To maintain consistent production and supply, businesses must closely monitor and manage their inventory. However, each company has its unique approach to inventory management, tailored to its specific goals and industry. Join Citek as we explore 9 inventory management strategies to enhance your business operations in 2025!
9 inventory management that business leaders should know in 2025!
9 Inventory Management Strategies
1. Just-in-Time (JIT)
This strategy keeps only enough stock to meet immediate needs. By reducing excess inventory, JIT can significantly lower production and storage costs. However, it requires strong partnerships with reliable suppliers to avoid supply chain disruptions.
2. First In, First Out (FIFO)
FIFO means using the first stocked items first, especially for items with a short shelf life such as food or medications. This method helps avoid expired stock and maintain product freshness.
With the FIFO strategy, the first stocks are sold or used first.
3. Last In, First Out (LIFO)
LIFO is the opposite of FIFO, where the newest items are sold or used first. It benefits businesses during inflation by lowering taxable income, as COGS is often higher with LIFO, reducing profits and taxes in the short term.
4. Economic Order Quantity (EOQ)
EOQ finds the ideal order size that minimizes holding and ordering costs. It relies on annual demand data, ordering costs, and storage fees. EOQ helps avoid stockouts and overstocking.
EOQ helps avoid stockouts and overstocking.
5. Weighted Average Cost (WAC)
Instead of tracking each unit's cost, WAC averages costs across all inventory. This method is useful for smoothing out price fluctuations and providing a more consistent inventory valuation.
6. Cycle Counting
Cycle counting involves counting portions of inventory regularly. This ensures data accuracy without needing full physical counts. Adjustments are made as discrepancies arise.
Cycle counting ensures that actual inventory quantities match the manufacturer's inventory data.
7. ABC Classification
ABC classification groups inventory by priority. “A” items are the most valuable and critical, receiving greater focus to prevent stockouts. Lower-priority “B” and “C” items receive less attention. This method helps businesses focus their inventory management efforts on the most important items.
8. Consignment Inventory
In this model, manufacturers supply goods to retailers, who pay only after a sale. It lowers upfront costs for retailers and reduces storage needs for manufacturers.
Consignment inventory management benefits both manufacturers and distributors, retailers,...
9. Cloud-Based Inventory Management
Cloud-based inventory systems track stock levels in real time, accessible 24/7. These systems forecast demand, calculate EOQ and WAC, and alert businesses when inventory drops below set levels.
Easily Manage Inventory with GROW with SAP
"GROW with SAP" optimizes inventory, boosts profits, and lowers COGS. With a public cloud platform, the system lets businesses track inventory anywhere, supporting decision-making and stock allocation as needed. SAP S/4HANA Public Cloud also tracks inventory by batch or serial number, helping businesses reduce waste and enhance insights.
SAP's GROW solution suite is a comprehensive, innovative solution for business management.
Conclusion
Inventory management is crucial for both manufacturers and retailers. Mismanagement disrupts the supply chain. These nine strategies improve operations, helping businesses grow sustainably in 2025.
Citek - Trusted SAP ERP Implementation Partner in Vietnam
Citek is a consulting company that implements a comprehensive SAP ERP digital transformation solution for medium and large enterprises with specialized solutions such as MES, Data Collection, CRM, Data Warehouse, Business Planning, Business Intelligence, etc.
Citek has gained the trust of 105+ domestic and foreign clients such as Hoa Phat Group, Gelex Group, Loc Troi Group, Eurowindow, THP Group, Adidas, Phenikaa, Nanogen Pharmaceutical, Cadivi, Thibidi, Honda Vietnam, Minh Phu Seafood, Nippon Paint, Ton Nam Kim, SMC Steel, Diana, Big C, Novaland, Mitsubishi Electric, Vipep, Vietnam Industrial Park, etc.
Citek is a prestigious SAP ERP consulting and implementation partner in Vietnam.
With important contributions in the field of Digital Transformation, Citek was recently honored at the Ho Chi Minh City Golden Brand Award 2023, the Top 10 Vietnamese IT Enterprises Award 2021, the Sao Khue Award 2021 and the Vietnam Golden Star Award 2021. In addition, Citek is also the only partner in Vietnam to be honored by SAP as SAP S/4HANA Partner of The Year 2020, SAP's fastest growing partner in the Asia Pacific region in 2019.
Contact now for SAP ERP consultation with Citek experts!