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A Guide to Inventory Management in a Warehouse: Tips and Strategies

woman in warehouse holding a tablet

Inventory management is one of the most important aspects of any warehouse or distribution operation. If executed correctly, it can help improve efficiency and productivity, while reducing costs. However, if it’s not done properly, many headaches and problems for warehouse managers and operators could occur.

Read further for more information on what inventory management actually is, how to effectively manage inventory, best practices, and tips for improvement to optimize your inventory management process.


What is Warehouse Inventory Management?

Warehouse inventory management is the process of organizing, storing, and keeping track of physical goods as well as the information associated with those goods (such as when they were received, how many are in stock, etc.).

The goal of a successful inventory management system is to ensure that the warehouse can meet customer demand while minimizing costs. This is achieved by ensuring that enough inventory is on-hand to make sure customer demand is met, but not too much that it results in excess or obsolete products.


Why is Inventory Management So Important for Warehouse Managers and Operators?

First, inventory management can help improve warehouse and distribution facility efficiency and productivity. By instituting an organized and efficient inventory management system, warehouse employees will find it easier to locate and retrieve SKUs as needed, saving valuable time.

Real-time inventory traceability can help to avoid overstocking stock-outs, which can result in finances tied up in inventory holds, lost sales, and unhappy customers.

Finally, inventory management can help to reduce waste in the warehouse, especially in the food and pharmaceutical industries. This is because it can help to ensure that inventory is properly rotated and used before it expires or becomes obsolete.

two warehouse workers carrying boxes

What is a Warehouse Inventory Management System? (WMS vs. IMS Software)

There are two main types of warehouse inventory management systems used to keep track of customer products: WMS and IMS. WMS stands for Warehouse Management System, while IMS stands for Inventory Management System.

IMS involves inventory management software that is used to track and manage inventory levels, orders, and shipments. On the other hand, WMS software is more comprehensive to include features for tracking inventory as well as managing warehouse operations such as order picking, shipping, and receiving.

Most warehouses use WMS software to manage their inventory. This is because it provides a more complete solution for managing both the inventory and the operations of the warehouse.

With ASCtrac® WMS, there is no need for most businesses to also use a separate inventory management software. This is because ASCtrac® combines powerful warehouse management capabilities with inventory management features needed by most warehouses.

warehouse worker with tablet and scanner

Warehouse Inventory Management Methods and Terminology

Many methods can be used to manage inventory in a warehouse. Let’s look at some of the most common:

ABC Analysis

This is a method of categorizing inventory based on its value. A items are the most valuable and are given the highest priority, while C items are the least valuable and are given the lowest priority.

Just in Time (JIT) Inventory

In this type of inventory management inventory is ordered and received only when it is needed. This can help to minimize the amount of products on-hand and reduce overall facility costs.

First In First Out (FIFO)

This method is based on the principle that the first items to arrive in the warehouse should be the first items to be shipped out.

Last In First Out (LIFO)

This process is based on the principle that the most recent items to arrive in the warehouse should be the first items to be shipped out.

Perpetual Inventory

This is a system where inventory is constantly being updated and tracked in real-time using scanners and WMS software.

Economic Order Quantity (EOQ)

This is a technique of determining how much inventory to order at one time to minimize the overall cost of the product.

Safety Stock

This is a buffer of inventory that is kept on hand to avoid stock-outs.

Batch Tracking

This is a system where inventory is tracked and organized by batches which can be helpful for expiration date or lot number tracking.


This is the practice of shipping inventory directly from the supplier to the customer, without it going through the warehouse first.

in a warehouse, one worker with a pallet jack, another carrying a box, another checking inventory counts

Factors in Choosing an Inventory Method

There is no single “best” method for managing inventory in a warehouse. The ideal method will vary depending on the type of business and the products being stored. It’s important to experiment with different methods to find what works best for your business and customers.

One of the most important factors to consider when choosing an inventory management method is lead time. This is the amount of time that it takes for an order to be received from the supplier and become available for shipping.

If you have a long lead time, it may not be feasible to use JIT inventory. This is because you would need to have enough inventory on-hand to cover the time between when an order is placed and when it is received.

On the other hand, if you have a short lead time, JIT inventory may be a good option. This is because you can order inventory as you need it and avoid having too much inventory on-hand.

