Top inventory management techniques to implement in 2021

Top inventory management techniques

Inventory Management is a way of controlling and tracking the inventory orders, their storage, and usage. Inappropriate inventory management leads to the working capital crunch, increase in storage cost, more idle time. Consequently, it causes waste of labor resources, supply disruption, leading to unsatisfied customers, and sales reduction. Therefore, following inventory management techniques is unavoidable to ensure an effective stock supply.

Essential inventory management techniques

Just in Time (JIT)

Just-in-time is an inventory management technique involving only the right quantity available at the time of production. Precisely, it means maintaining accuracy.

This is a technique requiring efficient timely suppliers, proper planning, and timely inventory arrival for the orders. JIT is appealing as it slashes costs on shipping, warehousing, insurance, and others. However, it is risky to stay always perfectly predictable.

Having access to timely fashion helps to stay competitive and real-time analytics help optimize operations. JIT, the inventory management cloud-based system offers clear visibility from anywhere into your inventory.


Backordering is a process that customers place orders, regardless of the stock. It is a practice commonly used by retailers when there is a surge in demand. Backorders are a way of taking orders, receiving payments for the products that are out-of-stock.

Enabling backorders is an indication of increased cash flow and sales. It gives flexibility for the small businesses, while the risk of overstock is less. However, it also includes the customer dissatisfaction risk to wait for a longer time.

One of the relatively simple inventory management techniques is backordering. It means using this inventory technique; you should match purchase and sales orders.

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Further reading: Best practices for managing backordered items.

Bulk shipments

A bulk shipment is comparatively cheaper to ship or purchase goods. Bulk shipments are the predominant inventory management techniques. It is applicable for high customer demand goods.

The bulk shipping downside is you have to invest extra money, right from the inventory to warehousing. It may offset the money saved due to stocking huge volumes. Besides, there is the worry of selling them fast.

Bulk shipments lower shipping costs, and ensure profitability. Shipping evergreen or long shelf-life products is a great option as bulk shipments.

Dropshipping and cross-docking

Inventory management techniques, dropshipping, and cross-docking are business models allowing you to ship and sell products that you do not stock or own. It is where the manufacturers or wholesalers produce goods, warehouse them, and take care of the shipping.

Dropshipping is convenient as it transfers the shipment details and the customer orders to a wholesaler or the manufacturer to ship it directly to the customers. The same is with cross-docking, where the incoming railroad cars or semi-trailer trucks directly unload materials onto outbound rail cars, trailers, or trucks.

Essentially, no inventory holding cost, low startup cost, less risk, and potential profit. There is a possibility of staging the inbound items until the completion of the outbound shipment. It may require a network and extensive fleet for cross-decking.


Consignment is an arrangement where a vendor agrees to give to a retailer their goods without upfront payment. They receive payment only when the retailer sells the goods.

The inventory management techniques favor a win-win situation for the suppliers and retailers, provided they share rewards and risks. It calls for a high degree of confidence. It is good to test new products and to know the product performance.

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The retailers benefit as their capital is not held, while they can return at no cost the unsold goods. It decreases lag times even to restock the products.


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