Have you ever been in a situation where you’ve had too much stock sitting in your warehouses and running costs just spiralled out of control? Or, the alternative scenario, where you just don’t have enough inventory in stock and can’t supply fast enough to your customers? Today, we’ll learn how to create the best business inventory management system for your company.


If you’re experiencing case no. 1, then you know the pain of watching valuable stock sitting there, gathering dust and eating into your precious cashflows. You know what it’s like to listen to your customers call you a supply risk due to chaotic approaches of business inventory management in a pricing system.



Obviously, no one wants to be the supplier that takes too long to restock. You’ll lose money and your customers become impatient. What’s worse is you’re risking customer churn.


In short, when businesses can’t buy what they need from suppliers when they want it because it’s out-of-stock or when pricing is way off, they go elsewhere. If this is you, your business not only loses valuable sales that could be worth millions of dollars in revenue, and you get tagged as a risk to their supply.


How can you avoid a supply and demand nightmare?

When you set the price for your inventory correctly, you can accommodate supply and demand dynamics. You also get to create more opportunities to generate healthy cash flows too, without wasting stock. 


In this article, we will explain how the best business inventory management practices work hand in hand with the right pricing. We will cover 5 key business stages in inventory management and discuss a system with proven pricing strategies used by B2B suppliers.


These are applicable to price overstocked products and deal with supply-side issues. Also, we will share some tips with you on how to improve your approaches to inventory management during peaks of demand.


At Taylor Wells, we believe that pricing is one of the key levers to make more margin from your stock. Good inventory management enables moving stock efficiently too. This way, you’re not holding stock too long and creating a backlog of costs.


business inventory management system

How it Works


Inventory management is part of a business’s supply chain management. It ensures that the business has the right products in the right volume (for sale), and at the right time. When will a specific line of products run out? When should you restock?  What are the costs of those items that aren’t selling well?


Basically, you need to have a good understanding of managing your inventory. It involves tracking every item of stock that you have. That refers to products, components/ingredients, goods in stock, production, and sales.


But, a good business inventory management system goes beyond just this. For instance, you thoroughly need to check the difference between dependent and independent demand, or forecast demand to plan ahead. This is especially useful if you want to grow your business in different regions.


1. Opt for a cloud-based inventory management system

Did you know that spreadsheets contain errors? They’re also outdated and slow to update real-time information. Aside from that, it doesn’t sync nor integrate with other analytics tools or data management systems.


It doesn’t have the features of the latest inventory management software that allow you to add or track products and sales channels. So, monitoring sales will often involve manual data entry and calculations which can take much of your time and are prone to human errors.


Cloud-based inventory management systems also prompt you when stocks are low. It also increases productivity with shareable features that can be conveniently sent to cross-functioning teams in your department.


2. Tracking your inventory helps make important decisions for the profitability of the business

With a touch of a button, you can easily access details and receive notifications for sales data and analytics through your sales platforms, the best-selling and least selling items, compare supplier costs, and automation of re-ordering in-demand stocks on the go.


A modern inventory management system saves you time and ensures data accuracy, free from manual error entries. It lets you focus on other aspects like marketing, product development, and growing the business.


Using mobile technology cuts costs on overstocks and helps you keep track of major business processes from home and elsewhere. For instance, barcode scanning makes tracking and providing receipts faster. It automates recordkeeping smoothly and eliminates the need to triple check your data.


When value components of inventory management and pricing system are weak, a company loses out on profitable revenue growth. They end up with a stock that not a lot of people need. When this happens, the running costs of the business spiral out of control and you may be tagged as a supply risk.


To avoid this nightmare scenario, below are some listed tips for your inventory management guide:


Concentrate on the needs of the business. Managing a warehouse full of inventory can be an intimidating task. So, determine which items are most important and concentrate on these first. Then, keep the top-selling products in stock. It’s a great start to keep your customers happy.


Stocks can either belong to periodic inventory which needs “periodic” monitoring every 3 to 6 months. While perpetual inventory needs daily or frequent monitoring which includes marking items as produced, received, damaged, replaced, sold, and returned. Both undergo quality checks and stock level accuracy.


