How to Conduct Inventory Management Process For A Business


Cynthia Vespia10/26/2021

What is inventory management process ?

The process of inventory management is the art of turning raw materials into finished products and then into sales. Inventory management processing starts with the input of raw materials and ends with the output of the finished product. Inventory management is the process of managing and monitoring the availability and use of inventory.


What is Inventory Management Process?

Inventory Management is one of the most important aspects of running a Small Business. Knowing how much inventory is on hand will keep business running smoothly as orders of fresh inventory are placed well ahead of time.

The process Features Inventory balances by identifying the stock on hand, monitoring incoming and outgoing, and figuring out the optimal quantity to order before stock gets low.

Inventory management will reduce costs and optimize utilization of the Supply Chain to meet customer demand. The process can be done manually using Excel Inventory sheets or by using inventory management software. Other methods like reducing dead stock or using the reorder point formula can also manage inventory.

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The Elements of an Effective Inventory Management Process

The key to successfully managing inventory is to ensure that the inventory process is maintained at the right inventory levels to meet customer demand and minimize inventory costs.

To accomplish this, you need management techniques that will assess inventory levels through cycle counts. Using inventory techniques can help make adjustments to warehouse inventory to make surecash flow is not impacted nor is the customer experience.

Here are eight steps for developing an effective inventory management process-
  1. New inventory products are delivered based on purchase orders.
  2. Product is inspected, sorted, and stored by different type inventory.
  3. Inventory levels are monitored by cycle counting or through perpetual inventory software.
  4. Customer orders are placed. Customers may make a purchase in person or through your digital storefront using a Credit Card
  5. Products are located by SKU number and taken from stock inventory.
  6. Customer orders are approved and shipped. A third party supplier is often used.
  7. Inventory levels are updated to keep accurate inventory counts. A perpetual inventory management program automatically changes stock levels to control inventory.
  8. Stock levels trigger an inventory order. Calculating your reorder point for each product is a major component of a time inventory model.

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The Importance of Inventory Management Process

Running any business involves tracking inventory. Having a solid inventory management process is the difference between increased revenue and losing profits. Most business owners just starting out don't realize the different aspects involved with inventory management.


An important part of the inventory management process is the inventory cycle. This refers to the time in-between the order of a product and when it is received. The inventory management process is everything that happens between those two points. This is why its important to have good management techniques in place.

The Challenges of Inventory Management Process

Inventory management has many moving parts within the process including the monitoring, controlling and planning of the inventory stock. The process can be done manually or by a software program. Because of the complicated nature of tracking the inventory, a computer program is often used to maintain accuracy.

Housed within a standard POS system, the inventory management software will track inventory levels and ensure products are ordered on time and within the quantity needed to keep business flowing. It can also maintain a sales sheet that highlights which products are the best sellers.

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What are the Strategies for Conducting Inventory Management Process

The inventory management process has four steps in a cycle to keep track of inventory- Receiving, storing, selling, and expiring. Within the four steps there are a few different inventory management strategies that are used for overall efficiency-

  • Using an automated inventory management system- This cuts down on human error and creates a more productive work environment.
  • Use data analytics to optimize inventory management- With current software being used for inventory control it offers real time data which can be used to predict sales forecasts and when to scale inventory.
  • Integrate mobile technology- Apps and mobile POS units make maintaining inventory management even more versatile. This type of technology helps to track, manage, and ship inventory anywhere at anytime.

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How to Conduct the Inventory Management Process

Optimizing inventory management is a powerful tool in controlling costs. It can also help manage the supply chain and vendor relationships.

Conducting the inventory management techniques looks something like this-


  • Inventory Control- Which is the basis of inventory management and entails maximizing costs while minimizing profit loss.
  • Stock Review- Compares which products are available in stock and what needs to be replenished for future needs.
  • Cycle Counting- This is when the inventory on hand is counted during a specific time period based on a repeating schedule.
  • ABC Analysis- A method that classifies inventory into different groups based on their value or quantity.
This approach to the inventory management process creates a more detailed and precise analysis of the products needed to run the business.

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How Does Inventory Management Process Impact the Bottom Line?

Inventory management has a big impact on a company's bottom line. Understanding the key components of the inventory management process such as purchasing, storage, and sales will be beneficial in successfully running a business.


There are many different software options that can make the inventory management process run much smoother and more efficiently. It's best to explore the different options and make an informed choice based on the needs of the business.

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