21 Feb

Importance of Inventory Management – 14 Awesome Benefits You should know

Do you know the importance of inventory management?I am sure most of you will say yes! But do you know the full range of benefits of inventory management?

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Inventory management enhances business operations with the effective flow of goods and services. Inventory Management and control implies the controlling of business stock or controlling the movement of products and services following their demand. Inventory Management and control are highly beneficial in today’s business world as it makes a vital part in any business success/failure having intense competition within its industry. The benefits of inventory management and the knowledge about its usage are vital for enhancing product quality, improving competitive ability, reducing inventory carrying costs by reducing inventories, service enhancement, and operational flexibility through pull systems. Inventory Management and control provide actions & strategies that are integrated into all management controlling, planning, and processes which are crucial to enhancing and making successful management.

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Every business inventory requires a lot of focus, and such attention is provided through Inventory Management and control. The list usually involves the most considerable cash-flow in any business, both concerning purchasing and selling stock. That’s why Inventory Management and control would, in turn, have a massive effect on business finance. Aside from adding competitive ability and profitability, the benefits of inventory management are, and it fosters growth leading to economic and business efficiency. Applying several analyses to business who make use of Inventory Management and control,

Why is Inventory Management Important – Below are 14 Benefits of Inventory Management and Control:

  • Inventory control paves for competitive ability
  • Inventory planning improves service level
  • Inventory planning and management reduces storage cost
  • High inventory turnover brings revenues
  • You can utilise warehouse space better
  • Inventory control makes cost accounting activities easier
  • Inventory control is consistent with safety and economic advantage
  • Regular supply at reasonable prices builds customer confidence
  • Inventory holding results in effective utilisation of human and equipment
  • Effective inventory control enhances market share
  • Inventory control improves product quality
  • Effective inventory control brings the potential saving
  • Inventory control avoids costly interruptions in operation
  • Inventory control strategy facilitates purchase economies

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1. Inventory Control Paves for Competitive Ability

The usage of Inventory Management and control benefits inventory control by enhancing market shares thus, paving the way for competitive ability. The best example is Apple’s smart inventory management which gives them a competitive advantage. Commonalities with values, high factor loadings values, and significant mean values are factors taken into consideration in determining a business supports for competitive strength. These factors undoubtedly demonstrate the importance Inventory Management and control, enhances market share and improves competitive ability.

2. Inventory Planning Improves Service Level

It remains the fact that good Inventory Management and power leads to what all business strive for continuity, the repeat clients. If you desire your hard-earned clients to come back to purchase your products and services, it is necessary always to improve your service level enough to be able to match customer request swiftly. Inventory Management and control aid businesses in meeting such demand by permitting you to provide the right levels of hands-on service immediately your customers require them with the desired lead time, highlighting the importance of inventory management,

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3. Inventory Planning and Management Reduces Storage Cost

These benefits of inventory management envisage on focusing upon Inventory planning and reducing storage costs as you maintain adequate inventories. The central values feature significant factor loadings and commonalities exhibited through proper Inventory Management and control. The factor lowers storage costs and increases revenue by using adequate inventory management and control emphasising importance of inventory management.

You must review this detailed Inventory planning guide 

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4. High Inventory Turnover Brings Revenues

Applying Inventory planning to any business can serve as a bridge to bring in higher revenues. Through proper Inventory Management and control, a company is capable of increasing its profitability. If a business overlooks the benefits of inventory management in its trade, sales, and production, it is possible to hamper maximisation of its operational efficiency. Intrinsically, the inventory’s cost of purchase and production has a substantial effect on gross profit. Using lessened cost of production, a business raises its gross profit. That is why proper inventory planning is required. And with all accounts placed as equal, such company would record superior revenues, which in effect, leads to more profits, again substantiating importance of inventory management.

5. You Can Utilize Warehouse Space Better

Proper Inventory Management and control involve accounting for all production, purchase, and sale of goods that meets customers’ demand. These benefits of inventory management affect management strategy that supports organisational warehouse in attaining better space management.

If you have an unorganised warehouse, you would always find it difficult to handle your inventory effectively. Several businesses elect to enhance their warehouses by arranging higher selling products together in areas that are easily accessible within the warehouse. Performing this process aids in speeding up the order fulfillment and preserves customer’s happiness.

On the same note, you can find Warehouse Space Optimization: 17 Tactics That Can Be Used to Improve Space usefull.

6. Inventory Control Makes Cost Accounting Activities Easier.

Better inventory management is surely going to make your financial controller happier and you can be easily in his good books!

Business owners often develop internal strategies and measures that will guarantee better control and planning of production and sales. Such approaches involve binding every partaker in the business to delivering activities that make Accounting Activities Easier including managers. Usually, these strategies aid such industry to order, account for inventory values, keep inventory flow, along with assistance on how to control obsolete goods. By executing such plans in inventory planning, several businesses can be able to manage its cash flow well.


To enhance your business cash flow, it is expected you set aside some investment into the most effective and practical inventory system that is powerful enough to meet your requirement and is also suitable to match your business environ. For this reason, companies with well thought out plans can save a lot more from the use of active Cost Accounting Activities. Additionally, better Inventory Management and control aid your business in establishing cost benefit for you concerning the financial market conditions. Better cash flow lets companies attain better business and organisational goals.

