In omnichannel retail, inventory management is the engine–when it’s off, everything else is too.
When shoppers are buying in every direction (online, offline, third-party marketplaces, and more), having too much inventory or not enough at all can wreak havoc. The thing is, with an omnichannel model, a brand’s inventory often exists in numerous locations: brick-and-mortar stores, 3PL warehouses, and Amazon and Walmart distribution centers.
To accurately predict demand, have the right amount of inventory on hand, and facilitate efficient and cost-effective shipping, brands need crystal-clear visibility into where their products are, what’s hot, and when orders are shipping.
This can only occur when brands understand their sales rhythms and fulfillment flow, while having the right inventory management system to keep everything running like a well-oiled, omnichannel machine.
But, how can retailers know what inventory management model is best for their business? We’re breaking it down in an in-depth guide.
Inventory management in an omnichannel world
Omnichannel inventory management is how brands keep the correct stock levels available for efficient order fulfillment across online platforms, physical stores, mobile apps, and other channels. But it goes deeper than that.
The right inventory management model ensures that inventory is optimized for individual retailers in a way that reduces costs while providing an excellent customer experience. In other words, the inventory management model that works best for one brand might not be the best for another.
In general, inventory management involves:
- Having a unified system to centralize all inventory data across channels.
- Providing real-time visibility to enable informed decisions regarding stock.
- Flexible order fulfillment and having the right stock in the right place.
- Better demand forecasting through accurate data.
- Balancing the need for reduced costs with ensuring enough stock on hand.
Popular inventory management models defined
An inventory strategy is one of those behind-the-scenes decisions that quietly affects the entire business: costs, profits, cash flow, and forecasting.
While there is no one-size-fits-all way to handle inventory management, the right model will be critical in handling everyday stock challenges, supply chain disruptions, and economic fluctuations. But, what works one year may not work the next, making it crucial to continually assess and adjust to meet current needs and prevent challenges.
The best way to make the right decision is to understand how each inventory management model works before deciding which to use or creating an ideal hybrid approach. The most popular inventor model management models include:
Just in Time (JIT)
Just-in-time inventory management involves having products on hand only when needed to meet customer demand. In essence, a JIT model aims to reduce storage costs, optimize cash flow, and improve operational efficiency. It requires a supply chain that is both fast and reliable, so brands receive the products right when needed. A JIT strategy can allow brands to respond swiftly to customer demand.
Just In Case (JIC)
Just-in-case inventory management became the go-to during the pandemic when the supply chain was experiencing major issues and demand spiked for particular products. With JIC, brands keep a larger amount of inventory (excess inventory) on hand to help prevent stockouts, avoid production delays, and prevent customer dissatisfaction. A JIC strategy works well during component shortages or supply chain disruptions.
ABC Analysis
With an ABC Analysis inventory management strategy, a brand ranks its items based on value and importance. Products are divided into three classifications — A, B, and C, with A being the most valuable and C the least, helping businesses focus their efforts on the most critical products. In this model, brands can optimize the purchase, storage, and distribution of top-level stock while managing lesser items more simply. ABC analysis enables retailers to prioritize inventory, improving cost-efficiency and decision-making.
Push and Pull Systems
Push and pull systems are two different inventory management strategies. Push is based on a forecast of future demand, while pull is based on actual customer demand. Push inventory management results in higher inventory levels, while pull is triggered by customer orders, meaning less inventory is on-hand. Push can be better for stable demand, and pull for more fluctuating demand.
FIFO, FEFO, and LIFO
FIFO, FEFO, and LIFO are often seen in managing inventory that’s perishable or has a limited shelf life. Each method varies and is suitable for different types of products:
- FIFO: First in, first out means the oldest items are moved first. This model is ideal when looking to prevent waste and spoilage.
- FEFO: First expired, first out revolves around expiration dates, ensuring that products set to expire are moved first. This model is often used with certain types of foods and pharmaceuticals where expiration dates are crucial.
- LIFO: Last in, first out is used when it’s most efficient to move stock up front. LIFO is not often used as it risks obsolescence for older items if not done correctly or with the right products.
Demand forecasting’s role in inventory management
Forecasting demand isn’t just a nice-to-have; it’s become a must for smart inventory management. Instead of relying on gut instinct or crossed fingers, brands can use data they’ve already earned to make better decisions about what to stock, when, and how much. With the right tools, that data goes beyond just past sales and seasonality—it taps into real-time signals like upcoming promos or a spike in web traffic.
When demand forecasting clicks, it’s a game changer. Retailers avoid the costly mess of overstocking and the missed sales of stockouts. More importantly, they’ll keep products flowing and customers happy—because nothing beats having the product someone wants available, exactly when they want it.
How to choose an inventory management model
The best inventory management strategy depends on your product type, lead times, customer expectations, and growth goals. If a brand has a more fast-moving product, they may want more frequent, smaller shipments. However, a high-value or seasonal product might need a buffer stock strategy.
The key? Finding an approach that enables flexibility and control, while being agile enough to adapt to supply chain disruptions and industry trends. Many brands opt for a hybrid model that balances the need for stock availability with cost-efficiency. No matter what a retailer decides, it should be thoughtful, tested, and adjusted to evolve with the business.
Working with a 3PL for streamlined inventory management
A good 3PL partner can transform how a brand manages inventory. Their support goes beyond storing and fulfilling by helping optimize stock levels.
The right 3PL will provide the tech solutions and real-time data needed to provide visibility and work alongside brands to develop strategies that scale with expansions, seasonal spikes, or economic and supply chain disruptions. The right 3PL provider boosts agility and cost-effectiveness for omnichannel operations, letting brands put their focus back on core tasks and growth.
Stop guessing and start strategizing an ideal inventory management plan today. Connect with a Kase omnichannel fulfillment expert to build a smarter, more scalable plan.
