How to optimize your inventory management?

Posted on November 20 2020

Reading time: 8 minutes

A good inventory management strategy has to constantly update inventory changes, enable you to know exactly where to find stored items, and help you plan a budget that will allow you to buy and store your stock

Inventory Management Stock Optimization

Definition of inventory management

Inventories are defined as a set of assets owned by a business in order to be consumed, used, or sold on a given date. For a company, we’re talking about goods, raw materials, semi-finished products, finished products, and packaging material.

Meanwhile, inventory management is defined as a grouping of the measures recommended by a business to determine the quantity of stock it needs and when it must be supplied. The challenge is to learn how to reduce the cost of storage while having enough stock to meet demand.

What are the main problems linked to poor inventory management?

  • Overstocking
  • Understocking
  • Sleeping stock
  • Bad management of restocks and stock rotation
  • Inaccurate inventory data

Overstocking definition

Overstocking is when a business stocks an excessive quantity of product for the quantity used or consumed. This can potentially generate a loss of profit and space.

Understocking definition

Understocking happens when there isn’t enough stock to meet demand. This can cause a shortage of stock and therefore a big hit to the image and overall appreciation of the business.

Overstocking Issue in inventory management

Sleeping stock definition

Sleeplinh stock is stock that isn’t consumed or that is rarely used and remains in the warehouse. The accumulation of sleeping stock in your warehouse can become expensive for your business because that type of product doesn’t generate income while taking loads of space that could otherwise be used.

Costs of sleeping stock issue

How to avoid the accumulation of sleeping stock?

There is no secret recipe to avoid the accumulation of sleeping stock, it’s necessary that you maintain your inventory in realtime. An inventory management software could be a solution to help you control and ensure proper stock rotation to determine which products are likely to become sleeping stock. You will then be able to adapt your restocks, and better evaluate your expenses.

Definition of minimum stock

Minimum stock is basically the restocking point. With an inventory management system, you’ll be notified when some of the products in your inventory are about to sell out. You’ll therefore be able to make a new order in order to avoid going out of stock.

Here are three methods to determine your minimum stock value:

  1. Determine the quantity of stock with the same barcode that is used during a certain period.
  2. Supplier Lead Time: The order treatment and delivery times
  3. The cost and size of the order

If you don’t pay enough attention to the management of your minimum inventory, overstocking of your products could occur. Good management of your minimum inventory allows you to significantly reduce your expenses, save your employees loads of time, and allows you to optimize the space in your warehouse.

To avoid falling into overstocking, sleeping stock inventory accumulation, or other issues that would lead to poor inventory management within your business, it’s important to choose the appropriate restocking methods. Of course, there’s no ultimate solution, only perhaps the one that will be more adapted to your needs. Here are some traditional methods of inventory restocking.

Traditional restocking methods

  1. Scheduled restocking: When a company orders a fixed quantity of inventory for a specific date. Ideal for a type of good that must be ordered regularly and constantly.
  2. Recompiling method: When the time comes to make an order, you must look at the remaining quantity of stock and order the necessary stock to reach the maximum storage. This is a favorable method when it comes to expensive and/or perishable products consumed regularly.
  3. Command Point or Right-On-Time Method: With this method, it’s the date when the order must be made that varies. As soon as there is no more stock, an order must be placed. Regardless of the date, the quantity of stocks to order is predefined and always remains the same. This is a relevant method for products that are not consumed on a regular basis.
  4. Restocking by order: This is when the quantity and date of the order are variable. This is a very practical method for a rarer or more expensive type of product. If you are not sure how much stock to order and when to make your next order, this method is best for you.

Regardless of your restocking method, if you don’t manage your inventory efficiently, you’ll never attain good results. Several large companies are unanimous, the use of an inventory management system is the best way to ensure good inventory control. Mismanagement of your inventory can lead to a huge loss of revenue and time for your business.

Using an inventory management system to improve your stock management strategy

Save some time

Your employees will no longer waste time searching for products in your warehouse. With inventory management software, the exact location of every single one of your products will be registered in realtime. You can also avoid valuable training time by downloading user guides and instruction manuals for all products available in your inventory.

Stock movements alert

Be notified when items are sold or moved within your warehouse. You’ll therefore avoid stocking sleeping stock.

Better communication between your employees

With only one place to locate all of your stock, your employees will have to head to only one platform. You will certainly avoid a few misunderstandings.

Save money and stock availabilities

An inventory management software will enable you to know your product history in order to predict future purchases and be able to negotiate prices with providers. It’s an efficient tool to save money and to avoid making many small orders throughout the year.

It’s simple! Everything is in the right planning of your needs. To make sure that your stocks are used to the best of their ability, it’s important to prioritize them according to their turnover rate. You can use stock management software to make your life and daily operations easier.

Come and talk to us about your challenge, our team is here to help you:


You need to plan your inventory orders based on all of your goals, not just on the remaining quantities. The goal is simple, you have to limit costs and space, but almost never run out of products!