7. Inventory Control Is Consistent with Safety and Environmental Advantage.

Too much inventory in warehouse can be health and safety issue when employs struggle to walk on the shop floor, can not moves goods easily and it is falling from the shelves.

Good inventory management leads to inventory reduction which leads to less packaging which leads to less waste and contribute to environmental advantage. For me one of the best reasons to show importance of inventory management!

8. Regular Supply at Reasonable Prices Builds Customer Confidence

Evidently, with better strategies in place, any given organisation can use inventory planning and control to improve its cash flow by providing higher customer service at consistent pricing. Inventory control and planning solution allows small business to gain insight into what products are selling more than others. This step will enable them to adjust their product line and to make intelligent business decisions.

9 Inventory Holding Results in Effective Utilization of Human and Equipment

Proper Inventory Management and control solutions save time regarding human resources and equipment usage. Less time expended on managing inventory leads to higher productivity for your business and clients as well. With these benefits of inventory management, your business stays steps ahead of the game and continuously have enough number of products at hand based on inventory movements.

I have seen this first hand during my days as Supply Chain Manager, if excess inventory is not your problem and you are hitting your targets, then you can find time to drive Kaizen activities to drive further improvement in supply chain department.

10 Effective Inventory Control Enhances Market Share

For companies whose scale of operations does not permit the running of several inventories by product line or SKU, the usage of Proper Inventory Management and control solves it. Nevertheless, in some situations, your business size does not matter since roles and policies have to be set up irrespective of the size of the business.  Such procedures and set up will help govern inventory spending and Enhance Market Share.

As we already established Inventory Management and control allows business to be able to handle all cash flow prospects. Companies are not continuously able to procure large amounts of inventory, as capital remains a significant factor in doing so. By having proper Inventory Management and control, businesses can recognise precisely what inventory size is needed and when to deploy them. This step can Enhances Market Share and free up other capitals for re-investment.

11 Inventory Control Enhances Product Quality

The use of Inventory Management and control can assist in remarkably improving business efficiency and product quality. These benefits of inventory management would aid in eliminating waste, and enhances focus on producing Right First Time or Six Sigma Quality.

It remains a fact that having a good inventory management system leads to better success and repetitive customers. If you desire your hard-earned customers always to keep coming, you have to enhance your product quality in the best ways possible.

12 Effective Inventory Control Brings Potential Saving

Proper Inventory Management and control can Bring in Potential Saving as benefits of inventory management. These benefits of inventory management provide businesses with monetary and real-time benefits. There is a debate within controllers if inventory reduction which leads to reduction of inventory carrying cost, can positively impact the bottom line? For me the answer is Yes!

The simple logic is if you reduce $100k of onhand inventory, and put this money in bank to gain interest, which is equivalent to bottom-line benefit.

By monitoring which product bring in more sales and what other potentials they have, your business can save more on every effort with an inventory recount to safeguard accurate records. Good Inventory Management and control strategy also benefits businesses in saving money that could otherwise be lost in slow-moving products. No one can deny this as top reason to show the importance of inventory management!

13 Inventory Control Avoids Costly Interruptions in Operation

Inventory Management and control are beneficial in limiting the employee’s ability to steal or disrupt your operations.  Often costly interruptions in service in businesses can be averted with proper planning. Deprived of inventory control, companies may be none-the-wiser to such disruption. These benefits of inventory management ultimately improve business profitability. By avoiding costly interruptions, businesses can reduce any ‘hidden’ costs. Showing, the importance of inventories management.

14 Inventory Control Strategy Facilitates Purchase Economies

Good Inventory Management and control aids in Facilitating Purchase Economies and maintaining steadiness in production operations. This approach is down to the maintenance of smooth flows in accessing raw materials. Consequently, there are no shortages experienced during the production process — these benefits of inventory management aids in reducing the risk of loss due to desuetude or deterioration of items, hence, highlighting the importance of inventory management. Such checks are placed on items regularly. Additionally, selling all slow-moving items promptly and maintains the right stock all Facilitates Purchase Economies.


I think this 1 min video summarizes the key points of this article very well!


These benefits of inventory management and control are beneficial and good practice for all business types. It is always important to keep a watchful eye on your inventory, and it is still best to do it properly. With these benefits attached to proper inventory management and control, you can regularly, identify and avert any potential inventory challenges and errors. Keep the listed benefits in mind whenever you plan to enhance your business inventory management strategy.

Please share if you think I have missed out any benefits to emphasis the importance of inventory management!

About the Author- Dr Muddassir Ahmed

Dr MuddassirAhmed is the Founder & CEO of SCMDOJO. He is a global speakervlogger and supply chain industry expert with 17 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East and South East Asia in various Supply Chain leadership roles.  Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Muddassir is a Six Sigma black belt and founded the leading supply chain platform SCMDOJO to enable supply chain professionals and teams to thrive by providing best-in-class knowledge content, tools and access to experts.

You can follow him on LinkedInFacebookTwitter or Instagram

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