The importance & benefits of managing inventory

Inventory management is one of the crucial aspects of any business. Whether you are selling through a small shop or in a marketplace like eBay, Amazon, Walmart, etc. Inventory control keeps your business afloat even in turbulent times.

If you think inventory management is all about cramming your warehouse with stock, you are wrong. Bear in mind that even when you’re selling online, platforms charge their fees to take care of your inventory — so overstocking in such cases can be too costly for you, but being out of stock would be even worse.

managing inventory management

That’s why inventory management is the basis of every profitable business. A shocking amount of capital is tied up in inventory. Inventory along with accounts receivable and accounts payable has tied up $1.1 trillion in cash. You know how much you need and when you should have more stock than your competitors, so you’re able to reap more profit.

Let’s be more precise and see how proper inventory management can benefit your business.

Never go out of stock

Some products are seasonal, while some are high in demand throughout the year. You won’t want to get out of stock anytime your product is high in demand, and your competitors are making bucks.

Especially when you are selling through a platform, for instance, Amazon, your ranking suffers when you are out of stock.

If you develop an inventory system, you will have insight into which month requires how much inventory. Thus, you will never go out of stock during peak time, nor will you have to pay any extra inventory fee in case of overstocking.

Maintain exemplary service level

Check out the customer portals of online marketplaces, and you will come across hundreds of complaints regarding late delivery. Mostly, this is due to a lack of inventory management.

The seller had one variation of the product available while the buyer ordered the other one. And upon checking, the seller learns about the unavailability of the product. Notifying a customer about the unavailability of a product after accepting their order leaves a negative impression.

If you have an inventory management system, you’d be able to inform your customer straightaway about the availability of a certain product.

An organized warehouse

A lot of online and offline businesses fail when they are unable to keep their warehouse organized. When the inventory is spread across the warehouse without assortment, it will take hours to fulfill orders.

This also increases order fulfillment problems — for instance, sending a small size when a customer ordered extra-large. Ultimately, this will result in a bad customer experience and less retention. This is a reason why 54% of warehouses plan to expand the number of inventory SKUs carried over the next five years.

Minimize labor cost

With inventory management, it’s possible to reduce labor costs. However, as said earlier, the inventory in your warehouse is not always the same, depending on the season.

So when you have little inventory to deal with, you can reduce your labor — and increase your revenue!

As well, when your product is in high demand, you can’t fulfill orders on time if you don’t have enough staff. So, once again, having an inventory system will help you to decide when to hire how much labor.

Increase your revenue

As I have explained above, inventory control is linked with several factors that can boost your revenue. Therefore, maximizing profitability isn’t about selling products at a higher margin but minimizing extra expenditures and investing in the right areas.

Here’s how inventory control can boost your yearly revenue:

  • Top-notch customer experience; thus, you enjoy a high customer retention rate.
  • You are always aware of how much space you need to keep your stock, so you don’t have to pay extra warehouse rent.
  • Minimum labor cost.
  • Smooth operations with an organized warehouse.


If you’re unable to reach your yearly targets, it could be because of a lack of inventory management. No matter at what level your business stands, maintain inventory control, minimize your expenditures, pounce on every opportunity to sell more, and keep your business profitable.