Inventory Management

Smart inventory management sits at the heart of profitability. Too little stock leads to missed sales and unhappy customers. Too much stock ties up cash and inflates storage costs. The sweet spot lies between those extremes.

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What Is Inventory Management?

Inventory management is the day-to-day process of ordering, storing, and selling everything you keep on hand—raw materials and finished products. The goal is simple: have the right products, in the right quantities, at the right time, while keeping holding costs low.

Why It’s Critical

Control your inventory costs

Stock costs money until it sells—think storage, handling, transport, insurance, and labor. Good stock control shows which items move and which gather dust, helping you buy smarter and negotiate better terms with suppliers.

Improve your cash flow

Overbuying ties up cash you could use for marketing, product development, or hiring. Balanced stock levels free up working capital so you can grow.

Keep customers happy

Stockouts cause overselling, delays, and poor reviews. Reliable inventory practices prevent those headaches and support fast, on-time delivery.

The Main Inventory Types

Understanding what sits in your inventory makes planning and accounting far easier. Most businesses work with five core types:

1. Raw materials
   Inputs used to produce finished goods.
   Examples: leather and rubber for shoes; surfactants and fragrances for shampoo.
2. Work-in-progress (WIP)
   Items currently in production but not ready to sell.
   Examples: cut leather uppers awaiting assembly; a mixed but unbottled batch of shampoo.
3. Finished goods
   Completed products ready for sale.
   Examples: boxed shoes; bottled, labeled shampoo on the shelf.
4. Maintenance, Repair & Operations (MRO) goods
   Supplies that keep operations running but don’t become part of the final product.
   Examples: uniforms, gloves, tools, cleaning products, office supplies.
5. Packing materials
   Items that protect and ship your products.
   Examples: cartons, poly mailers, bubble wrap, packing peanuts, tape, labels.

Tip: Include all five types in your inventory reporting and budgeting. A complete picture leads to better purchasing, smoother production, and healthier margins.