is not managed. If you’re often troubled by the fact that your products turn out of stock on your website, you are not managing your inventory properly. It also means that you are losing sales without even realizing it. The question is what can you do to prevent getting into such kinds of situations? The answer lies in the tools and techniques of inventory management. 

eCommerce inventory management can be the difference between success and failure for your business. It can be the reason why customers shop from you or completely move onto your competitors. For this reason, you must pay attention to the details of your stocks and manage them effectively. However, inventory management can seem like a challenging affair. As a beginner, you might not know what tools and techniques of inventory management to put to use. 

But, don’t worry since you’re in the right place. Read on to find out more about the tools and techniques of inventory management.

Tools and techniques of Inventory Management: Addressing the Main Challenges 

E-commerce, internet online shopping and delivery concept. House
E-commerce, internet online shopping and delivery concept. House

There can be many challenges while selling online. But if your inventory is sorted consider the majority of your work done. However, sellers who do not invest in inventory management, end up with several challenges.

Overstocking and Overselling

If you don’t have good control over your inventory, this means that you don’t know about the shopping habits of your target audience. Therefore, you will easily fall into situations where you can’t supply the demand in the market. Alternatively, you will have overestimated the product. And now you are sitting with a lot of inventory that is not selling. 

Either of these situations can be an expensive affair for a business. In the first situation, you’re losing out on your customers. While in the second situation, you are generating waste, and a lot of your inventory is either perishing or facing some kind of damage. 

Manual Management

Another big problem in inventory management manual management of the inventory. When you start using the tools and techniques in inventory management, this reduces your burden of manual tasks. But, otherwise, you will have to get into the nitty gritty of your inventory at all times. This will make you lose your focus from your actual business objective, i. e making more sales. When your business grows there is no way that you can rely on manual processes if you have to meet the demands of the customers. Moreover, you’ll be working with multiple partners that will become exhausting and disturb your manual management severely. 

Lack of Visibility

Most organizations suffer from a lack of business visibility even without realizing it. With time the product demands in the market become more and more complex. Therefore, inventory becomes complex in itself. Lack of visibility is a genuine concern that companies face across different levels. They can face it on multiple channels or at a warehouse level.

When you’re selling on multiple channels you’ll have to keep track of inventory on all those channels. Unless you’re using an eCommerce inventory management software, you will lose sight of your business. Similarly, your visibility across multiple warehouses will also be jeopardized. 

Lack of Insights

One of the biggest challenges that online sellers face is the lack of insights for their business. To grow your business, you will need the data. This data will in turn help you make crucial decisions. Similarly, to provide customers with distinguished satisfaction, you will have to look at the insights of your business. When you don’t have insights about the demand and how they are changing in the market, you will be at a loss. 

6 Tools and Techniques of Inventory Management 

Confident inventory auditor working at warehouse
Confident inventory auditor working at warehouse

Inventory management helps with adequate supply change management. With the proper inventory management methods and Materials are in place, and companies enjoy the benefits of strategic cost management.

ABC analysis

ABC analysis, known as better control analysis, is an inventory management technique where the items are classified into mainly three categories that are a, b and c. A type of inventory is highly controlled because it consists of a high price inventory, usually less in number. 

Still, very expensive.B consists of relatively lesser expensive stock than the A. The number of items is also of the moderate level, so control is also of average level. The C category consists of a high number of inventory items; therefore, it requires fewer investments, and thus, the control level is also minimum. 

With the help of ABC analysis, an organization can improve the ability to deal with large and complex data by breaking them into three segments where first to divide the customers into every three categories. 

Then you would consider the volume related to your margin contribution. Once the segmentation is done, the customer with a higher priority would go to category A. The less essential customers will be placed in category C, and the customers who are somewhere in between will stay in category B. The analysis will help you to examine your most valuable customers.

Just in Time

Just in time, the company keeps only those inventories which they need during the production process due to which the company saves the cost of storage and insurance. The company also orders the list whenever the old stock of the inventory is close to replenishing. 

Although it is a minimal risky method because a little delay in order can lead to out of the stock situation; therefore, this method requires proper planning so that new orders can be placed timely.

Economic Order Quantity

Economic order quantity is the ideal order quantity that a company must purchase for its inventory given a set of demand rates, production costs, and other variables. This is usually done to minimize the variable inventory cost, and this equation includes account storage ordering cost and shortage cost. 

The ordering and holding costs are those factors that are to be considered while determining the rock you where ordering cost are those costs that are incurred whenever an order for inventory is placed with the supplier and holding price, also known as carrying charge, are those called which are incurred to maintain the stock in the warehouse. When you focus on deciding on how much quantity of stock should the company order at the point of time, with the help of your cue model, the organization can place the right amount of inventory.


The acronym VED stands for vital, essential, and desirable. It relates to the classification of maintenance of spare parts. you can split the spare parts into three categories in order of importance.

Vital items are those which render the equipment in a process totally, and in case these items go out of stock, there is a loss of production for the whole period. Essential items are those who reduce the equipment performance, although they don’t render and save but can be deleted without affecting the equipment performance seriously. 

Most desirable items are non-functional. they do not affect the performance of the equipment. However, many organizations use this technique for controlling spare parts of inventory. A higher level of stock is required for vital and costly elements. Therefore, it is critical in maintaining such inventory and an organization can maintain a low level of stock for desirable parts which are in the top and required for production.

FSND Analysis

FSND analysis classifies the inventory based on quantity, rate of consumption, and frequency of issues. Here F stands for fast-moving. S stands for slow-moving. And N is for items that sellers do not use for more than a particular duration. 

This inventory method is quite useful for controlling obsolescence. All the things are inventory and not used in the same order where some are required frequently, and some are not required. Therefore, this method classifies the inventory, and the order of new stock is placed based on inventory utilization.


MRP stands for material requirement planning and inventory control methods where the manufacturers order the inventory after considering the sales forecast. This system integrates the data from various business fields where the stock exists based on which the manager would carefully place the order for the inventory with the material suppliers.

Tools and techniques of Inventory Management Can Kick Off Your Business

Make the most of your business with proper inventory management/ whether you’re a small business or a large enterprise. Remember that unless you prioritize the demands of your customers, there is nothing you will be able to achieve. Along with inventory management, you need to take care of your shipping strategy. Use a logistics service like Dash101 that helps in shipping seamlessly. Start shipping at Rs 23/500 grams and maximize your reach to 26000 pin codes. 


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