Inventory management is a core function of any organization regardless of its operations. It involves being aware of the quantity you have in store, analyzing various products demand as well as determining the appropriate time to order more. However, inventory management sounds as an easy task theoretically but in the real sense, it calls for awareness about various aspects.

Here are the four things you need to know about inventory management:

a. Inventory restricts cash flows

While it is wise to have high inventories in your business, it is important to know that stocks restrict cash flows. Hence, it is essential to have credible inventory management. Retaining your inventory levels is recommendable. Importantly to note, when you accumulate large stocks without proper forecasting, there are high chances of making losses.

In fact, you will be forced to sell the products at a lower price or a discount if the products are in low demand and nearing the expiry date.

b. Do not allow suppliers to restock your business

As mentioned above, holding high inventories increases your overall costs. While as it is cheaper for you when your vendors restock your business, the act compromises your inventory management. In the real sense, you need to be acquitted with information about the current levels and set the reordering levels.

 As such, to avoid making a loss, you should not allow suppliers to restock your business unless you have sent a reorder request.

c. Always set priorities based on the item’s demand

One of the major mistakes entrepreneurs do is lacking prioritization of products based on their demand. In enhancing your inventory management, you need to know which products are moving more than the others.

Hence, you can maintain higher quantities of these products while minimizing those whose demand is weak. This way you can maintain appropriate inventory levels without incurring extra costs.

d. Inventory gain or loss value   

Depending on the nature of the business you operate, your stocks can be gaining or losing value. For this reason, you need to know the kind of products you are handling. If you predict a possibility of a rise in price for certain products, then you can increase their stock levels. However, you must be very conscious in your forecast as a little mistake can lead to a massive loss.


In short, inventory management requires you to equip yourself with information about the market status and products demand. You need to know which products are in high demand, the levels of inventory to maintain, and when to reorder. Importantly, you should be aware that products gain or lose value and they restrict the cash flows. As such, it is necessary to be conscious of the type and the level of stock you hold in your business at a given time.

Additional reading: The Perks of Using an Inventory Management Software in Distribution