Author: Matt Rickerby Jul 19, 2021 7 Min READ

How to Use Inventory Tracking to Boost Your Business Efficiency (Methods, Benefits + More)

7 Min READ
How to Use Inventory Tracking to Boost Your Business Efficiency (Methods, Benefits + More)


Inventory tracking is one of the biggest challenges in managing a profitable and productive ecommerce business. Ideally, you’d have a system in place that ensures you always know how much inventory you have available, so you can excel at planning your supply chain management accordingly. But without efficient inventory tracking, it becomes increasingly likely you’ll encounter stockouts, overstocking, delays, or excess capital tied up in inventory. 

As your company scales to the next level, it’ll be that much more important your inventory tracking method can evolve with you. Keep reading to learn about the ins and outs of tracking your inventory, and discover how to optimize this process to make your daily operations as smooth and streamlined as possible.

Manage your inventory with Extensiv

What is inventory tracking?

Inventory tracking is the process of continuously monitoring all of the inventory items that a business owns. Tracking tools provide data on how much inventory a company owns, plus the current status of the inventory. In addition, inventory tracking software limits unnecessary theft or loss, by detecting real-time inventory levels for every SKU across every channel.

The primary goal of inventory tracking is to maintain an accurate understanding of available stock levels, allowing businesses to optimize their inventory management. It helps in avoiding stockouts (running out of products) and overstocking, which can tie up capital and warehouse space unnecessarily.

3 inventory tracking methods to consider

While there are several different approaches to inventory tracking, most companies rely on one of three methods. The best type of tracking for your business will largely depend on your specific needs; however, as you continue to grow, automated systems are far and away the greatest tool for knowing where your products are, the correct count at each warehouse, and where those goods are headed next.

1. Manual methods (spreadsheets)

Computer, or even pen and paper, spreadsheets can be a valuable resource for small businesses and startups who need help tracking a low volume of inventory (for example, if you’re dealing with a few select products or similar types of inventory that all reside in the same place). Ecommerce retailers can manually add SKUs to their Excel inventory management spreadsheet and then create columns for pertinent details like product quantity or descriptions. 

Keep in mind that as your business grows, it’ll be harder to find the hours to update your spreadsheets and perform manual inventory tracking. For this reason, many companies outgrow their static spreadsheets rather quickly and adopt more dynamic means of tracking inventory.

2. Inventory management systems

Inventory management systems allow companies to know exactly where their inventory is and how much they have on hand at any point in their supply chain. With qualified inventory management software, businesses can easily track products in the entire lifecycle (and regulate the warehousing and processing of these items, as well).

When using inventory management systems, merchants can also incorporate barcode scanners and Radio Frequency Identification (RFID) technology to support the most up-to-date tracking possible. That’s why inventory management systems are the choice platform for ecommerce brands who want inventory tracking optimization and better accounting for their assets. 

3. Inventory apps

Inventory tracking via an inventory management app lets you make pivotal business decisions with greater certainty. Using real-time inventory tracker apps on your desktop or mobile device, you can keep a close eye on your supply chain and SKU movement, and oversee product performance from virtually anywhere you’re located.

And by analyzing this tracking data, you’ll have the ability to schedule sales orders for raw materials, thus eliminating stockout situations and excess inventory. In other words, inventory apps put an end to superfluous spending and miscalculations among stock counts, which means you can meet all of your fulfillment needs unimpeded.

3 biggest benefits of inventory tracking

parcels ready for shipment

Inventory tracking is integral to your company’s success, since without it, any number of inventory issues can arise. But by leveraging efficient inventory tracking, you’ll be privy to a range of benefits that can boost the accuracy of your data and reporting, prevent losses due to too much (or too little) product on your shelves, and guarantee effective inventory management.

1. Always have enough stock on hand

Ensuring product availability is directly linked to maximizing your fulfillment potential—and luckily, inventory tracking assists in achieving both goals. Real-time inventory tracking gives you insights into how your products are moving to make sure you always have enough warehouse inventory and stock on hand, regardless of seasonality or unexpected surges in business, and can help guide your demand forecasting strategies.

Similarly, tracking inventory can help you set reorder points and other inventory notifications, create purchase orders, and maintain adequate buffer stock, so you can automate replenishment. With inventory tracking, you never run out of an item or ruin a customer’s experience because you were unable to complete their order.

2. Accurate inventory counts

Another advanced inventory strategy is making accurate inventory counts which are vital for avoiding the traps of stock control (overselling or understocking). With inventory management systems, your stock counts and order management will be more precise than ever, thanks to advanced automations for product tracking and inventory control (which eliminates the risk of human errors or accounting inefficiencies).

In fact, when you track inventory in real-time, you won’t have to worry about unforeseen backorders or delayed shipments; instead, you’ll have the assurance that whatever a customer ordered is there on your shelves and ready to be shipped out.

3. Don’t tie up too much capital in inventory

Your products are your bread and butter, but if you’re not sufficiently tracking your inventory, there’s a good chance you’ll incur excess costs that can negatively impact your bottom line. That said, a significant benefit of asset tracking is that it keeps you from tying up too much capital in dead stock or unmoved goods.

And when you have a detailed look at your current stock and its movement throughout the supply chain, you’ll be more prepared to make inventory-related informed decisions (like discontinuing a stagnant SKU or offering discounts, as needed). 

3 inventory tracking challenges

dealing with product returns

Now that you have an understanding of what inventory tracking is and how it can benefit your business, it’s important to note the difficulties involved with monitoring your various items. While it’s true there are a handful of obstacles that can crop up, if you have the proper inventory method in place, you’re sure to get back on *track* in no time.


