As more ecommerce businesses add warehouses, inventory management becomes a key function. This article explores the basics of inventory, how and why it helps ecommerce companies operate more efficiently, and what are some of the other benefits of this essential process.

What Is Inventory Management?

It is the process of ensuring that the correct amount of inventory is available to meet customer demand, while minimizing the cost of goods sold. Inventory may include items such as manufactured products, raw materials, and packaging.

In order to manage inventory effectively, it is important to understand the various components that make up inventory:

  1. Stock – The physical assets that are currently available for sale. This includes products in the warehouse, as well as finished goods that are ready to ship.
  2. Fixed Expenses – Costs associated with holding a certain level of inventory, such as storage costs or employee wages.
  3. Turnover – The rate at which items are sold or used in production. This is affected by a number of factors, including marketing efforts and product availability.
  4. Margin – The difference between sales and expenses, which allows businesses to operate profitably.
  5. Inventory Overages – When a company holds more inventory than is necessary to meet customer demand, this can lead to inflated prices and loses in revenue.
  6. Inventories Forecast – A projection of how much inventory will be required in the future based on past trends and current market conditions.

How is Inventory Management used?

Inventory management system is the process of keeping track of all the items that are in stock, so that when an order is placed, the company can find the necessary supplies quickly and with minimum hassle. It’s also important to ensure that the correct amount of stock is available at all times, in case a product becomes popular or needs to be restocked quickly.

There are a few different ways to do inventory management. The most common way is to use a system called barcoding. This system assigns a unique identifier to every product, and stores this information in a database. When an order is placed, the system can look up the identifier for the product that was ordered and see which shelf it’s on.

Another way to manage inventory is by using a list. This system keeps track of what items are in stock, but doesn’t assign any identifiers to them. The system simply records which item was removed from inventory and how much it cost to purchase it.

whichever method you choose, make sure you have accurate information about what’s in stock at all times so you can fulfill customer orders quickly and with minimum hassle.

When should you use inventory management?

It is a process used to track the number and variety of items in an organization. This information can help businesses to make decisions about what to produce, how much to produce, and when to produce it.

When should you use inventory management?

There are a few situations where management is important. The first is when a business is starting out. Without accurate inventory information, a business may not be able to accurately predict its future needs and could end up producing more than it needs. Additionally, management can help businesses reduce waste by ensuring that they’re only producing what they need.

The second situation where inventory is important is when a business is experiencing rapid growth. With more products being produced, it becomes increasingly difficult for businesses to keep track of which products are in stock and which ones are being ordered. Inventory management can help businesses keep track of their product supply and ensure that they’re not running out of certain items prematurely.


In general, any time a business experiences an increase in production or sells more products than it previously did, it’s important to implement inventory management systems in order to ensure accuracy and prevent excess product production or waste.