How to Improve Warehouse Picking Speed and Accuracy in 7 Steps

Jul 16, 2025 | Blog

There’s a lot that goes into fulfilling a customer order, way more than most people realize. From receiving the order to delivering it to your doorstep, order picking remains one of the most labor-intensive and error-prone processes in the warehouse.

In fact, so many warehouses actually struggle with picking and packing mistakes. Each of these mistakes not only comes with a heavy financial cost but also the potential of damaging customer relationships that took years to build.

In this article, we’ll break down seven practical steps that can transform your picking operations, improving operational efficiency and customer satisfaction.

What’s the Average Warehouse Pick Rate?

The average pick rate for most warehouses is 50 to 250 items per hour. But this rate varies because of so many factors, including industry, warehouse sizes, and the complexity of the operations. 

This is why it’s important that you know where your operation stands based on benchmarks so you can identify areas for improvement, and in turn, you can set realistic performance goals.

7 Steps To Pick Orders Faster in a Warehouse

Improving warehouse efficiency doesn’t happen overnight. But what most operations don’t realize is that there are many more actionable ways to make real progress.

Analyze the Current Warehouse Operations

The very first step is evaluating your warehouse operations because this helps you identify the bottlenecks and inefficiencies of your operations. Map out your picking process from start to finish, including picking paths, storage layouts, and order processing times.

By doing this, you can pinpoint areas of delays, for example, excessive walking distances, frequent stock-outs, or maybe congested picking zones. 

Change the Layout of the Warehouse

If you haven’t already, consider implementing ABC analysis. This prioritizes high-demand items for quick access, leading to quicker order fulfillment.

This layout reduces pick times through optimized layout, streamlines routes within warehouse zones, and overall improves the efficiency of picking processes.

Remember that even the smallest adjustments in your warehouse layout can really help reduce the travel time for pickers. 

Choose an Efficient Picking Method

Different operations require different picking methods. This is why the best method for your warehouse will greatly depend on your order profile, inventory characteristics, and staffing structure.

• Batch Picking: Pickers collect items for multiple orders simultaneously, which reduces travel time, but this method requires careful sorting.
• Zone Picking: This method reduces congestion by dividing the warehouse into sections with dedicated pickers, focusing on picking items only within that area.
• Wave Picking: This method aligns the picking process with order priorities, where it coordinates multiple pickers across zones to complete large volumes of orders in a scheduled timeframe.

Use Technology to Speed Up the Process

Even basic technological integration helps streamline picking processes and reduces errors in order picking. Implement barcode scanning for accuracy and use tools such as mobile scanning devices to eliminate paper pick lists.

Integrating Warehouse Management Systems (WMS) can reduce travel distance by optimizing pick paths and ensuring real-time inventory updates. There is also a voice-directed picking that keeps pickers’ hands free while providing clear instructions. 

Train Employees Effectively

Remember that even the best systems and layouts still underperform without proper training. Companies that train staff on best practices in picking can help them understand all the standardized picking processes and become familiar with the technology in use, leading to more efficient operations.

ShipHero’s intuitive system dashboards and automated workflows reduce the learning curve for new pickers. The clear visual guidance makes the training more effective, ensuring consistent performance across teams.

Track Key Metrics for Picking Speed

You can’t improve what you don’t measure. So, implement and monitor key performance indicators (KPIs) to identify improvement opportunities and recognize top performers, whose techniques can be shared with the team.

Here are some performance metrics to monitor:

• Pick rate (items picked per hour)
• Order cycle time (from order receipt to ready for shipment)
• Accuracy rate (percentage of orders picked without errors)
• Distance traveled per order
• Error rates and types
• Labor utilization

Improve and Optimize Inventory Management

When inventory is disorganized or inaccurate, pickers waste valuable time searching for products, waiting for bin filling, or replacing pallets. This is why inventory replenishment strategies are important for an efficient picking process.

Inventory management tools from ShipHero provide optimization across multiple warehouses and alerts for automatic replenishment. This makes sure that the right products are always available in the right locations. 

You can also organize products by popularity, size, and other relevant picking factors to optimize storage for faster and easier picking.

Pick-to-Light by ShipHero: Ensuring Efficient Order Picking

ShipHero’s Pick-to-Light system improves the overall picking efficiency through visual guidance. It uses LED displays to guide pickers to the exact location of items, accelerating the picking process and reducing errors at the same time.

Pick-to-Light stands out for a few key reasons:

• Increase in picking speed by up to 50%, compared to traditional paper-based methods.
• Achieve near-perfect accuracy rates through visual confirmation.
• Reduces training time for new pickers.
• Integrates seamlessly with ShipHero’s WMS for synchronized operations.
• Scalable and adapts to various warehouse sizes and layouts.

Relationship Between Warehouse Picking Speed and Accuracy

In warehouse operations, speed and accuracy are often viewed as competing priorities. But in reality, speed without accuracy creates returns, customer service issues, and rework that ultimately affect overall efficiency.

