What Are the Various Types of Inventory Management?

Types of Inventory Management

Inventory is important for all organizations as somehow it is an integral part of your business. However, organizations do not give priority to inventory management, as a result, the business suffers from loss due to negligence of inventory management. Therefore, in this blog, we will cover types of inventory management and other topics that will help you in better inventory management. But first, let us know what exactly inventory and inventory management are!

Inventory can be divided into 4 main categories:

- Raw material

- Work in progress inventory

- Finished goods

- MRO (Maintenance Repair Operation) Spare part

Let us discuss them in detail:

A. Raw Material

Raw material is the inventory that is essential for making finished products. Manufacturing-based organizations utilize raw materials the most. Raw material can be directly produced by your business, or it can be purchased from a vendor.

B. Work in Progress Inventory

Work in progress inventory is that inventory in which the product is still unfinished. It is not yet ready for utilization or purchasing.

C. MRO Spare Parts

MRO Spare part inventory is mainly used in the locomotive & automobile industry. It is a part that is removed from an asset and a new part is installed.

The maintenance department uses it most while they are performing maintenance. Old, rusty parts of machines are removed, and new parts are installed. They are not part of the raw material inventory or finished goods. An example of MRO is nuts & bolts, changing conveyor belts, and so on.

D. Finished Goods

After working with all raw materials & processing them, then finally it is the state when production work is completed, and goods are ready to use, consume, or sell.

These are the four main categories into which inventory can be divided. There are, however, as many various kinds of inventory management as there are types of organizations.

There’s no one-size-fits-all answer as far as organizations are concerned, so it’s important to know as much as possible about the different types of inventory management techniques available to you so you can find the option that works best for your company.

What Is Inventory Management?

Inventory management is the phenomenon of ordering, storing, and selling an organization’s inventory, as we have discussed above, distinct types of inventories.

For several organizations, inventory selling is one of the main sources of revenue generation. The management of inventory is not a simple task, especially when your organization has multiple branches because at some places you will require less inventory.

Inventory management helps in eliminating several types of inventory issues. Therefore, managing the right balance is hectic, which is why you need to invest in an automated inventory management system.

It shows you the inventory level of various locations from a single dashboard. An effective Infizo Stock management software provides help in inventory forecasting.

Lots of organizations are using automated inventory management software as it provides more accuracy. According to Global Market Insights, “The Inventory Management Software Market size crossed USD 3 billion in 2019 and is estimated to grow at a CAGR of over 5% from 2020 to 2026.”

What Are the Distinct Types of Inventory Management?

It is very important to choose the right inventory management type for your business. Distinct types of inventory management are discussed below:

1. Perpetual Inventory Management

In this method, inventory is updated after a specific period, usually months or a year. It means that data is updated monthly or yearly. In this competitive business world, it can be dangerous for business.

You do not know the real-time picture of inventory. It may lead to stockouts and an imbalance in inventory management. The perpetual method can be utilized in small-size industries as they do not need inventory regularly.

2. Periodic Inventory Management

In the periodic method, inventory is updated regularly so organizations do not have to worry about the inventory real-time number. In simple words, data is updated at regular intervals.

Organizations can see the real-time number of inventories. With the periodic method, you can easily avoid stockout issues.

Basically, the difference between perpetual and periodic inventory management is that perpetual inventory updates inventory regularly whereas periodic inventory updates inventory after a long period of time.

What Are the Benefits of Inventory Management for a Business?

Inventory management can be beneficial for a business, as we have discussed below:

Benefits of Inventory Management for Business

Missed To Read: Explained Processes & Best Practices to Improve Infizo Stock Management

Eliminating Overstock

Many organizations purchase inventory in large quantities, investing significant amounts of money. However, inventory has a limited lifespan.

When an organization cannot deplete these stocks, it negatively impacts business, leading to potential waste of the entire inventory. Thus, overstocking can be detrimental to business operations.

Nevertheless, with inventory management software, this risk can be mitigated. Such software offers data and analytics, enabling organizations to precisely calculate required inventory levels and avoid overstocking.

Avoiding Out-Of-Stock

Out-of-stock situations should not be overlooked, as they can cause severe issues for any business, especially in the retail and manufacturing sectors. These industries need to maintain inventory consistently.

If inventory is unavailable, customers cannot find the required products timely, resulting in dissatisfaction. Hence, it’s crucial to address this issue, which can be efficiently managed with automated software.

This software allows for setting re-order limits for each inventory item. When inventory falls below a specified level, it automatically alerts the responsible person to replenish the stock.

Valuable Insights

Data plays a pivotal role in business, offering a comprehensive view of inventory and related expenses. It’s instrumental in identifying opportunities and challenges.

Insights obtained from data are valuable for enhancing business efficiency. They enable businesses to reduce unnecessary expenses and boost productivity.

Through these insights, businesses can identify periods of high or low sales and adjust their strategies accordingly.

Better Productivity

Understanding the precise location of each inventory item is crucial for business operations. There are instances where inventory is misplaced, or locating specific items is time-consuming.

Such scenarios halt business operations and affect employee productivity. Inventory management software helps avoid these situations, streamlining business processes.


Staying competitive in the market is vital. Even minor mistakes can lead to significant losses. Implementing inventory management software provides a competitive edge to businesses.

Investing in this software significantly improves daily operations. This article highlights just a few benefits of inventory management software.

Also Read: Why Equipment Calibration Management Is Important for Manufacturers?

Frequently Asked Questions (FAQs)

1. What Are the Various Types of Inventory Management Methods?

Below are various inventory management methods:

A. JIT (Just in Time) technique

B. Drop-shipping

C. ABC Analysis

2. What Are the Inventory Management Techniques Used for Tracking Inventory?

Techniques for tracking inventory include barcode, QR Code, RFID, NFC, GPS, BLE, IoT.

3. What Is the Significance of Inventory Management Practices?

Important inventory management practices include:

1. Monitoring inventory stock levels.

2. Employing inventory tracking technologies.

3. Investing in automated software.

4. Establishing reorder points.

5. Streamlining daily operations.

6. Utilizing reports & analytics for business improvements.

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