Cost Cutting Inventory Management

Idea: Turn Your Inventory Management From a Cost-Centre to Cost-Cutting Centre

In business, the rule of thumb is to elevate profits, increase your income and drive down your costs. When it comes to businesses dealing with a lot of inventory, the cost reduction factor can come into play by reducing your inventory costs. While technology has blessed business with modern tools, the customer demands have also raised with time. To serve the customer promptly, any business needs to keep their inventory level sufficient. When you are dealing with several Stock Keeping Units (SKUs), it’s essential to optimum inventory management.

The cost of keeping the inventory more than optimum level is the loss of interest, loss of product’s shelf life and loss of space. On the other end, the cost of keeping lower inventory can lead to stock-outs or lack of options for the customer, which can make you lose customers and ultimately, your business.

Considering these problems, it is very much important that you keep your inventory to the optimum level to minimize inventory associated costs.

What are the Costs Associated with Inventory?


Space is the most significant cost, as warehouse rent or upkeep is not cheap. More SKU and inventory translates into the need for a bigger warehouse, which is a direct and significant cost of the business.

Material Movement

Stocking the incoming material and retrieving the ordered material involves the movement of material within warehouse as well as external logistics cost.

Storage Cost

You have to bear inventory holding cost (interest cost) until the cycle of customer payment and ultimately until vendor payment gets completed. It means that till a sizable amount of stock is sold, it keeps consuming costs. In case of a higher level of inventory, your finance cost increases till you receive the payment from the customer.

Damage and Theft

In case goods remain unsold beyond the shelf life of the product, the aspect of wastage increases. Moreover, it is a loss of opportunity to store the SKUs (Stock Keeping Units) which could have given more opportunity to serve the customers. When the warehouse is managed manually, it is also prone to inventory shrinkage and mismanagement.


Having a large inventory translates into a diverse inventory to classify. This problem can be solved by creatively bundling the products for online sales according to types, usage, and suitability to deliver. Efficient classification consumes more time, space and effort. On the other hand, poorly classified inventory results in operational failure and rising costs.

Manpower Cost

Warehouse management needs an end to end monitoring and execution of stock movement and storage. For many medium-sized warehouses, manpower cost is as high as a small factory, as you need people at floor levels and managerial levels. In the absence of automation or automated software, the manpower cost is more than usual.

How to Reduce Inventory Management Cost?

Save Space:

You can keep the inventory only limited to order fulfillment. You can also consider dropshipping to save your own space and leverage on external resources. You can consider utilizing the same space by accommodating more SKUs in your warehouse. In other words, your overall space requirement should be reduced per SKU that you sell in the marketplace.

Save Time:

You can invest your time in marketing your product, by minimizing the time from warehouse management.

The manual system of the updating stock registers is prone to human error. Moreover, more workforce is needed to perform stock management across multiple warehouses. The task gets even more complicated for multiple marketplaces. In these situations, an automated solution for inventory management would save a sizable amount of your time which you can use to expand your business.

Save Storage Cost:

The optimized inventory level helps you to track your finance. You can save interest cost and prevent damages due to prolonged presence of unsold inventory.

Save Human Efforts:

Higher the level of inventory, higher the efforts to handle it. Additionally, the efforts made behind them consume your precious time, energy and resources. Simplify and streamline your processes to reduce requirements of manual labour.

How Can an Inventory Control Software Do To Save Your Costs?

For effective cost reduction, simply defining processes is not sufficient. What you require is complete inventory control. It means to take charge of your all inventory related processes that is built to handle customer order fulfilment. Modern inventory management software solutions can store minute SKU details at all stages and at all levels of inventory to control your inventory at optimum levels.

Product Management:

Automated storage of product database allows you to create an extensive database of the products, its variants, as well as usage. You can apply filters as per requests from marketplaces. You can also decide product group and deploy upscale strategies to increase user experience and revenue.


A barcode friendly software contributes to minimizing human efforts and intervention. It updates the system seamlessly and on a real-time basis. The barcode inventory management system reflects every event like stock addition, stock transfer, the stock outward movement for order fulfillment on a real-time basis.  Moreover, you can get updated stock count at any moment with few clicks in the software.

Stock Management

You can create minimum inventory level, alert of excess inventory, stock transfer across different warehouses and similar activities related to stock management. You can also monitor the age of the stock and its shelf life, that can help you decide the strategy to clear old stock on priority.

Marketplace efficiency

With the help of professional software, you can list your product at multiple marketplaces. The change in inventory level due to order received at one channel partner is reflected in all channels on a real-time basis.

Upma Kanswa

Upma Kanswa

Observer of small things. Hasn’t been able to choose between mountains and beaches yet. Chose written words to express herself. Writes and edits for Orderhive, which is simple & smart inventory management software.

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