1. Managing inventory with multiple sales channels

It’s safe to say inventory tracking would be a lot easier if your products simply stayed put within a single warehouse; unfortunately, that scenario doesn’t make for a very successful ecommerce business. The reality is, multichannel selling and distribution is the optimal path toward profitability and sustained growth for any type of brand or industry.

Managing inventory with multiple sales channels can be somewhat of a challenge, seeing as it’s time-consuming (and expensive) to scale your warehouse management and inventory tracking processes. While this is by no means an impossible or impassable task, it will require greater organization, and likely the help of sophisticated omnichannel inventory management software.

2. Dealing with returns

Even after a customer has completed checkout and their order has left your warehouse, there’s no guarantee that product is gone for good. Although returns are an unavoidable part of the ecommerce landscape, that doesn’t make them any less difficult to deal with. And yet, it’s crucial you take care of returns in a timely, thoughtful manner that translates to customer satisfaction and accuracy among your inventory counts.

With that said, manually handling returned goods is rarely your best option. Instead, you’re better off using an inventory management system that can simplify this process and make sure customers are refunded (and items are re-accounted for) within the shortest window.

3. Eats up time and resources

Once your business is on a steady trajectory and growing year-over-year, it’s common for your inbound and outbound logistics to take up more of your time and attention, as well. And these hours spent overseeing stock levels can easily distract business owners from more value-added activities, like analyzing sales trends, launching new marketing campaigns, or really anything that has a direct effect on the company’s growth.

If you continue to manually track inventory or complete inventory counts by hand, know that this practice inevitably eats up critical time and resources you could be devoting somewhere else.

Supercharge your ecommerce growth in 2024 – click here to learn how Nomad Goods  streamlined their inventory management with Extensiv!
3 ways to streamline & improve inventory tracking

Young Woman with Tablet Preparing Parcel for Shipment to Client

Despite the challenges associated with inventory tracking, there are still ample opportunities to move beyond these issues and help your business soar. By implementing a few ways to streamline and improve your inventory tracking, your company can breeze by any impending roadblocks and exceed your goals with ease. Here are some pro tips to streamline and improve your inventory tracking.

1. Use an inventory tracking system

The best way to fend off shortages, delays, discrepancies, or unnecessary inventory costs is with an innovative tracking system. Fortunately, Extensiv's order management solution is a leader in inventory management software, having designed a comprehensive platform with built-in tools to keep track of inventory. 

There’s no doubt inventory tracking becomes increasingly complicated as you add more sales channels and warehousing options, like in-house, fulfillment by Amazon (FBA), or outsourcing to a third-party logistics (3PL) provider. With Extensiv's order management tool, you can make sense of your multi-faceted business needs and use inventory control software to automate inventory tracking to enhance your workflow, simplify your supply chain, and see greater results across the board.

2. Use data and inventory forecasting

Rather than manually adjusting your inventory levels based on customer demand, you can actually harness inventory data to uncover selling patterns and product fluctuations. Inventory forecasting allows you to modify your projected demand based on previous years’ sales, current market trends, and even your inventory turnover ratio for incredibly precise planning.

Not only does forecasting make inventory tracking that much easier, but it also gives you improved inventory control, by calculating what you’ll need to fulfill future orders and predicting what you’ll sell over a given period of time.

3. Conduct frequent inventory audits

The purpose of conducting inventory audits is to ensure accuracy between your existing stock counts and financial records. Frequent inventory audits or cycle counts can provide an in-depth look at your stock flow, help you gauge profits and losses, and keep your business running smoothly.

In addition, regular audits can readily upgrade your inventory tracking. That’s because audits offer important insights into where your inventory is located, and whether certain SKUs have been misplaced or mispicked (which gives you a chance to correct these problems, if needed). 

Improve inventory tracking efficiency with Extensiv Order Management

Inventory tracking is an indispensable part of your ecommerce operations and has the potential to make or break your success in the long-term. But when you partner with a capable and qualified inventory management system, there’s really nothing your company can’t achieve—and Extensiv’s order management platform is definitely that kind of system.

Extensiv’s order management tool is the ideal solution for accurate and efficient inventory tracking, by maintaining real-time stock counts and automating ongoing processes to elevate your brand at every level. With superior functionality, you’ll never wonder whether you have the right amount of product on hand; instead, you’ll have access to continual inventory updates, so you can have total confidence from the initial point of sale to final order fulfillment.

If your ecommerce company produces, purchases, or sells merchandise, it’s imperative to track your inventory throughout the various stages of your supply chain. 


Inventory tracking FAQs

How can businesses choose the right inventory-tracking software system?
Consider factors like:

Types of inventory.
  • Business size and scalability needs.
  • Integrations with existing systems.
  • Budget for implementation and maintenance.
  • Features required (barcode scanning, radio frequency identification, real-time updates, analytics, etc.).
What are the risks of poor inventory tracking?

Poor inventory tracking can lead to stockouts, overstocking, inaccurate inventory reporting, dissatisfied customers due to delayed customer orders, increased carrying costs, and inefficient use of resources.

Can inventory tracking help with supply chain management?

Can inventory tracking help with supply chain management?

Written By:
Matt Rickerby

Matthew Rickerby is the Director of Digital Marketing at Extensiv, the leading solution for multichannel, multi-warehouse D2C brands. For the past ten years, he’s covered ecommerce topics ranging from conversion rate optimization to supply chain management.

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