Reasons Why Warehouse Inventory Management Is Crucial For Your Business

Reasons Why Warehouse Inventory Management Is Crucial For Your Business4

Warehouse inventory management can make or break your business – a poorly managed supply chain leads to stock-outs, losses, and eventual business failure. According to one report, 10 to 30% of stockouts are due to supplier shortages while the rest are a result of poor replenishment practices.

It is crucial for businesses across all industries to focus on warehouse inventory management to ensure an efficient flow of goods. Having an inadequate inventory can jeopardize your level of customer service which, in turn, affects your sales and the business’s ability to achieve optimal profitability.

As a key component of supply chain management, here are 11 reasons you need to implement warehouse inventory management practices to oversee and organize materials or equipment.

Improves Cash Flow

Inventory control helps manage cash flow – if you run a manufacturing business, warehouse inventory management helps you to determine how much you need to invest in the business. An industrial warehouse takes up a lot of business cash because you have to budget for production, storage, loading areas, administrative areas and equipment.

With proper warehouse inventory management, you can use the forecasts to avoid tying business capital to slow-moving inventory. In addition, this allows you to free up cash and re-invest in other areas of the business such as freight costs which have increased significantly.

Prevents Overstocking

Overstocking is a surplus stock that happens when the business buys more stock than they sell, significantly hurting profitability. Statistics show that stockouts cost businesses about $1 trillion each year; therefore, a lot of companies go overboard in trying to avoid this scenario.

Overstocking happens because most businesses fear stockouts, but takes up valuable warehouse space. You need enough space for production, assembly, distribution, and storage of materials and equipment. That’s where warehouse inventory management comes in handy – it helps with space management.

Tracking Inventory

A good warehouse inventory management system helps keep track of inventory across multiple locations. For instance, if you have more than one warehouse in different geographical locations, from one spot you can monitor stock levels and plan what to allocate to each sales channel. Inventory management in multiple warehouses becomes much easier because you can track all products and deliver them to customers from a centralized point.

Your business needs real-time visibility to monitor stock levels. With this information, you can make better decisions on what needs to be added, dispatched, and on the slow-moving inventory.

Improves Order Accuracy

Reasons Why Warehouse Inventory Management Is Crucial For Your Business

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The most successful brands have an order accuracy of between 96%-98%. Maintaining a high rate of order accuracy will encourage customers to buy from you. An efficient warehouse inventory management system ensures that the filled orders are accurate. Inaccurate orders hurt business sales, negatively impact profitability and increase the returns rate.

Therefore, you should ensure that the warehouse space is well organized so employees can easily find the goods. One of the ways to do this is by choosing an ideal racking system for your company for easier product retrieval. This makes the picking process more efficient.

You can use systems and inventory management software to track where all the goods are in the warehouse. These systems also have multiple scans that employees use to confirm that they have picked the right item before shipping.

Improved Customer Service

Failing to deliver items on time will hurt your business’s reputation. In order to avoid disappointing your customers, your business needs to have set delivery times for your equipment and other goods and ensure that they are fully aware whether your company does same-day or next-day deliveries.

Additionally, you can manage customer expectations with a proper inventory management system. Inventory planning and control also allows you to gain insight on what products customers order more. If customers get items on time, they are more likely to stay loyal and order more items, boosting your profitability.

Generates More Revenue

If you are looking to boost your profitability, also pay attention to your warehouse and inventory management processes. When the equipment in your industrial warehouse is working properly and your space is optimized, you’ll achieve operational efficiency. This saves the company money that could have been incurred in organizing the space or treating injuries.

Furthermore, since you can meet your customer orders much faster, the sales will increase. Customer loyalty is important because it brings in repeat customers and boosts the overall revenue of the organization.

Improves Employee Safety

Your company will be more organized if the warehouse and inventory management process are running seamlessly. Operations in the industrial sector can present a safety risk, especially if there’s no system. Having too much inventory on the floor space can hinder the movement of goods and increase the risk of employee injuries.

Once you get warehouse equipment products for your business you need to have them placed safely to avoid injuries and safety issues. A proper warehouse management system focuses on the proper personal protection equipment (PPE), sanitization efforts, maintenance, and the safety of the equipment. In addition, this will lead to inventory reduction, less packaging, and less waste to protect the environment.

Minimizes Theft

Warehouse inventory management cuts down the cases of theft. This is because inventory control monitors every item that comes in and goes out of the warehouse. Furthermore, all the product details are digitally recorded, making it difficult for employees to manipulate. If you are dealing with expensive equipment, theft would incur heavy losses.

With a proper inventory management system, you can limit company disruptions. When you lose products or materials in the warehouse, you have hidden costs that can be pricey in the long run. To avoid this, you can use technology such as warehouse management software that stores data and tracks stock more efficiently.

Boosts Overall Productivity

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With an organized inventory management system, you can build a more productive workforce. A working system or software cuts down the time spent searching for products in the warehouse and processing deliveries. Additionally, you don’t have to visit your factories or locations every time you need information about stock levels.

Create an inventory management plan to motivate your employees – they will be more satisfied if the operations are seamless. Flexibility is maximized if the floor space is properly organized – making it easy to move, pack, store, and retrieve goods. Your employees will also increase their productivity because they save time on some activities.

Helps With Compliance Issues

As a business in the industrial sector, you need different compliance certifications for your business, depending on your location and scope of operations. A warehouse and inventory management system come in handy in ensuring safety in the warehouse or factory floor space.

If you are dealing in manufacturing or heavy equipment, compliance elements will focus on the safety of your employees and whether they have the proper personal protection equipment (PPE). There are also checklists for maintaining heavy equipment and ensuring that everyone is safe.

Additionally, you might need to provide this information for financial reporting. Having a warehouse and inventory management system will provide the necessary information on stock levels and sales.

Improves Competitive Ability

Inventory management in your warehouse contributes to your market share and competitive ability. A proper system will help you determine whether your business can run different product lines. In addition, it becomes easier to know how much inventory size is needed at a particular time and when to put the products out in the market.

With this information, your business can increase its market share by focusing on the best-performing products. This also increases the competitive ability against other businesses in the industrial sector. Warehouse inventory management identifies your company’s area of strength to stay ahead of the competition.


Warehouse and inventory management are vital for the survival of your business. Not having proper control over your inventory could affect your cash flow and revenue.

If your business is expanding rapidly, there are ways to manage your warehouse inventory much better – invest in warehouse management software that makes it easier to monitor and oversee inventory control.

Globally, the warehouse management systems market size was valued at $2.94 billion in 2021 and is projected to grow at a compound annual growth rate of 16.1% from 2022 to 2030. You should take advantage of this technology and seamlessly integrate it into your existing business systems.

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Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

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