Importance of inventory management

Aaron Thompson
January 12 2024

Over the past 15+ years it has been surprising the responses we have received from small-business owners when they are asked about the importance of inventory management for their businesses. Some really get it, but others do not seem to realize just how many dollars are falling through their fingers.

Can you imagine trying to run a business when you don’t know how many widgets you have in your inventory? Or when you need them to complete a sale, not knowing exactly where they are? Even worse is not having enough on hand to complete the sale and losing the customer to a competitor.


The importance of proper inventory management can’t be emphasized enough these days. A good inventory system will provide high visibility of all items right down to the shelf and bin, even if you have inventory in multiple locations. It will prevent stockouts, allow for ample lead-time to replenish stock, and give you an idea of the value tied up in your stock at any given time.

For many businesses, physical inventory is their biggest expense. Properly managing this expense could mean the difference between success and failure. Ask yourself if transfers of inventory between locations are quickly, easily, and accurately recorded. Your answer will reveal a lot about how well your system is actually working.


The following might help determine if your inventory solution needs to be upgraded. If you answer yes to more than one of these questions, you probably need to look for a better system – one that simplifies the processes by automating them from start to finish.

  • Do many individuals touch the inventory from the time it arrives until it is sold?
  • Are the processes and procedures loosely defined and poorly enforced?
  • Does incoming inventory get placed in whatever space is open and available?
  • Do you wait to reorder inventory based on discovering you are running low or out?
  • Are inventory counts best guesses based on routine manual counts?
  • Do you find yourself doing double and triple data entry in different systems to try and track movement of inventory from receiving to the final sales?
  • Does picking and packing require employees to hunt all through the warehouse for items to complete an order?
  • Is your system for tracking inventory paper-based, on a whiteboard, or trapped in a custom-built spreadsheet?

These processes may work short term, but they are not cost-efficient ways of running a business. If you are serious about competing and consistently generating strong profits, you need to purchase an appropriate inventory management software solution. The ROI on a great system, like Fishbowl Manufacturing or Fishbowl Warehouse, means it will pay for itself in a few short months and make your life much easier and your business much stronger and healthier. Proper inventory management is a competitive advantage that will drive your company’s performance. The commitment to do it right might seem hard at the start, but the long-term benefits can’t be ignored if you are trying to build a sustainable and profitable business.


Inventory management is important to small businesses because it helps them prevent stockouts, manage multiple locations, and ensure accurate recordkeeping. An inventory solution makes these processes easier than trying to do them all manually. To see if your inventory solution is up to the challenge, ask yourself the series of questions listed in this article.

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