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  February 29th, 2024 | Written by

Improving Inventory Management: Best Strategies for Optimal Fulfillment

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Inventory management involves strategies and tools for ordering, keeping, tracking, and delivering inventory. Optimal inventory management is essential for loss minimization and profit maximization. These are goals every business aspires to attain. Although choosing the appropriate inventory management method can be difficult, it’s always worth the trouble. Here are some popular strategies to help you optimize your inventory management. 

Always Better Control (ABC) Inventory Analysis

This analysis approach categorizes commodities in order of importance. The three categories under ABC are:

  • A – Items of high value but low sales frequency
  • B – Items of moderate value and moderate sales frequency
  • C – Items of low value but high sales frequency

ABC allows you to determine what items to prioritize when restocking. You don’t want too much of a commodity that hangs around the shelves and gathers dust. Also, you don’t want too little of a good that moves fast. You will slash your storage and carrying costs through ABC analysis, ultimately optimizing your inventory stock ratio. 


LIFO (Last In, First Out) and FIFO (First In, First Out) help determine your inventory’s cost. FIFO is an excellent way to keep your stock fresh if you deal in perishable goods. For instance, while arranging milk on a shelf, supermarket attendants push the old ones to the front and slot the new arrivals at the back. That ensures a customer picks those with closer expiry dates, lowering the chances that your goods will go wrong. FIFO also results in higher profits and higher taxes if the prices of commodities rise while in storage. 

With LIFO, if the prices of goods have surpassed the purchase price per your last order, the selling cost of your commodities will be higher, lowering your profits and taxes. This approach is often used with non-perishables like metals and petroleum. It is not an appropriate indicator of ending stock value since the leftover stock may be too old or obsolete. That gets you a considerably lower valuation than current market prices. 

Both LIFO and FIFO require accurate tracking of spending on inventory to be beneficial to a business. 

Just In Time (JIT) Approach

The JIT method ensures you do not incur overstocking costs. Under this strategy, you only order items to satisfy immediate demand. Since this leaves no excess inventory in your warehouse, you save on insurance and storage costs. You only order new stock when the old one is almost depleted. Despite its benefits, JIT could easily result in a stockout if your supply chain suffers even a minor shock. That is why this method requires thorough planning to be feasible.   

Economic Order Quantity (EOQ)

EOQ is your business’s ideal inventory level to meet consumer demand while minimizing shortages, holding, and order costs. EOQ is also an essential cash flow tool that helps firms regulate the money in their inventory balance. This is critical since inventory is among the largest assets for many businesses. Minimizing its levels may save you cash to inject into other essential business processes or invest elsewhere. 

Besides, the EOQ formula establishes your inventory reorder point. You must immediately restock when your stock goes below this level to avoid stockouts and associated shortage costs. 

Acquire Warehouses Strategically 

Although it is simpler to manage centralized inventory, keeping inventory close to where it is needed is vital. Strategically distributing your stock across several storage warehouses lowers shipping costs and time, improving your delivery efficiency. Simply use your historical data to evaluate demand trends and appropriately situate your warehouses and fulfillment centers.  

Employ Inventory Software


You must have noticed that all the approaches we highlight in this piece require accurate sales and inventory data tracking. While manual methods are still used, they are tedious and prone to error.  They even require businesses to close a few days early to take stock. 

With sturdy inventory software, you can synchronize your processes to view all warehouses, inventory, sales avenues, and customers in a single place. Whenever an item is sold, a simple scan of the code at the point of sale is sufficient to adjust stock levels in your database, ensuring your inventory data is always up to date. 

Inventory software also generates inventory reports, which you can use to forecast demand across different locations. That enables you to make savvy purchase decisions that improve cash flow and facilitate business growth. 

Final Thoughts

Inventory is a significant business asset. You must protect and nurture it to maximize profits and minimize losses. Pick any or all of the tips above to optimize your inventory management and grow your business.