7 Most Effective Types of inventory Management Strategies

10 min read

One of the most challenging points when running an e-commerce business is choosing the proper inventory management technique. And indeed, with the business growth, this difficult task becomes more and more complex to handle. It means that all the types of inventory management strategies should be examined from the very beginning. Thus you’ll be able to set the best one and reach success quicker. In this article, we are going to present inventory management techniques and processes. 

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What is Inventory Management? 


inventory management strategy

Inventory management is all about keeping track and controlling your stock. It includes all the processes starting from manufacturing, buying, storing, and using. Most importantly, inventory management regulates orders with its order management branch. It, in its turn, ensures the right quantities of the right items. And it is concerned with the right things reaching the right location at the right time.


Non-correct inventory management can elevate storage cost, working capital breakdown, waste of resources, and overall supply chain disorder. As a result, the amount of sales drops down, and the number of unsatisfied customers grows. All this means that inventory management is a crucial business aspect. It should be necessarily included in your business management. It is a must as a vital element of a practical and successfully growing company. 


7 Inventory Management Strategies

Inventory management as an inseparable supply chain component can be carried out in different ways. So there exist various types of inventory management strategies that can help inefficient inventory management. Here we present a list of those techniques:

  • Just-in-time (JIT) inventory
  • ABC inventory analysis.
  • MRP Method 
  • Dropshipping
  • Bulk shipments.
  • Backordering.
  • Consignment
  • Cross-docking
  • Cycle counting
  • EOQ Model 
  • VED Analysis 
  • FSN Method
  • Minimum Safety Stock


Let’s see some of the more profound ones by finding out the best 7 techniques. 


ABC Analysis

The first inventory management technique we present is ABC analysis. It is an acronym that stands for Always Better Control. It involves inventory items according to their classification into 3 groups (A, B and C). 

  • The inventory in category A usually includes expensive, high-priced items that are not much in their number. These items are the most controlled ones. 
  • The items in category B are less expensive than those in group A. Their number is higher, but this inventory, compared to the A category, is moderately controlled.
  • And the items of the C category are high in number, require fewer investments and minimum control.


JIT Analysis 

The second type of inventory management strategies is JIT. The abbreviation opens as Just in Time method. In this strategy, a company keeps as much inventory as it needs for production. And then, it orders new inventory when the old stock needs replenishment. A business runner should use this method carefully because the most crucial factor becomes time. No delays are possible as hesitating. As a result, you can get stock-out. So here, planning becomes one of the most critical factors. It should be done correctly and most crucially on time so that new orders are placed whenever needed. 


MRP Method 

MRP is another effective inventory management method. It means Material Requirements Planning. Here the manufacturers first carry out sales forecasting and only then order the inventory. The MRP system takes data from different business areas with the existing inventory. Then the responsible person places orders of new inventory according to the market data and demand in the market. 


EOQ Model 

EOQ is the Economic Order Quantity inventory management technique. The main focus of attention becomes quantity. A company should make the right decisions about how much inventory to order at a particular point. Here when reaching the minimal inventory level, the responsible person reorders items. Order costs and carrying costs become lower with the help of this EOQ model. Hence the EOQ model ensures the right quantities when needed. 


VED Analysis 

The next inventory management strategy type is VED standing for Vital Essential and Desirable. It is mainly concerned with some additional inventory parts. For example, components essential for products that are usually very expensive. And also extra elements that the whole process cannot operate without. Additionally, any company can have a low inventory level for desirable parts, which are not often required for production. 

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Inventory, Order & Shipping Management Software



FSN Method

FSN stands for Fast, Slow and Non-moving inventory. This is one of the most popular methods of inventory control. It is beneficial for controlling obsolescence. Of course, not all items are used in the same way and order. Some are used more, thus needing to be updated frequently. In contrast, the others are not necessary at all. Therefore, according to this method, inventory can be classified into 3 groups.

  • Fast-moving inventory, 
  • Slow-moving inventory, 
  • Non-moving inventory. 


Minimum Safety Stock 

And the last one from the list of the most effective types of inventory management strategies refers to the safety stock. It is the level of inventory with the help of which businesses avoid stock-out. Companies place the new order beforehand when using the minimum safety stock, especially when the existing inventory isn’t over yet. 


For example, 

company total inventory=18,000 units, 

new order placed when the inventory reaches 15,000 units. 

3,000 units of inventory are part of the minimum safety stock level. 


Integration of inventory management software


Digitization is a beneficial strategy for any field, including inventory management. Integrating all your inventory data in a single software is the quick and convenient format for tracking your inventory, warehouse, orders, and other essential aspects of the eCommerce business.

One of the tools that can allow you to do that is eSwap, the inventory management software which allows you to utilize many features with just a few clicks. The main features of the platform include:



Explore the other opportunities of the software and dot hesitate to link your business to a quality online tool, that will maximize the effectiveness of any strategy you choose.


As already mentioned, inventory management is an essential part of every business. With the help of effective inventory management systems, companies can reduce their various warehousing costs, inventory carrying charge, ordering cost, cost of obsolescence, etc. As a result, it improves the whole supply chain of the business. So it is vital to take all the necessary steps to maintain an adequate inventory management and control system. And the most reliable method is to use some of the most effective inventory management techniques.