What is Inventory Management and How to Simplify the Intricate Process?

Inventory management is a systematic way to source, store, and sell inventory both the finished goods and raw materials. To put it simply, inventory management is the approach to manage the stocks at the right place, right level, and the right time.

If you’ve been in eCommerce businesses, then probably you’re well aware of the hassle you had to face previously. Especially when you’re handling a bulk amount of products, the scenario becomes even more intricate. And you can’t afford a single slip up; else you’re inviting a good number of unfavorable reviews in the pipeline. Although you can simplify the process with the use of the WooCommerce inventory management plugin.

So, what exactly is inventory management?

As we’ve put its definition in the first place, it’s a simplified approach to manage your inventory. In this fast-paced competitive world, where small to mid-sized businesses are incessantly competing against the global conglomerates, it’s time to manage your inventory operation efficiently.

Inventory basically includes all the products you’ve in your stock; it’s like a warehouse. And inventory management is the process to take care of the warehouse. It’s the process to maintain the stock storage, amount of product, and most importantly order fulfillment.

Previously businesses used to maintain a Google sheet or excel file to track the databases and therefore manage the orders.

But, it surely becomes a complicated process, as you’ve to know the points when to reorder a product, how much to reorder, how much you’ve in stock, and so on. It’s not a single task that you do but a thousand.

So, with the manual process, the chances of inefficiency are much higher than anything.

Importance of Inventory Management:

If you’re still unable to grasp the significance of inventory management, then we’ve shed the light on some of the reasons here. Take a look at them,

  1. Increased Customer Satisfaction

In the eCommerce business, customer satisfaction is non-negotiable factors. The number of satisfied customers depends mostly on order fulfilment. You can understand this better when you put yourself in a customer’s shoe. Will you be satisfied if the product doesn’t reach you by the delivery date? Or if it shows ‘out of stock’ after you’ve ordered it?

Both scenarios are unpleasant, right? And this can bring a serious downfall in your business if you leave your customers unsatisfied for a long time.

So, inventory management keeps the process simple. You will know how many stocks you’ve in hand and how many orders you can handle, therefore you can update the product page accordingly.

Nowadays the automation systems have made the job much easier as you can manage the product page directly from the WooCommerce inventory management plugins. So, provide unlimited happiness to your customers without a single load on your head.

  1. Prevent Money-blockage

Let’s say you’ve got a product quantity worth a million, stocked in your warehouse. It means you’re blocking the money that you could have invested, right?

So, when you’re managing your inventory efficiently, you know the exact timing when you should reorder. This mitigates the chances of blocking your products for a long time and therefore your money.

  1. Prevent Product Spoilage

If you’re trading packaged goods, especially consumer packaged goods; some of them have an expiry date. So, people won’t buy it once it expires. If you’re inefficiently managing your products, it means you won’t be able to know what items you should order, and how many of them you should order.


You may end up overstocking them and it further increases the chances of product spoilage. Because, if you’ve bought excess products than the total number of sales, obviously you’ll spoil them, right?

Formulas of Inventory Management:

Formulas might seem a little confusing, especially at the beginning. But, as you go along with it, you’ll understand the use of these formulas. However, we’ve put together these formulas here for your ease. So, let’s take a look,

  1. EOQ formula

EOQ formula or also known as economic order quantity formula basically helps you to save up some cost in your eCommerce business. You can decide the optimum quantity of products you’ve to purchase to minimize the budget and prevent overstocking.

The formula is,

EOQ = √(2DK / H), or the square root of (2 x D x K / H)

Here, D= the total set up costs. It includes handling and shipping costs as well.

K= Rate of demand

H=cost of holding

  1. DIO formula

DIO formula also known as day’s sales of inventory formula is applied when you want to decide the total number of days your inventory requires to turn into the sales.

  1. Reorder Point Formula

It’s the formula to decide the right time to order for more stock. So, you won’t end up overstocking the products and block your money in the warehouse.

  1. Safety Stock Formula

Safety stocks dictate the emergency buffer. When you’ve not enough stock to meet the total number of demand, then this formula helps you decide the exact amount you should reorder.


However, the process of inventory management can be hassle-free with the use of the automation process. When the technology is taking its peak, why not use it for simplifying the complicated tasks like inventory management right?

So, with the WooCommerce inventory management plugins, you can simplify these inventory management tasks.

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