Key concepts of inventory management

Advanced Inventory management

With billions wasted on stale or unsellable inventories each year, and an additional estimated $40 billion lost to employee theft in the US alone, the importance of keeping a strong handle on your business's stock with good inventory management techniques is becoming more apparent.

Here are some key concepts that will help you better understand the health and flow of your inventory.


The method you use for ordering items, and the amounts you buy, should be governed by your return on investment.

Whereas larger businesses have large distribution networks and multiple warehouses, their smaller counterparts need to keep a closer eye on how their limited storage space is used. Therefore, it’s crucial to monitor and analyse trends in which items are selling or being used faster than others.

This is something that a business management ERP system such as ECI M1 is able to highlight clearly, so that you can manage your stock orders as efficiently as possible.


The point at which a new delivery of stock arrives is an important one, because it’s at this point that headaches can arise.

Make sure each package and accompanying packing slip is as it should be. If something’s damaged, this is the time to file a damage claim before the shipping company leaves. Similarly, if the contents of a package doesn’t match what’s listed on the packing slip, a claim needs to be filed with the vendor as promptly as possible.


Managing your storage space effectively is a must, particularly for small businesses with limited or shared warehouse space.

ERP systems like M1 also include warehouse management functionality, allowing you to determine the best way to utilise the space you have. By using the inventory logging data, it allows you to optimise the use of warehouse space for items that travel in and out fastest, speeding the process up.

Minimising loss

This may not be restricted to just an inventory management concept, but reducing all forms of loss — including employee theft — is important for the accuracy of a company’s stock count. Using an automated system rather than a manual one can do a great deal to combat this, because each product will likely carry RFID tags and access to the inventory will be more limited.

Admin errors are also a common cause of loss for businesses, which can occur at various points in the inventory cycle if your business uses a manual system.

Inventory management systems and ERPs

As well as automating the points highlighted above, inventory management systems that integrate with wider ERP systems can use a wide range of data from across the company to analyse and build forecasts of consumer trends.

This means that the inventory can be prepared for expected surges in demand for a particular product, rather than catching the business by surprise and leaving you with no stock and no option but to disappoint customers.

Click here to find out more about the capabilities of M1.

ECI Staff Contributors

About the Author

ECI Staff Contributors love to share their insights and expertise on a variety of topics including sales, marketing, cloud, ERP, and SMB development as well as on product specific education. With offices throughout the United States, Mexico, England, the Netherlands, Australia, and New Zealand, more than 40 employees contribute to blog on a regular basis.