7 Popular Inventory Management Methods and Techniques in 2021

Inventory is a popular term being widely used in all tiers of industries (primary, secondary and tertiary). It refers to the stock of items that are in storage, transit or being kept for maintenance/repair. Operations management experts believe that the inventory carrying costs amounts to 30% of the total inventory costs, whereas the total inventory costs hold a significant sum of the total business running cost. It is, therefore, necessary to monitor and control the inventory at all times to be able to fulfil the demands of the customers as well as reordering the stock to meet future demand.

Inventory management methods and techniques allow the warehouse managers to make better decisions by providing a real-time situation of the warehouse and optimizing the routine operations. Here we will discuss the 7 popular inventory management methods and techniques that have been proven to be the best:

1. Bulk Purchasing

Bulk purchasing refers to ordering stock in large quantities at discounted offers. The purchasing may seem a lot initially, but it is pertinent to mention that this technique works best with items of the highest demands as they can sell very quickly thereby accommodating the initial investment with quick returns.

2. Just-In-Time (JIT) inventory

JIT is a technique that allows us to keep the stock at a minimum level and replenishing it when required. This keeps the inventory holding costs minimized but it also requires the business to be agile enough to replenish the inventory before a complete stockout.

3. Dropshipping

This technique of inventory management is relatively new yet proved beneficial in the field of logistics. Dropshipping allows suppliers or wholesalers to ship directly to the end consumer as per the instructions of the dropshipping manager. The manager asks the supplier to provide the order at a given location and the customer receive the stock at their doorstep, thereby eliminating the need of the manager to keep a physical inventory.

4. ABC analysis

The ABC analysis classifies items into categories of cost as most and least expensive. The most expensive items will then be required a safer place in the warehouse and monitoring since they will be the reason behind most profits. This cost-based segregation of the inventory allows the business to make appropriate decisions of replenishment.


FIFO stands for First-in-First-out. This method demands that the stock coming first into the warehouse should be the one that goes out to the customers. Practicing FIFO will allow the warehouse to always have a fresh stock of inventory and eliminating the chance of goods getting expired or deteriorate, keeping the business safe from the cost of customer claims of warranty and repairs.

6. Cycle Counting

To count the inventory after the completion of each business day is known as cycle counting. It allows businesses to always monitor the inventory and track daily sales and profits. Cycle counting can be used as a tool to measure business performance and modern inventory management tools such as SAP can also be used to achieve this purpose.

7. 3PL (Third Party Logistics)

The 3PL is a great technique to outsource the logistics needs of the business to a third-party logistics provider. When outsourced, the third-party logistics provider is made responsible to hold the inventory as well as shipping it to the customers thus reducing the costs of business. The decision to outsource the logistics is guided by the cost comparison between holding the inventory by the business and the 3PL provider.