Manage supplier relationships. This is significant especially for stock-based businesses. This way, you’ll secure reliable supply, acquire competitive pricing, and gain knowledge on emerging trends that may affect your business.


Inventory management systems help businesses to stay on top of its inventory. As all businesses have their own unique needs, it’s important to choose a system that matches yours. For example, a global stock-based company like Amazon needs a multifaceted solution that accommodates a huge number of orders processed every day.


Check your competitor’s stock levels and pricing. With the use of competitive intelligence software, you can determine your competitor’s stock availabilities. Then, you can set the most competitive prices on your competitor’s out-of-stock items. Apart from this, you can also track what prices they’re selling at and volumes. Here’s our guide to pricing tools software.


Check out the latest top picks by Fit Small Business and business.org for the best inventory management software. It’s ranked based on different types of software best suited for B2B retail, restaurants, accounting, barcodes and product tracking, specialty shops, and eCommerce.


5 Key Stages of a Business Inventory Management System 


It may seem daunting but stock inventory management is much easier to understand and handle when each stage is broken down. Below are five major stages of how your products start from the suppliers, go into the warehouse, and down to the customers.


  1. Purchasing raw materials to produce goods or products that are for sale with no assembly needed. In this case, it’s important to use a first-in, first-out approach. That means the first items that were bought must be sold first. This is especially applicable to perishable goods such as food, cosmetics, medicine, and flowers.


  1. Manufacturing or production for companies that are involved in manufacturing. In the case of wholesalers, they can skip this step entirely.


  1. Storing the raw materials just before they’re produced or manufactured – The finished products shouldn’t be kept for too long. In fact, the FIFO approach is applicable to non-perishable items so they don’t end up stuck in the storage until they’re damaged and eventually become unsellable.


It’s best to store older products in the front and place the recently purchased items at the back. This gives you an effective chronological order of storing your stocks in terms of time of purchase


  1. Sales. Once again, it’s best to use the FIFO approach right from the purchase to storage, then selling the items to customers. Which products have a higher value? Which ones are most expensive? What are the items that occupy the storage the most? Identify the least expensive products. What items are in between? Categorise them into ABCs.


  1. Reporting, tracking, and recordkeeping the numbers and data for each sale which covers volume growth, revenue, management, stock levels, and profitability.


Apart from managing these key phases, businesses need to price their stock and optimise their go-to-market strategy. A suitable price can help distributors and manufacturers manage supply and demand dynamics.


business inventory management system




  • Creating an up-to-date business inventory system helps businesses maintain stock levels. There must be a tracking system for products that are selling the most and those that aren’t. This can also help decrease business costs and further increase sales.


  • Businesses can get rid of overstock through annual auditing of inventory management and pricing systems. So, be sure to check your competitor’s out-of-stock products through intelligence software.


  • With the help of technology and storing your items in chronological order helps minimise overstocking. Consider this for seasonal products and services too. On the flip side, a frequent shortage of inventory or stock risks customer churn (they buy from competitors.)


  • How a business takes care of order quantities, safety stock, replenishment cycle times, seasonality, forecasts, is very important. It’s best to adjust each operation based on your specific business needs and track what works and what doesn’t.




Inventory control is part of the supply chain management of a business. It helps ensure that companies minimise slow growth, increased costs, bring flexibility and accuracy in terms of product volume. This largely relies on the size of the business, its model, and types of products or services.


The best approaches to timely inventory management aid the business in meeting its objectives. That includes sales forecast, calculations, and figures that predict growth and market trends.


Moreover, businesses should consider the value of the closing stock (trading stock at the end of each income year) and the opening stock (at the start of the next income year). There has to be a balance between overstocking and product shortage as both bring customer and profit loss.


For a comprehensive view on driving pricing strategies to maximise growth,


Download a complimentary whitepaper on How to Drive Pricing Strategy to Maximise EBIT Growth

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Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

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