Small Business Help

8 inventory management techniques for small businesses

Myranda Mondry | October 29, 2019
Business moves too fast for slow processes. This is especially true in B2B and B2C e-commerce. If you’re focused on moving goods, it’s imperative that you apply inventory management techniques and best-in-class technology to keep up with the buyer’s pace. Managing inventory stock levels by passing around a piece of paper or an Excel spreadsheet isn’t going to cut it. To keep up with expectations and demands, an online shopping option is a must. In person or online, buyers want to view what’s available in real time, on their own time. Inventory management techniques can make or break any business today. 

What is inventory management?

Inventory management is best achieved through a combination of technology and techniques. Pairing the right technology with the right techniques can boost any business. Inventory management can’t be completely automated. Nor should it run entirely on human power. To achieve a business advantage, inventory management requires a delicate balance of technology and strategy.  

Why real-time inventory management matters

Inventory management is important to your buyers, whether they know it or not. Though most inventory management activities occur in the back office or warehouse, your processes can affect a buyer’s opinion of your company.A strong inventory management program helps you maintain healthy stock levels. And it enables you to earn strong customer service ratings. These ratings can help you maintain a strong and healthy business. Inventory management also helps you:
  •     Avoid dead stock (those trendy or seasonal styles)
  •     Keep perishables from expiring, rendering inventory unsellable
  •     Reduce inventory costs

Inventory management strategies for small business owners

1. Real-time inventory management software

This is a must-have for success for any small business. Whether you ship 10 items or 1,000 in a day, cloud-based inventory management software scales as you grow. And it can help you maintain accurate stock levels on your website or in B2B selling portals. Never question whether or not you can fill an order.

2. Demand forecasting

The foundation of this technique requires human judgment and technology. By reviewing prior-year sales data, you can plan for similar scenarios in the coming year. This, of course, requires someone to review the data and make a call based on the prior sales figures. This is yet another example of how inventory management software can be combined with human judgment to work as a business advantage. This method also includes sales forecasts for the coming quarter.

3. FIFO (First In, First Out)

For any item in your warehouse, the first batch of inventory shipped to your warehouse should be shipped out first when a customer orders it. This one is especially important in the world of perishables. Those goods have a greater chance of spoiling, the longer they sit in your warehouse. Use bar codes and alerts to prevent items from spoiling. If items are nearing their sell-by date, run a sale or discount on those items to move them out.

4. ABC (Always Better Control)

This strategy requires you to classify inventory into three categories. Category A is typically defined by expensive items that you maintain a lot of stock in. Category B items are stocked and priced moderately. Finally, Category C items are typically less expensive than categories A and B and limited in stock. By dividing inventory into these three classes, you can better choose the investment you make into specific items within each category.

5. Minimum stock levels

When you reach a minimum stock level, an order will occur to replenish your stock. Keep in mind, you’ll need to account for the time it typically takes to receive an order from your supplier. Make sure you set your minimum levels high enough to get by with the inventory you have, while you’re waiting for that new order.

6. FSN (Fast, Slow, and Non-Moving) 

This strategy requires you to classify inventory based on a scale of fast, slow, or non-moving.  Naturally, you’ll want to make sure you maintain healthy minimum stock levels on fast inventory. And you’ll want to closely monitor this category. Slow goods might be seasonal goods that might be irrelevant by the next season. Keep a low inventory of these items, and watch them carefully for obsolescence. If you know that these items will eventually become obsolete, it’s time to run a sale or offer a discount on these items.

7. Dropshipping

Often used by growing businesses, this method allows you to build your brand and reputation but not stock inventory. By developing and paying vendors to ship for you when your customer places an order, you invest less in inventory while your business is growing. You will pay a service fee per shipment, but dropshipping allows you to focus on growing your brand awareness and sales, not shipping.

8. Cycle counting

This method requires that you count a portion of your inventory regularly. Once a month is suggested as a best practice for this inventory management method. An inventory auditing method, this technique is less disruptive to your warehouse and teams. You can also focus on Category A items mentioned in the ABC method. 

Using inventory management to your advantage 

Choosing the right technology will enable you to automate things like ordering more stock when you hit your minimum level. Inventory management software makes it easy to see which products aren’t moving fast enough, so you can make a judgment call on whether or not you need to launch a marketing campaign around them. The right system can help you optimize operations and unify the data you need to better serve your customers and meet today’s expectations. Finding that balance between technology and strategy is the key to using inventory management to your advantage. 
Dean Mansfield is the President and CEO of, an all-in-one platform that allows wholesale distributors to successfully operate a B2B e-commerce business. Before Systum, Dean helped thousands of companies scale their businesses through sustainable revenue growth, including leading NetSuite to its IPO in 2007.
A little about Myranda Mondry

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