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What is Warehousing Inventory? The Ultimate Guide for 2024

2.8 minutes

In this article, we explore what warehousing inventory is and its importance. We also share our simple 6-step process for managing warehouse inventory. Read on to learn more. 

warehousing inventory

What is Warehousing Inventory?

Warehousing inventory refers to the stock of goods stored in a warehouse awaiting dispatch or consumption. It encompasses everything from raw materials and finished products to spare parts and other commodities.

Example: At "Cosmic Auto Parts," their warehousing inventory boasts over 10,000 raw metal sheets for manufacturing and an additional 5,000 finished car parts awaiting shipment to dealerships. Furthermore, the warehouse holds a reserve of 50,000 spare screws, bolts, and other smaller components to swiftly address any immediate demand or replacement needs.

importance of warehousing inventory

Importance of Warehousing Inventory

Warehousing inventory plays a critical role in supply chain management and the overall functioning of a business. Here are some important reasons:

Ensures Product Availability: 

A well-managed inventory ensures that products are always available for shipment or sale, preventing stockouts that can lead to customer dissatisfaction and lost sales.

Optimizes Storage Space: 

Effective warehousing inventory management ensures efficient utilization of storage space, leading to reduced storage costs and maximized storage capacity.

Financial Stability: 

Inventory represents a significant investment for most businesses. Proper warehousing inventory management helps optimize this investment, leading to improved cash flow and profitability.

Supports Production: 

For manufacturers, warehousing inventory is essential for uninterrupted production, ensuring that necessary raw materials and components are always on hand.

warehousing inventory management process

6 Steps to Manage Warehouse Inventory

Use our 6-step warehousing inventory management process to effectively manage your warehouse inventory. Simply follow the steps below:

1. Assessment of Current Stock: 

Conduct periodic physical counts to understand the exact number of items in the warehouse.

Example: At the end of each month, "TechGizmos Ltd." performs a complete count of all their electronic components in the warehouse. This practice ensures that their system records align with actual stock levels.

2. Invest in an Inventory Management System: 

Use software solutions to track products as they come in and go out of the warehouse.

Example: "SoleMate Shoes" recently adopted a cloud-based inventory system, allowing them to track shoe models and sizes in real-time as they move in and out of their storage facilities.

3. Set Par Levels: 

Determine a minimum quantity for each product. When stock drops to this level, it's an indicator to reorder.

Example: "HealthFirst Pharmaceuticals" has set a reorder level for their most popular painkiller. Once stock dips below 500 units, an automatic purchase order is triggered to their supplier.

4. Categorize Inventory: 

Use the ABC method, where 'A' items are high-value, 'B' items are moderate-value, and 'C' items are lower-value, to prioritize your stock.

Example: At "Stella's Home Decor," items like luxury vases and handcrafted lamps are categorized as 'A' items due to their high value. Meanwhile, generic candle holders might be classified as 'C' items, given their lower cost and higher stock volume.

5. Forecast Demand: 

Use historical data and market trends to anticipate future product demand, ensuring you always have the right amount of stock.

Example: Using last year's sales data, "WinterWear Co." predicts a surge in demand for woolen scarves in December. This insight allows them to order more stock in November, ensuring they're well-prepared for the sales rush.

6. Implement FIFO (First-In, First-Out): 

Ensure that older stock gets sold first to prevent the accumulation of outdated or perishable goods.

Example: "FreshFarm Grocers" always ensures that produce that arrived first gets placed at the front of their shelves. This way, customers always pick up the oldest stock first, reducing the risk of perishable goods going to waste.


Imagine "LunaTech Electronics," a fictitious firm specializing in state-of-the-art smart home devices. Their warehouse in Atlanta, Georgia, holds a vast array of products, from smart bulbs and plugs to advanced home security systems. Let's explore how they apply our 6 warehouse inventory management steps:

1. Assessment of Current Stock:

Every quarter, LunaTech initiates "Operation Count." Their team meticulously checks and logs the stock of every SKU to ensure that their digital records mirror the actual physical count. Last March, they identified a discrepancy of 200 smart plugs that led to a system update and process refinement.

2. Invest in an Inventory Management System:

LunaTech uses "SmartStore Pro," an AI-driven inventory software. It seamlessly integrates with their point-of-sale systems, e-commerce platforms, and supplier databases. In 2022, the system flagged an unusually high return rate for a specific batch of smart bulbs that enabled them to quickly address a potential manufacturing defect.

3. Set Par Levels:

For their best-selling product, the "LunaCam Home Security Camera," a par level of 1,000 units is set. When their stock dips below this number, the system automatically sends a reorder alert to their procurement team. This strategy ensured they never faced stockouts during the holiday rush last year.

4. Categorize Inventory:

Their range of products is categorized using the ABC method. The "LunaSecure Alarm System," priced at $500, falls under the 'A' category due to its high value and margin. On the other hand, the "LunaLite Smart Bulb," retailing at $20, is a 'C' item. This categorization helps them prioritize stocking and reorder strategies.

5. Forecast Demand:

LunaTech's data analytics team observed a recurring spike in sales of their "LunaTherm Smart Thermostat" during early fall. By analyzing past trends and future weather predictions, they forecasted a 20% sales growth for Fall 2023 and adjusted their stock orders accordingly.

6. Implement FIFO (First-In, First-Out):

In the "LunaTech Smart Battery" section, the team meticulously arranges stock so that batteries manufactured earlier are easily accessible at the front. This practice ensures older stock is sold first and maintains the freshness of the product for their customers.

We hope our article has now left you with a better understanding of what warehousing inventory is and how to effectively manage your warehouse inventory. 

If you enjoyed this article, you might also like our article on inventory visibility or our article on inventory loss.

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