8 Effective Inventory Management Strategies That Will Help Your Online Sales Grow

By Jake Rheude, Red Stag Fulfillment

Inventory management is a process that lets you keep track of stored goods. Doing so ensures that the right products are in the right place at the right time.

This explains why you need to establish an effective inventory management system. That’s because having such a plan allows you to be proactive when catering to fluctuating market demand. This includes that you do not have too much or too little stock in your inventory.

Moreover, an inventory management system allows you to be efficient in storing and shipping your products. Nonetheless, this can be challenging for many e-commerce business owners.

That said, we have listed down eight inventory management strategies that you can practice to boost online sales.

Jake Rheude

Jake Rheude
Director of Marketing

First-In, First-Out

The first-in, first-out (FIFO) principle is vital for inventory management. This means that older stock needs to be sold first. Doing so ensures that your items will not expire in the storage facility.

This explains why FIFO is ideal if you sell perishable items. For one, you cannot sell an expired item. Second, storage can be costly.

However, you can still use the FIFO principle when selling non-perishable products like clothes.

When you let a clothing item sit at the back of the shelf, it will wear out. The color of the fabric may fade, and it can tear when machine washed. This can make the item unsellable.

Regular Inventory Audit

Doing regular edits with your stocks and inventory is one of the best ways to ensure your inventory and recorded data matches up.

Auditing is an excellent way to “double-check” your inventory. This ensures that what you’ve recorded will reflect what’s going on with your business and website.

Without doing these audits regularly, data can easily get lost and misplaced. As a result, you’ll end up with less inventory than you initially thought.

You might also misplace products or popular items because they weren’t recorded in a timely way. Working with a company that provides inventory planning services allows you to manage your inventory better.

Remember Your ABCs

Certain products tend to drive in more revenue than others. You can utilize the ABC analysis report to grade your stock’s value depending on your revenue percentage.

percentage of stock that represents 80% of your revenue.

Your Content Goes Here 80

percentage of stock that represents 15% of your revenue.


percentage of stock that represents 5% of your revenue.


Here, your A stock will represent where your most profitable and valuable products come from. You need to have these items on hand so you won’t miss out on future sales.

Meanwhile, your C stock is your dead or slow-moving stock. These are the stocks that you want to sell at a discount. That way, you can free up some of your inventory.

Inventory Forecasting

In inventory management, accurate forecasting is also essential. The projected calculation of your sales will usually be based on various factors. This includes market trends, sales figures, projected growth, the economy, and more.

It also plays a significant impact on your profitability. There are two primary inventory forecasting models:

  • Quantitative forecasting. Utilizes the data from past sales to predict future demand. Ideally, the more data you have, the more accurate the prediction.
  • Qualitative forecasting. It relies on expert knowledge to help predict the market demand. An excellent example would be conducting a customer survey to know how likely they will recommend your product to friends and family.

Inventory Management - Inventory Forecasting

Identify Low Turning Stock

If you stocks that didn’t sell in the last 12 months, you should probably consider stopping stocking that item.

Similarly, it would help if you considered employing various strategies to help eliminate that stock. This includes running a limited-time promo, inventory sale, or giving it away for free.

Having an excess stock will both waste your space and capital at the same time.

Carry Safety Stock

Having safety stock is the same as having an inventory fund. It’s the inventory that you’ll aside for future use in case an emergency happens.

It serves more like the threshold you need when reordering stocks before you dip into your emergency stock allocation.

It’s always a great idea to integrate safety stock in your inventory management strategy if your supply chain gets disrupted. For some circumstances, it will prevent you from receiving or managing your merchandise.

Use Inventory Management Software

As your business grows, you may have to upgrade to an inventory system that allows you to track and order items effectively.

This software allows you to streamline your inventory management process. This includes eliminating the need to use spreadsheets. Another is allowing automated inventory updates.

Having inventory management software also decreases human error. This is a common problem encountered when handling stocks and tracking items coming in and out of the warehouse.

That’s because, as your business grows, the volume of orders or products might be difficult to track manually. You need a central database that will allow you to receive and then send information to all your channels.

Outsourcing & Dropshipping

Some might think that both of these are anti-inventory systems. That’s because businesses will usually leave the storage and order management to third-parties. But this isn’t often the case.

To give you an idea, we’ll discuss each:

Inventory Management - outsourcing & Dropshipping
  • Outsourcing. Usually, a third-company vendor or company will be the one who will manage order fulfillment and stock storage. The most famous example is the Amazon FBA, wherein the marketplace will take charge of everything for you. This includes stocking of items, packing, and then shipping out of orders. .
  • Dropshipping. This ecommerce method allows you to connect with manufacturers and suppliers. What happens is that you can accept orders through your online store and forward it to your manufacturer and supplier. And they will be the ones to pick, pack, and ship your orders.

Over to You!

For your ecommerce business to succeed, you will need to keep track of your inventory. This includes knowing the number of supplies you have, picking and packing an order, and shipping it to your customers.

However, we understand that inventory management can be tedious. Thus, the eight strategies listed above can help you be efficient in storing, organizing, and shipping your products.

This is to prevent you from leaving your products to collect dust on the shelf.