Stock is usually the largest amount of cash an online store has sitting still. Too little of it and you lose sales, disappoint customers and pay extra for rushed shipments. Too much and money is stuck on shelves, storage costs climb and slow products end up discounted. Inventory management is the discipline of steering between those two failures with numbers rather than instinct. It covers recording every unit that comes in and goes out, knowing the cost of what you hold, deciding when to reorder and how much, and checking regularly that the system matches the shelf. Done well, it turns stock from a guess into a plan.
What is inventory management
Inventory management is tracking how much stock a business has, where it is and what it cost, and deciding when and how much to reorder. The goal: enough stock to fill orders, without burying cash in surplus.
- Recording: every unit that comes in and goes out.
- Cost: what the stock you hold is worth.
- Reordering: when and how much.
- Control: counts that confirm the system matches the shelf.
How inventory management works
Every good inventory system rests on a record of movements. Stock goes up when goods are received from a supplier and down when orders ship, with adjustments for counts, damage and returns. From that record you get three numbers per product:
- On hand: units physically in the warehouse.
- Available: on-hand units minus those already committed to open orders.
- Inventory value: units multiplied by their cost, under the costing method you use (FIFO or weighted average, for example).
Inventory management formulas
Reorder point
Reorder point = average daily sales × supplier lead time (days) + safety stock
- Sales: 12 units of a product a day.
- Lead time: 20 days.
- Safety stock: 60 units as a buffer against delays.
- Result: 12 × 20 + 60 = 300 units. When available stock drops to 300, it is time to order.
Inventory turnover
Inventory turnover = cost of goods sold for the period ÷ average inventory value
- Annual cost of goods sold: $240,000.
- Average stock value: $60,000.
- Turnover: 4, so stock sits for about 365 ÷ 4 ≈ 91 days before it sells.
A falling turnover is an early warning of overbuying or slowing demand.
Inventory management for an online store
Online stores feel inventory errors fast:
- Selling without stock: an item that is not on the shelf leads to a cancellation, a refund and an unhappy customer.
- Several channels: each has its own stock number. If those numbers drift apart, the same unit can be sold twice.
- Costing: a product's margin is only as reliable as the cost recorded against it.
Common inventory management mistakes
- Counting only what is sold, not what is received. Without recorded receipts, stock and cost figures drift from reality.
- One threshold for every product. Fast and slow sellers with different lead times need different reorder points.
- Treating available and on-hand as the same. Units committed to unshipped orders cannot be sold again.
- Skipping periodic counts. Theft, damage and picking errors accumulate silently.
- Staying on a spreadsheet too long. Once several people or channels touch the same stock, manual sheets fall behind.
Related concepts
- SKU: each tracked item needs a unique one.
- Landed cost: imported stock should be valued at its full landed cost, not the supplier's price alone.
Inventory management in StoreChart
The StoreChart inventory module keeps a ledger of stock movements for each warehouse:
- Receipts: record the supplier and unit cost. Imports can be received straight into stock at their landed cost.
- Available and on hand: for products with inventory tracking on, available quantity drops when an order is created and on-hand quantity drops when it ships.
- Low-stock threshold and costing method: per product. Costing is fixed, weighted average or FIFO.
- Connected stores: orders from WooCommerce and Shopify update StoreChart's stock.
- Not included: StoreChart does not write stock levels back to those stores, so each store's own stock settings still control what shoppers can buy there.
Frequently asked questions
Inventory management vs warehouse management?
Inventory management is about knowing what you have, where, and when to reorder: the numbers and thresholds. Warehouse management (WMS) is the physical execution layer: bin locations, picking routes, and staff workflows, and often sits on top of inventory data rather than replacing it.
How often should you review a minimum-stock threshold?
At minimum every quarter, and immediately after a significant change in sales velocity (a viral product, a seasonal spike, or a new marketing channel): a threshold set for last year's demand level will trigger too late or too early once demand shifts.
Does inventory management matter for dropshipping?
Yes, though the mechanics differ: instead of tracking physical stock on hand, the store needs visibility into supplier stock levels to avoid selling a product the supplier itself is out of, which otherwise surfaces only after the customer has already paid.