What is Inventory Management?

Inventory is one of the most important components of any business and ensuring that the final product is in line with company regulations and the goals set out is vital to success. So, what is inventory management and how does this process help a business to better manage its stock? Inventory management refers to the managing of raw materials all the way up to the actual selling of the product, and every step in between! Understanding the stock you have, how this inventory is stored and distributed as well as the demands of the market are all part of inventory management. 

The way that inventory is managed can have a great impact on a business, as you will not want to be holding too much stock that ties up finances or too little stock that you cannot meet the demands of your customers. This process is therefore one of the most important aspects of any business and having the right inventory management tools to help you succeed can make all the difference.

Why is Inventory Management Important?

Inventory management helps a business to organise stock and ensure that every stage of inventory development is in line with both financial capabilities as well as demand. Inventory is often one of the greatest expenses for a business and ensuring that a company does not tie up all of their financial resources in inventory is incredibly important. Only a certain percentage of a business’s finances should be going towards inventory development and ensuring that this amount is correct can ensure that you do not run into issues. 

While ensuring that your business is capable of being financially secure whilst developing and procuring inventory, it is also vital that you are able to meet the demands of the market. You need to be distributing enough products to satisfy your customer base and become reliable while still maintaining this financial stability. As you can imagine, this is a fine line to walk and having the best inventory management softwares to help through the process is extremely important. 

How Does Inventory Management Work?

Inventory management strategies work by helping businesses decide on which and how much of certain stock to purchase at certain times according to trends of future demand and purchasing. Managing inventory helps a business purchase the right amount of stock at the right time to ensure that they are meeting the demand of the market while not purchasing too much that they will be left with an excess. Inventory management works by balancing all aspects that have to do with stock and distribution and ensures that these elements are in line with the financial capabilities of a business. 

What are The Processes Involved in Inventory Management?

The processes involved in inventory management range from the storing and manufacturing of raw materials all the way up to the sale of the final product. The distribution of these products, as well as the storing of them in warehouses, are all processes involved in inventory management. The inventory manager will be responsible for ensuring that each step of the process goes smoothly and that everything runs in the most effective way possible. One of the best ways to ensure that these processes run smoothly is by using automated software that can control the amounts of products and raw materials produced, the distribution of these products as well as the storing of the items. 

Inventory Management Techniques

As this can be quite an intricate process, different businesses have come up with a variety of different methods when it comes to inventory management. Below are just a few inventory management techniques that are commonly used. 

  • Just-in-time Inventory: Also known as the JIT inventory technique, this process involves holding as little inventory as possible to reduce the amount of risk that comes with having a large amount of stock on hand. This technique works for some businesses, but you do run the risk of not being able to keep up with demand! 
  • Bulk Shipping: While the just-in-time inventory technique focuses on reducing the amount of stock that you have on hand, bulk shipping increases the standard amount of stock that you have. This technique is built on the idea that shipping in bulk is more cost-effective than shipping smaller quantities. While this may reduce transportation costs, you may find yourself paying more for the warehousing of these products. 

What are The Challenges of Inventory Management?

As inventory management is such an important part of any business, knowing the challenges of the processes involved can help you to better structure the way that inventory is managed in your own business. The following are just a few of the common challenges that are faced when it comes to inventory management. 

Getting Accurate Stock Details

In order for inventory management systems to be effective, you need to be able to get accurate details on the stock you are carrying. Taking stock of the inventory you have should be a continuous process, otherwise, you run the risk of basing your orders on data that is inconsistent. If you do not have an automated system whereby stock details are automatically updated, you may not know how much of a certain stock you have at a given point and whether this stock is in line with the financial capabilities of your business and the demand of consumers. Getting accurate stock details is therefore an incredibly important part of managing inventory! 

Poor Processes

Ineffective processes can be detrimental to inventory management. When looking to manage smaller inventory levels, keeping track of stock within the supply chain can be done manually but as soon as more stock is needed and demand rises, previous manual processes will not be able to keep up with the effective processing of information. This is why, as your business grows and manufacturers more products, your inventory management systems need to be updated and automated. 

Changing Customer Demand

Change in customer demand happens quickly and as a business will often not pick up on the change soon enough, changes are not made when purchasing raw materials. The changing consumer demand can either lead to a business not being left with enough stock and raw materials to keep up with consumers or they may end up ordering too much of one thing and be left with an excess. Neither of these is good for business. A good inventory management software will be able to align inventory with consumer demand and the forecasted trends associated with certain markets. 

Using Warehouse Space Well

A warehouse to stock the products or raw materials that you have purchased needs to be organised and efficiently designed. Systems and processes need to be developed and maintained in order for the correct management of warehouse stock. When it comes to retail inventory management, this is particularly important! Inventory management systems are designed to ensure that warehouses are correctly structured to help move out products effectively and quickly, lowering the number of problems that may be caused. 

What are The Benefits of Inventory Management?

While looking at examples of inventory management systems and their challenges, it is important to see how these systems could benefit you in the long run, particularly if they are run well. To help better explain inventory management, here are some of the benefits associated with instituting this concept within your business. 


  • Improves the Flow of Money: When you have a good inventory management system, the flow of money is continuous with no gaps left due to an excess of stock. As money is put into producing new products, the outflow of cash from sales of final products is put back into the business. With managed inventory, a business will be continuous! 
  • Saves a Business Money: When you have good practices in place to better understand the trends and forecasts of how the stock will sell and the intended demand, it can help a business to save money. When products are developed from natural resources, transported, manufactured and then distributed to stores, it can be quite costly. When this product is not purchased, it means that the company has ultimately lost out on not just profits but on the money that has gone into the manufacturing and storing of the product. With inventory management, you are able to know what stock you have at certain locations and when to order more if demand spikes! The preemptive design of automated systems and their ability to forecast trends helps with this. 
  • You Prove to be Trustworthy to Customers: When you have the product that a customer needs at the right time, you appear to be more trustworthy. This ensures that customers not only purchase the product that they intended to buy but will rely on you in the future! 

How is Inventory Management Different From Other Processes?

You may be wondering how inventory management differs from other processes involved in the organisation and management of stock. While other processes may take into account different steps of inventory organisation, inventory management looks at the process as an entirety. From the procurement of raw materials to the distribution and sale of the final product, inventory management solutions look at each of the steps involved, analysing data and basing stock decisions on the information provided. 


With different types of inventory management systems and processes, it is important to have a team on your side that can create unique and versatile solutions for your business! We here at QuickApp have designed inventory management systems that not only work effectively but that complement the unique needs of your business.