Need for Inventory Management

By Annapoorna


Updated on: May 18th, 2022


3 min read

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Inventory management is essential for tracking inventory from suppliers to warehouses and customers. Without proper management, inventory would either be available in excess, or there would be a crisis for the same. 

What is Inventory Management?

Inventory refers to either saleable products or the raw materials available in hand for manufacturing products for sale. Inventory management is essential for earning profits and keeping the customers happy and satisfied. The key to proper inventory management is knowing the right quantity and ordering time of stock. Inventory management is a three-step process- 

  1. Buying or manufacturing products
  2. Storing the products/inventory
  3. Selling the finished products for earning profit.

Need for Inventory Management

Inventory management facilitates the smooth functioning of your business and enhances sales, promotes cost-effectiveness, and improves customer experience. Listed below are some of the reasons why businesses need inventory management:

  • Managing Finances

Inventory management helps businesses understand which products are more valuable in sales and earning profits. This allows businesses to eliminate unnecessary capital blockage by strategically planning their future inventory orders.

  • Tracking Inventory

Inventory management provides a complete detailing of the inventory and its location. It is especially useful in assigning distribution channels to the inventory. Inventory management eases the process of managing more than one shop/store or warehouse.

  • Avoiding Late Deliveries

Businesses are likely to face stock-outs if they do not have proper inventory management that’s where they can use the inventory management software. Stockouts can result in late deliveries and unhappy customers. Inventory management considers all plausible factors and fluctuations and provides stockout warnings from beforehand. This helps in improving customer experiences, thus increasing sales.

  • Managing Time and Effort

Proper inventory management leads to a well-arranged warehouse or store. This makes tracking products in hand and products on order easy and less time-consuming. It helps in increasing productivity and efficiency.

  • Predicting Future Sales

Inventory management helps in predicting future sales based on past transaction data. This helps businesses to prepare well for the future and meet customer expectations.

  • Enhancing Customer Loyalty

Effective inventory management warns businesses about deteriorating inventory from beforehand. This ensures that customers are only provided with top-notch quality products. Enhanced customer experience leads to repeat customers.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


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