Inventory Management plays a decisive role in the enhancement of efficiency and competitiveness of business enterprises, moreover, it helps to save money, save time and increase inventory accuracy. When managing your inventory processes, there are a variety of factors which you need to consider.  The factors can affect inventory management in different ways, and it is important to be informed about these factors.

Let’s look at the main factors that can affect inventory processes.

1. Financial Factors

Getting financials right is important, as every step of the process involves a great deal of financial risk.

By planning the spending of each inventory management task such as item ordering, tax costs associated with stocks, transportation, storage, etc. strategically you’ll be able to handle your inventory management process smoothly reducing major cash flow problems.

2. Consumer Demand

Consumer demand is important for inventory management, too, as our main goal is to have satisfied customers. Imagine, customers buy a huge amount of toothpaste, but minimal amount of toothbrush. It means that, in case of stocking equal amounts of both, will bring to a shortage of toothpaste, excess inventory of toothbrush, or both. To avoid negative financial effects on your business – you have to track customer demands and product sales, and order inventory accordingly.

3. Suppliers

Partnering with the right suppliers is crucial, as suppliers are one of the most influential factors, affecting inventory management. Managing supply chains can be difficult for business, particularly if you cannot rely on suppliers to meet deadlines and deliver quality products.

The following questions are important if you want to choose the right suppliers.

  • Should You Partner with Multiple Suppliers?

It is often said that placing all your eggs in one basket can be risky, which is something to consider in making a decision between single and multiple supplier sourcing. If something happens to your supplier, whether it be financial insolvency, a physical setback (such as a fire in the supplier’s main warehouse), or just a period of poor material-availability, you will find yourself unable to keep your promises to your customers.

Whereas, there are benefits in working with two or more suppliers. For instance:

  1. If a competitor buys one of your suppliers , or runs into financial or business difficulties, you have at least one another supplier to fall back on.
  2. Demand fluctuations can be more manageable if you have a choice of suppliers with whom to adjust order volumes.
  3. Having two or more suppliers will increase your company’s ability to circumvent supply disruptions.
  • Should You Focus On Price?

Although price is not a major factor affecting inventory management, it is a key consideration for most businesses. As a growing business, lower procurement costs allow you to invest more money elsewhere within your business. Identifying a supplier who is able to offer a special price is therefore of significant benefit to many businesses.

4. Product Type

Inventory management must take into account the different types of products in stock. For example, some products may be unstable and therefore have a shorter shelf life than others. In this case inventory must be managed to ensure that these items are rotated in line with expiration dates.

5. Managing tools and technology

Another factor affecting inventory management is technology. Modern technology can save both time and money as well as improve the efficiency of inventory management processes. With the right managing tools you’ll be able to streamline your inventory management process further. Tools like barcode scanners, label printers, mobile computers, etc. along with a good inventory management software can double or even triple the speed of your inventory processes. Also, the new technologies will help you to implement counting, recounting, receiving, picking and other processes more efficiently.

6. Lead Time

Lead time in inventory management is the lapse in time between when an order is placed to replenish inventory and when the order is received. It directly affects your total inventory levels. The longer your lead time the more stock you will need to hold in your inventory. Longer lead times makes deliveries more unpredictable and forces a company to rely heavily on demand forecasts to make orders.


As you can see the number of variables that can affect inventory management are numerous. So, it’s always important to be aware of these factors in order to maintain a smooth and seamless inventory management all the time.