How Inventory Management Benefits Startups

A supply chain often consists of four critical components – a product manufacturer, a wholesaler that distributes the product, a retailer that sells the product, and a customer that buys a product. Inventory management is an integral element of your supply chain. Its main goal is to help you optimize the amount of your inventory at any time given so that you never have too much or too little items in your stock.


When monitoring your stock levels continuously and optimizing them, you will be able to predict your demand curve and adjust any part of your supply chain, from production to shipments, to the current market needs. By managing your fast-moving goods, you will minimize your storage needs, boost profits, and cut costs. Above all, you will ensure that popular products are always available to your customers when they want them.

Benefits Of Inventory Management

Like I have mentioned above, inventory management can benefit your small business on multiple levels:

Improving Customer Satisfaction

Increasing customer experiences is critical for any growing business. No matter if you are selling products online, offline, or both, remember that your customers expect you to provide seamless user experiences. Research says that 1 in 3 customers will stop buying from you after just one negative experience, while over 90% of them would never do business with you after 2 poor experiences.

One of the main issues that may harm user experiences is missed delivery promises. For example, if your product catalogs or website promote products that don’t exist in your stock right now, this may frustrate your customers and discourage them from buying from you ever again. With the help of the right inventory management and forecasting tools, you will be able to monitor your production and sales, update your stock info in real-time, predict high/slow demand sales periods.

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Reducing Inventory Waste

There are many causes of inventory waste and some of them are overproduction, over-processing, waste of resources, and product defects. Now, inventory waste is often a result of poor inventory management processes. When done strategically, inventory management will help you minimize overstocking and overselling. By monitoring product demand consistently, you will be able to notice new market trends. For example, if buyers start expressing more interest in a product, you will need to restock on and maximize customer satisfaction. Above all, you will prevent overstocking unpopular products. Inventory waste may seriously harm your financial health, especially if you are selling perishable goods.

Theft Control

With the right inventory management software, you will track the number of the products in your stock and compare it with your sales and revenue. This way, you will be able to see whether some items go missing and take actionable steps to prevent theft.

Saving Time & Reducing Costs

Any of the abovementioned factors, from reducing the inventory waste and storage space to improving customer satisfaction and predicting product demand, will help you boost your business performance, increase sales, and reduce expenses.

How To Improve Inventory Management?

Now that you know the benefits of inventory management, let’s see what steps to take to improve it.

#1 Invest In Small Business Inventory Management Software

In the past, businesses needed to measure inventory levels and manufacturing data manually. If you are still managing your data in complicated Excel sheets, it is time to switch to more sophisticated and automated technologies. This is where you should invest in manufacturing software for small businesses.

There are many perks of using cloud-based inventory management tools. First, they will help you integrate your entire business and centralize all business processes under a single platform. Second, you will save your employees’ time and automate many repetitive and manual tasks. Finally, you will be able to observe your inventory holistically and get a 360-degree overview of your market demands, being able to adapt to the current trends.

#2 Use The FIFO Method

The idea behind FIFO, or the “first in, first out” approach, is logical – the products that came first to your store need to go out first. This rule is particularly useful for those businesses selling perishable goods, such as dairy products, food, cosmetics, makeup, plants, and so forth. One of the easiest ways to implement the FIFO method into your inventory management strategy is to model your warehouse after it – older stock should be placed to the front, while new stock always goes to the back.

#3 Perform ABC Inventory Analysis

The ABC method is one of the most common inventory control systems in different industries. Products are classified by their economic value and velocity (how quickly they move) into three groups:

  • Group A includes slow-selling products. They are smaller in number but have the highest profit margin.
  • Group B incorporates items in your stock that are moderate both in value and number.
  • Group C consists of low-value products that have the highest velocity. Those are everyday products your buyers need, such as beverages, food, etc.

ABC inventory management allows better time management, lets you organize inventory accurately, and helps you price products strategically.

#4 Find Any Low-Turn Products

Low-turn products are those that have not been sold in the last few months. This happens for a good reason – they are either not relevant to your customers or market trends have changed. Your goal is to identify items that don’t sell and stop stocking them. Sure, you will need to sell the remaining low-demand products in your stock strategically. For example, you could provide massive discounts to encourage customers to purchase them. Inventory management software will help you monitor for how long a certain item has been in your stock, as it updates product listings in real-time.

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#5 Test Quality Control

No matter what kind of business you run or what products you sell, quality control is critical for your business. Your products should always look great, work perfectly, and meets customers’ expectations. This will strengthen your brand’s credibility and show your customers that you care about their experience. The lack of quality control may result in lots of rework, higher lead times, delivery delays, and customer dissatisfaction. Broken or visually displeasing products will clutter the shelves in your storeroom, increasing storage expenses and harming your inventory management efforts.