Also, consider the cost of inventory. If your business is on a tight budget, you may want to choose a cost-based inventory management method such as ABC analysis. Otherwise, perpetual inventory management may suit your distribution center just fine.


Best Practices for Warehouse Inventory Management

Now that we’ve discussed what inventory management is and why it’s so important, let’s take a look at some best practices for inventory management in a warehouse.

Accurate Inventory Counts

One of the most important things to do is to develop an accurate and up-to-date count of all SKUs in stock. This can be done manually or with the help of technology, such as barcoding or RFID tags. It’s important to count inventory regularly, as it can help to identify problems early on and prevent them from getting worse.

System for Storage and Organization

It’s also important to have a good system for organizing and storing inventory. This includes storing items in the appropriate way (temperature, hazmat, regulations, etc.) and making sure that products are easily accessible to improve efficiency and productivity in the warehouse.

Tracking Inventory Levels

Another important tip is to track inventory levels closely, specifically in real-time. By monitoring inventory levels with ASCTrac®, you can be sure that you always have a good grasp of product amounts on-hand to meet customer demand but not so much that it results in excess or obsolete inventory.

Regularly Review Processes

It’s important to review your inventory management process and WMS software regularly. This can help to identify areas that need improvement and make changes accordingly.

Be Prepared for the Unexpected

Things will inevitably go wrong from time to time. Having a plan in place for how to deal with unexpected events (such as power outages, severe weather, etc.) will help to minimize any disruption to your operation.

worker grabbing small parts to be shipped

Tips for Improving Inventory Management in a Warehouse

If you are looking to improve your inventory management accuracy and efficiency, start by following these tips:

  • Automate where possible: Automating tasks such as inventory tracking and order picking.
  • Use technology: Taking advantage of technology such as barcoding and radio frequency identification (RFID).
  • Outsource where possible: Outsourcing tasks such as warehousing and logistics can help to free up time and resources that can be better spent on other tasks.
  • Implement a just-in-time inventory system: This type of system can help to reduce the amount of on-hand inventory.
  • Practice cycle counting: This is a type of inventory management in which physical counts are done on a regular basis (often daily or weekly) rather than all at once. This can help to catch any inventory errors early.
  • Improve warehouse layout: Having an efficient warehouse layout can help to reduce travel time.
  • Utilize quality WMS software: A well-designed WMS software system like ASCtrac® can help to improve overall inventory management and operations. It can provide real-time inventory visibility, automate tasks like stock replenishment and order picking, and assist in optimizing the layout of the warehouse.

While the tips above can help warehouse managers and operators improve their inventory and operations management, it is important to remember that there is no one-size-fits-all solution. It is important to evaluate your operation and find the best methods for your distribution facility.

warehouse worker sitting on some boxes

Choosing the Right WMS Software

When selecting WMS software, be sure to consider factors such as:

  • Ease of use: It should be easy to use and understand, with a user-friendly interface.
  • Functionality: Your WMS software should have all of the features and functionality that you need to manage your inventory effectively.
  • Scalability: The software should be able to expand and grow with your company.
  • Integration: It should be able to integrate with your existing operational systems and software, like ERP or accounting software.
  • Cost: The system should be affordable and offer a good return on investment.


Inventory management is a critical aspect of warehouse operations. By following the tips and best practices outlined in this article, warehouse managers and operators can improve their overall inventory and operations management practices.

If you would like to learn more about how ASCtrac® can improve your inventory management and overall warehouse operations, please contact us today.


What is a Warehouse Management System (WMS) Software?

Warehouse management system software helps to manage inventory and other functions of a warehouse. It can include features such as real-time inventory tracking, order management, and shipment organization. This will result in better accuracy and efficiency, while also reducing operating costs.

What is Inventory Control?

Inventory control is the process of managing inventory to ensure the warehouse can satisfy customer order fill rates.

How Often Should Inventory Be Counted?

There is no one-size-fits-all answer to doing inventory counts. It depends on the specific operation and what works best for them. However, some warehouses choose to do physical counts on a daily or weekly basis.

What Are Some Common Causes of Stockouts?

Some common causes of stockouts include inaccuracies in forecasting, poor inventory management, and problems with the supply chain.

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