3 Inventory Management Techniques

When businesses don’t have a handle on the activity of their inventory, or worse, track it with outdated spreadsheets and data entry, the rest of the pieces, like order fulfilment, don’t fall into place.

When you don’t know how much inventory you have on hand, you can’t make smart reorder decisions.

3 Inventory Management Techniques

Safety stock inventory

Safety stock inventory management is extra inventory being ordered beyond expected demand. This technique is used to prevent stock outs typically caused by incorrect forecasting or unforeseen changes in customer demand.

FIFO and LIFO

LIFO and FIFO are methods to determine the cost of inventory. FIFO, or First in, First out, assumes the older inventory is sold first. FIFO is a great way to keep inventory fresh.LIFO, or Last-in, First-out, assumes the newer inventory is typically sold first. LIFO helps prevent inventory from going bad.

Just-in-time inventory management

Just-in-time (JIT) inventory management is a technique that arranges raw material orders from suppliers in direct connection with production schedules.

JIT is a great way to reduce inventory costs. Companies receive inventory on an as-needed basis instead of ordering too much and risking dead stock. Dead stock is inventory that was never sold or used by customers before being removed from sale status.

Written By 

Gazi Sanaul Hasan