Methods of Inventory and Supply Chain Management

Managing stock and ensuring timely delivery are two important aspects of running a business. If you don’t plan well, you can end up with too much inventory, late deliveries, or unhappy customers. That’s why having the right inventory and supply chain management methods in place is important. Let’s walk through the basics and some commonly used methods that help businesses run better.

BOOK A FREE DEMO

Inventory Guide

What Is Inventory Management?

Inventory management helps you track your stock, including what you have, what you need, and when you need it. It allows you to avoid running out of products or holding too much inventory that just sits on shelves.

Key Inventory Management Methods

There are several methods businesses use to manage their inventory. Here are some of the most common ones:

ABC Analysis: Items are grouped into A, B, and C categories. A-items are high-value and need close attention, B-items are mid-level, and C-items are low-cost items that require less tracking.
Just-in-Time (JIT): In this method, you only order or make products when you need them. It helps reduce storage costs but requires very accurate planning and reliable suppliers.
Reorder Point System: You set a minimum level of stock for each item. When the stock drops to that level, it triggers a reorder. This prevents stockouts.
Fixed-Time Replenishment: Inventory is checked and refilled on a set schedule—like every week or every month—regardless of stock level.
Dropshipping and Consignment: In dropshipping, a third party ships the product directly to the customer. In consignment, you only pay for the stock once it’s sold.
Batch Tracking: This helps you trace products by the batch they were produced in. It’s useful for businesses that need to track expiry dates or product recalls.

What Is Supply Chain Management?

Supply chain management is the process of moving products from the supplier to the customer. It encompasses the entire process, from raw material procurement and product manufacturing to storage and delivery. Good supply chain management ensures products are available when customers need them, while also reducing waste and saving money.

Methods of Supply Chain Management

Businesses use different supply chain methods depending on their size, product type, and customer needs:

Collaborative Planning, Forecasting & Replenishment (CPFR): This method involves working closely with suppliers and partners by sharing sales data and demand forecasts. It helps avoid overstocking or understocking.
Agile Supply Chain: This method focuses on speed and flexibility. It’s great for businesses with changing customer demands or fast-moving products.
Lean and Just-in-Time: These methods aim to remove waste and reduce inventory by producing only what’s needed. It requires good coordination and reliable suppliers.
Technology-Based Systems: Tools like barcodes, scanners, and inventory software help businesses track stock and manage operations in real-time.

Choosing the Right Inventory and Supply Chain Method

Choosing the right one depends on:

The type of products you sell
How fast does your inventory move
How predictable your customer demand is
The amount of storage space you have
Your supplier’s reliability
Whether your systems can handle real-time tracking

Benefits of Inventory and Supply Chain Methods

Using the right methods can bring several benefits:

You spend less on storage and avoid extra inventory
Customers get their orders on time
You avoid running out of products
Planning becomes easier and more accurate
Operations run faster and with fewer mistakes

Challenges and Risks to Consider

Wrong demand forecasts can lead to too much or too little stock
Supplier delays can disrupt your entire plan
Data entry mistakes can cause inventory errors
Overdependence on one method might not work during emergencies or market changes
System errors or breakdowns in digital tools can affect real-time tracking

Staying alert and reviewing your process regularly can help reduce these risks.

Conclusion

Inventory and supply chain management are key to running a successful business. Whether it’s using ABC analysis to focus on top-selling products or setting up an agile supply chain to adapt quickly, choosing the right method makes all the difference. Take time to understand your business needs, and with the right methods, you can lower costs, improve delivery speed, and keep your customers happy.