A Comprehensive Guide To Inventory Management

A Comprehensive Guide To Inventory Management

Inventory management is a process that is often taken for granted by business owners. It’s one of those necessary tasks that need to be carried out to keep the business running, but few people know how to do it properly. To improve your business operations and keep your inventory levels in check, you need to understand what inventory management is and how to carry out its process.

In this article, we will define inventory management, discuss its process, and outline its various associated techniques. We’ll also take a look at whether or not you’ll need to hire a sorting company for inventory management purposes.


What is Inventory Management?

Inventory management is the process of monitoring and tracking stock levels and the movement of goods—whether it be fulfilling orders for finished products or transporting raw materials to partner manufacturers. This process is a critical component of supply chain management as it ensures that businesses have the necessary inventory levels to meet customer demands.

It serves as the foundation of a business’s overall health and longevity. It helps minimize costs while boosting both cash flow and profitability. When your inventory is organized properly, you better understand what products are selling, how much inventory you need on hand, and where your inventory is located.

Without proper management, you can potentially experience several issues, such as:

  • Excess inventory that ties up valuable cash flow
  • Stockouts that result in lost sales
  • Inefficient use of warehouse space
  • Miss shipments, shortages, and spoilage
  • Long lead times and excessive inventory levels
  • Wasted time searching for inventory that’s not properly organized


With so much at stake, it’s important to understand the inventory management process and how to carry it out effectively.


The Process of Inventory Management

Inventory management involves eight key steps. So before building an inventory management plan, it’s essential to have a solid understanding of each step of the inventory management process. This knowledge is crucial to minimizing errors and creating your business’s most effective inventory management plan.

  1. Goods are delivered to your facility: This phase is when raw materials for manufacturers or finished goods for consumers first enter your warehouse.
  2. Inspect, sort, and store goods: Start checking all of the inventory items as they come in to ensure they’re not damaged and meet your quality standards. Once you’ve determined that the inventory is up to your standards, you can begin sorting it and storing it in the appropriate location.
  3. Monitor inventory levels: As inventory moves in and out of your facility, it’s important to keep track of how much inventory you have on hand at all times. This inventory count should be updated regularly to ensure accuracy.
  4. Stock orders: Your customers will place orders in-store or on your website. When an order is placed, you’ll need to check your inventory levels to see if you have the necessary items in stock to fulfill the order.
  5. Stock orders are approved: Once you’ve confirmed that you have the inventory to fulfill an order, you’ll need to get approval from the customer before proceeding with the transaction. This is typically done via email or over the phone. Once your customer confirms the order, pass it to your supplier, or you can automate this process through a POS system.
  6. Take goods from stock: These goods are found via SKU or barcode and are taken from inventory to be packaged for shipment to the manufacturer or customer.
  7. Update inventory levels: Using an inventory system or workflow creation system, you can update inventory levels automatically and share this data with the necessary stakeholders.
  8. Purchase/Reorder: Make sure to restock supplies and inventory as needed. Low inventory levels can result in production stoppages, so it’s important to keep an eye on inventory levels and reorder when necessary.


Inventory Management Techniques

There are a few different inventory management techniques that you can use to streamline your inventory management process and keep inventory levels low without sacrificing customer satisfaction.


Just-in-time inventory

This technique involves only ordering inventory as needed, which helps minimize waste and excess inventory.


Kanban inventory

Kanban Inventory is a lean inventory management technique that uses visual cues to signal when inventory needs to be replenished.


Economic Order Quantity

This inventory management technique helps minimize inventory costs by determining the optimal order quantity for each item.


Minimum Order Quantity

MOQ is the smallest amount of inventory retail businesses will purchase to keep costs low and manageable. Keep in mind that inventory items that are costlier to produce will tend to have a smaller MOQ compared to cheaper items that are easier and more cost-effective to manufacture.


ABC analysis

This management technique categorizes inventory into three categories—A, B, and C—based on cost, frequency of use, and importance. This technique can help you prioritize inventory and ensure that the most important items are always in stock.


FIFO and LIFO inventory

FIFO (first in, first out) and LIFO (last in, first out) are two inventory management techniques that dictate the order in which inventory is sold. FIFO inventory is sold in the order in which it was received, while LIFO inventory is sold in the reverse order.


Batch Tracking

Batch tracking is a quality control technique that inventory managers can use to keep track of inventory items. This technique involves assigning a unique identifier to each batch of inventory, which can be used to track the batch throughout the inventory management process.



Dropshipping is an inventory management technique in which inventory is shipped directly from the supplier to the customer without passing through the inventory of the retailer. This can help to minimize inventory levels and save on storage costs.


Six Sigma

Six Sigma is an inventory management technique that uses statistical methods to help inventory managers identify and eliminate errors in the inventory management process. Through Six Sigma, inventory managers can streamline inventory management and improve efficiency.


Bulk Shipments

Bulk shipments are inventory management techniques in which inventory is shipped in large quantities, typically to save on shipping costs. This can be a good option for inventory that is not time-sensitive and does not need to be shipped in small quantities.


Do You Need a Sorting Company?

If you’re having trouble managing your inventory, it might be time to consider hiring a sorting company. A sorting company can help you with inventory management, from receiving and storing inventory to shipping and tracking inventory.

Sorting companies can be a great option for businesses that don’t have the time or resources to manage inventory. However, it’s important to carefully vet any sorting company you’re considering hiring to ensure they’re a good fit for your business.

When you’re considering hiring a sorting company, there are a few things you should keep in mind:

  • The size of your business: A sorting company should be able to accommodate the inventory needs of your business, whether you have a small or a large inventory.
  • The type of inventory you have: A sorting company should be able to handle the type of inventory you have, whether it be raw materials, finished products, or both.
  • Your inventory management needs: A sorting company should be able to meet your specific inventory management needs, whether it be managing inventory levels, tracking inventory movement, or both.
  • Your budget: A sorting company should be able to work within your budget, whether you have a small budget or a large budget.


Hiring a sorting company can be a great way to improve your inventory management. However, it’s important to ensure that you hire a reputable and reliable company. With a little research, you can find the perfect sorting company for your business. 



Whether you’re a business trying to execute proper inventory management, or a sorting company helping another business with their inventory management needs, you’ll need a tool that can help you track inventory levels and movement. DATAMYTE has that tool!

The DataMyte Digital Clipboard is a workflow automation software that offers inventory management capabilities through workflow creation and inventory tracking. With the DataMyte Digital Clipboard, you can create inventory management workflows that fit your specific needs and track inventory levels and movement in real time.

Our easy-to-use drag-and-drop interface makes creating the ideal inventory management workflow simple and easy. And with our inventory tracking capabilities, you can be sure that you’re always up-to-date on inventory levels and movement.

If you’re looking for a tool to help with inventory management, look no further than the DataMyte Digital Clipboard! Book a demo with us today!



Inventory management is an essential component of proper supply chain management. Through this process, businesses can track stock levels and the movement of goods, whether delivering raw materials to manufacturers or fulfilling orders for finished products.

By creating a proper inventory management plan or hiring a professional sorting company, businesses can ensure that their inventory is properly managed, saving time and money in the long run.



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