6 Tips for Inventory Management
Managing inventory and orders is an important part of business that should be taken very seriously. In many cases, not properly tracking these things can lead to mistakes such as lost orders, delayed orders, or even potentially losing a customer.
Here are six tips on managing inventory and orders to allow any inventory-based business to grow without operational headaches.
Tip 1: Understand the differences between product types
There are generally four different product types that businesses use to account for inventory:
- Item – a simple product that gets delivered to the warehouse. There is no packaging or assembling effort and the product is ready to be sold to your customers.
- Assembly – an item that needs to be assembled together by smaller item parts within the warehouse. For example, a bicycle is comprised of a frame, wheels, chains etc. and putting all the parts together results in a finished “assembly.”
- Family – a group of similar items or variants of a parent item. For example, if you have a t-shirt item and it comes in 3 different sizes and 4 different colors…then there will be 12 different variants a part of one family named “t-shirt.”
- Case Pack – also known as a “bundle,” usually a multiple of an item bundled together into one. For example, a case pack of 12 sunglasses would get shipped to the wholesale customer and then sold individually. The difference between an assembly and a case pack is that an assembly stays intact (as in it does not get broken down) whereas a case pack is bundled together for efficiency purposes and then can later be broken into single items again.
Tip 2: Always have SKU numbers, barcodes and product specifications
Similar to a driver’s license, every product needs to have a unique ID number known as a SKU (Stock Keeping Unit). A SKU is vital for internal use as there will be instances where a particular product needs to be found quickly and having an SKU will make it easy to find. Additionally, having a SKU is imperative because another company could have a product named “Black Pants” exactly like and resellers are dealing with multiple vendors, thus creating a need to differentiate between similar products.
Second, when working with other companies such as resellers whether it be an independent e-commerce store, a brick and mortar store or a big-box chain, a universal barcode/UPC number will be expected. A UPC number is another form of a SKU, but instead it comes in the form of a barcode which can be scanned and identified through a live database powered by GS1. Be cautious not to purchase UPC numbers from anywhere but GS1 or a valid reseller. The whole point of a barcode is to be scanned and looked up via a database, so having a barcode that brings up a different product from another company causes a lot of confusion and could potentially lose customers.
Finally, it is always good to have a system for listing all your products specifications. Those specifications should have at least the following:
- Product Name
- SKU Number
- UPC Number
- Description
- Color
- Size
- Price
- Weight
- Dimensions (depending on product)
Tip 3: Track what you sell and to who
There is a vast amount of data related to a company’s products and who the consumer is. There are certain questions you should be trying to answer on a daily/weekly/seasonal basis to drive core business decisions. For example:
- Which products are top-sellers?
- Which customers are buying the most?
- Which months are our slow months when people rarely buy?
- How many repeat customers do we have?
Not having the tools to track this information is like driving with a blindfold…it is just not a smart business decision.
The best companies rigorously measure key metrics to drive an increase in sales, customer lifetime value and purchase size. For example, if you want to run a profitable business, you need to analyze how much money it costs to get a customer (in terms of sales and marketing) and figure out how much that customer will spend with you over the next two to five years. If their lifetime value is typically three times or more than the cost of sales and marketing for that one customer, then you will have a profitable business.
Making business decisions based on gut feelings lead to disaster when dealing with inventory and order management. Even early on in the building of a business, making an investment in a system to hep with this can save a lot of time and money down the line.
Tip 4: Create a system for processing and fulfilling orders within your company
Number of orders is the most important factor for a business because it represents revenue. But many companies do not have proper systems to handle, process and fulfill these orders. The best thing to do is create a list of tasks that need to be completed to fully process and fulfill an order.
A typical process will look like this:
- Step One – Create a sales order in the accounting or order management system.
- Step Two – Check Inventory. See if the product is available.
- Step Three – If inventory is in stock, pack the order and figure out the cost of shipment.
- Step Four – If there is a credit card on file, charge the payment for the order total and any shipping and handling charges.
- Step Five – Convert the sales order to an invoice and apply the payment to that invoice to close the transaction.
Additionally, if you have other sales channels where you manage inventory separately or you have an inventory spreadsheet, adjust it. It is important that inventory remains the same across the entire system to avoid confusion.
There are many systems, like Lettuce, that completely automate this process so you don’t have to do all the manual work like managing inventory, customers, accounting, shipping processes and analytics. If you do not create a system, orders can get lost, delayed or configured incorrectly. This is an easy and common way to frustrate customers and potentially lose them.
Tip 5: Have monthly audits of your inventory
Even with the greatest technology around, we still need to reconcile the numbers in our books with real numbers. Inventory can get misplaced, stolen, damaged and thrown away. Doing a monthly or at the very least, quarterly audits of your inventory is a great practice. It’s an easy process that, with a well-kept system, will prevent major roadblocks in the future.
Here’s an easy way to perform a monthly audit:
Print out a sheet with the name of the product, the SKU number and the inventory number you have in the books. Leave an extra blank space next to the product so that you can quickly write in the counted inventory number and see if your system matches what you actually have in stock.
Tip 6: Perform daily audits of new and existing orders
Always do a daily audit of all the orders. If you start getting a large number of orders each day, it is essential that you check the status of each order and not delay them longer than they need to be. The faster you can get an order out to a customer, the more likely they will have a good experience and return to buy more from you in the future.

Raad Mobrem is the CEO and cofounder of Lettuce, inventory management software designed for small to medium inventory-based businesses. Lettuce consolidates the entire order, processing, accounting, inventory, forecasting, fulfillment and shipping process into a single click. Say hi @raadmobrem
Inventory management control system works pretty similar for almost all business the differences though, might include a few changes in methods and workouts depending on business motivations, goals, and future accomplishments.
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You made an interesting point when you explained that not using the proper tools in inventory management is like driving with a blindfold. I would imagine that having the right kind of software would make keeping track of an inventory much more efficient. It would be interesting to learn more about the different types of software businesses utilize.