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Inventory Management Strategies To Implement Today
DotActiv TeamAug 27, 2021 10:30:00 AM8 min read

4 Inventory Management Strategies To Implement Today

We've written about this before: inventory management is a critical concept that you need to grasp, no matter if you are a retailer or supplier. Fortunately, there are multiple avenues - inventory management strategies - available to you to manage your stock better. Or at least have a firm understanding of what comes in and goes out of your business. 

You only need to consider the following statistic uncovered by Ed Romaine, a 30-year expert in the industry. He quotes a survey commissioned by Peoplevox. It found that 34% of businesses have shipped an order later than expected because they sold an out of stock product.

That speaks to the seriousness of getting this right. So how can you achieve that? We unpack a few strategies you can implement in your business today, so you don't struggle tomorrow and why they are worth considering.

About the contributors

Ilze Klopper joined DotActiv in 2018 as a space planner, working on the Amka account. Here, she is responsible for all the business analytics in all categories. Ilze is currently working on the development of Custom Reporting Templates within DotActiv Software.

Leané Mulder joined DotActiv in 2019 as a space planner, working on various ad-hoc accounts. Since then, she has been promoted to account manager. Today, she oversees work on our Motus account. She has a BSc in Consumer Science from North-West University.

Rina Wilkens joined DotActiv in 2018 as a space planner. She has since worked her way up to the position of account manager. Today, she oversees the Health Department at Dis-Chem, which includes categories such as Vitamins, Sports and Foods.

Yolandé Beumer joined DotActiv in May 2019 as a retail space planner for Edible Groceries at Pick n Pay before moving to Dis-Chem. In 2021, she was promoted to account manager where she will look after various ad-hoc accounts. She has a BSc in Consumer Science with Business Management from the North-West University and recently graduated with her Masters.

Safety Stock

1. Consider investing in safety stock

Safety stock, in simple terms, is any stock that you would have in your stockroom over and above what you have on hand to sell. The goal in having this stock is to prevent stock-outs. 

In short, it acts as a buffer in case sales of a certain item are either higher than what you had initially expected or if your supplier is unable to deliver additional/current stock in time. 

Those are not the only benefits of investing in safety stock. There are plenty of others. One includes reducing risk. You can plan and manage unforeseen circumstances such as problems with slow delivery or delayed manufacturing.

Preventing stock-outs is another benefit, which we've already mentioned. Then there is the point that it allows you to please and satisfy your customers and any shoppers who visit your store. Because you're avoiding an unnecessary out of stock situation, you can continuously meet customer demands throughout the year.

You can also gain a competitive advantage. Let's say, for example, you are a hardline retailer and you have additional stock on hand of a particular product. You also know you can use it to entice more shoppers to visit your store. 

So why not run a promotion on them, enticing customers to visit your store. While they're in-store, you can benefit from any additional purchases they make.

Use Software

2. Use software to manage your inventory

Besides investing in safety stock, another inventory management strategy to consider is to use specialist software. 


For one, we don't recommend that you try to manage your inventory manually. It's a complicated process and doing it manually could lead to potential issues, including financial costs. Human error is also a reality. 

Another reason is because of what you can do with specialist software. That includes having the ability to monitor how many products you need to keep in stock to meet consumer demand.

It also allows you to incorporate trends into your forecasting. Let's say, for example, you know that there is an uptick in sales for a particular product during summer and that season is coming up. It's the perfect time to order more to ensure you meet the demand. Imagine attempting this manually? 


Need software to help you calculate how many days it takes for your stock to sell out? We can help


With software, you can also accurately calculate the stock profile/amount of inventory you need over a certain period. We can go back to the example of that product that saw an increase in sales. Knowing that means you can ensure you have enough. This is also where the safety stock strategy can come in. By anticipating potential spikes in sales, you're covered.

As for the consequences of not using software, while some mirror the benefits - see human errors as an example - there are others too.

For example, it can lead to an increase in your costs. You could find yourself spending money on stocking items that are not profitable for your business. 

You'd also struggle to track your inventory across your business. 

Without software, how will you know how much inventory you have? That's especially true if you have a few thousand lines in your store. Even 100 lines could be a challenge. You might suffer from theft without even knowing about it.

Time wastage is another consequence. How would you expect to run a viable business if you need to track your inventory manually? There wouldn't be much time for anything else. With software, you can save your time and use it for other critical aspects of your business.

Use Data

3. Use data and analytics

When it comes to managing your inventory correctly, you need a firm understanding of your data. Not only that. You also need to know which different types of data to consider.

Here’s a summary of what to look at

  • Sales and Units Data;
  • Unit Movement;
  • Days of Supply (DOS);
  • Weekly Movement;
  • Minimum Stock Level; and
  • Safety Stock.

Taking into consideration the above-mentioned data to better manage your inventory, you can complete a stock forecast analysis.  

Units movement will show you the total number of units of stock moved for a specific product over a period. DOS calculates the number of days it will take for you to run out of stock on the shelf if sales continue at the same rate as recent sales, and weekly movement calculates the number of units per product needed for the entire month based on the rate that it sells every week.

With these metrics, you can plan and forecast how your stock will look over a given period, which makes your inventory management efforts more efficient. Using this together with specialist software also ensures your efforts are accurate and meaningful.

Use Forecasting

4. Use forecasting to manage your inventory

If you consider the definition of demand forecasting, there shouldn't be any argument around whether or not it's a worthwhile inventory management strategy to use.

As mentioned in a previous article on demand forecasting, where we compare it to demand planning, we quote ShipBob's Kristina Lopeisnki, who defines it as “the process of using predictive analysis of historical data to estimate and predict customers’ future demand for a product or service”.

Thus, with forecasting, you can expect to prevent (or at the very least limit) stock out situations since you can learn how much to order and when to order it. You can also reduce your costs. 

With forecasting, you can manage your inventory more effectively as you only order what you need and stock those products in demand. Meanwhile, you can decrease holding any unwanted stock. That also means you can be more efficient in how you use your available space. 

Let’s consider you’re a food retailer. Forecasting is crucial because you can’t sell perishable food after its expiry date passes. With forecasting, you can manage your inventory so that that never happens. If it does, you need to reconsider how you forecast.

Specialist software like DotActiv can help, of course. With it, you can determine your casual data. Using your DOS and actual facings means you can know how to forecast the amount of stock you need for the month so that you can continually replenish your shelves.


Need help forecasting your inventory so you can always meet demand? We can help


You can also determine your assortment ranges when building planograms since they have a direct influence on the forecasting for the stock profile. There is cluster optimisation, which provides you with a deeper understanding of the behaviour of your shoppers, your shelf capacity and how long it takes to replenish your stock.

Here’s a good example of what we mean: DotActiv recently completed a project where we ensured that a retailer could build data-driven planograms based on recent sales and units data. This particular client wanted to see what would happen if we build planograms for different regions based on the top-performing products. We based these products on sales, units and profitability specific to the different regions.

Thereafter, we calculated a gap percentage figure, which forecasted the number of sales that could possibly be gained if those planograms were implemented. This would not only increase revenue but also allow for more effective inventory management as items stocked are those products liked and used by consumers. 

It’s one example of many of how forecasting acts as a viable and credible strategy to manage your inventory effectively.


Managing your inventory effectively can be quite daunting at first and especially so if you don’t have set strategies in place. Fortunately, if you can implement such strategies, it’ll be that much easier to run a profitable retail business. 

Looking for advice or need a category management solution that can help your business? Visit our online store here for more information or book a custom exploratory consultation.


DotActiv Team

The DotActiv team comprises category management experts lending their retail experience and knowledge to create well-researched and in-depth articles.