When customers receive incorrect or incomplete orders, their trust in your business is immediately affected, regardless of how quickly you resolve the issue. 

The most successful warehouses recognize that there has to be a balance in both because many of the same improvements that increase speed also enhance accuracy.

How to Calculate Order Accuracy Rate?

Order Accuracy Rate (%) = (Number of Accurate Orders / Total Orders) × 100

To calculate the order accuracy rate, divide the number of perfectly fulfilled orders by the total number of orders shipped, then multiply by 100 to get a percentage.

This metric directly impacts both customer satisfaction and your operational costs. This is why 99.5% or higher is the recommended target accuracy rate.

Tips to Minimize Error Rates

Error rate monitoring is critical because it can reveal patterns in your error rates. Maybe there are specific shifts or seasons where you are more error-prone, or products that are commonly confused.

Here are a few smart ways to reduce mistakes on the floor:

• Double-check orders by implementing verification steps at key points in the picking process.
• Leverage automation to reduce manual tasks and make use of automation like barcode scanning or ShipHero’s Pick-to-Light system to confirm correct item selection.
• Establish quality check stations for high-value or commonly confused items. This organizes inventory for faster access and ensures accurate order fulfillment.

Key Takeaways

• Improvements across warehouse layout, picking strategies, technology integration, and training programs all contribute to warehouse picking efficiency.
• Technology solutions like ShipHero’s WMS or Pick-to-Light streamline warehouse operations at scale.
• Training and tracking key metrics guide continuous improvement efforts.

Frequently Asked Questions

What is a Good Pick Rate?

For manual picking operations, a good pick rate typically ranges from 80 to 150 items per hour. Note that for both manual and automated picking, the rate varies significantly based on warehouse size, item types, and complexity of orders.

Can Picking Speed Be Improved Without Automation?

Yes. Picking speed can be improved without automation simply by reorganizing high-velocity items, implementing batch picking methods, or redesigning pick paths.

That said, tech solutions offer far greater speed and accuracy benefits. For example, operations using advanced systems like Pick-to-Light can achieve a pick rate of 200-350 items per hour.

Automation enhances visibility of picking errors, tracks accuracy rates across orders, and even utilizes KPIs to improve picking speed.

Can Mobile Devices Help Increase Warehouse Picking Speed?

Yes, mobile devices can help increase warehouse picking speed by eliminating time spent handling paperwork and manually recording picks.

ShipHero’s mobile-optimized picking solutions provide improved pick paths, real-time updates for inventory changes, and immediate verification. Plus, it integrates seamlessly with handheld devices like scanners and smartphones, minimizing the learning curve.

Inventory Management vs. Warehouse Management: What is the Difference?

Jul 16, 2025 | Blog

At first glance, inventory management and warehouse management might appear to be interchangeable terms, two sides of the same logistical coin. After all, both deal with products, storage, and the movement of goods.

But in reality, both are distinct systems, each with its own set of responsibilities, technologies, and strategic importance. Today, many businesses still struggle to distinguish where one system ends and the other begins. 

In this article, we’ll explore what each system does, how they complement each other, and how to decide which solution (or combination) best supports your business. 

Ultimately, understanding the critical differences between them is the key to building a more responsive, efficient, and profitable operation.

What is Inventory Management?

Inventory management is the strategic process of tracking, ordering, and optimizing stock levels across multiple locations. It’s the system that ensures your business always has the right products, in the right quantities, at the right time. 

At its core, inventory management goes beyond simple counting:

• Aligns inventory levels with demand forecasts
• Supports order fulfillment processes by ensuring availability
• Reduces stockouts through replenishment planning
• Monitors inventory turnover rates to improve cash flow
• Involves cycle counting for inventory accuracy
• Tracks expiration and shelf-life of products, especially for perishable or regulated goods

What is Warehouse Management?

Warehouse management, on the other hand, is all about how goods move within a facility, not just where they are. It focuses on the physical control and operation of storage spaces.

If inventory management is your brain, warehouse management is your hands and feet. It governs everything that happens inside the warehouse, from receiving goods to shipping orders.

A robust warehouse management system (WMS):

• Optimizes storage space for efficiency
• Controls stock locations within the warehouse
• Enables efficient picking and packing of goods
• Improves labor efficiency within storage areas
• Minimizes handling times through organized layout
• Enhances visibility across supply chain operations

Inventory Management vs Warehouse Management

The main difference between inventory management and warehouse management lies in the scope and focus areas. While both systems are integral to the supply chain, they differ significantly in their tools, processes, and use cases.

According to Investopedia, inventory management focuses on maintaining optimal stock levels across locations, while warehouse management centers on the efficient handling and storage of goods within the warehouse.

Key Functionalities

System Capabilities

While inventory and warehouse management often overlap in function, the software systems that power them are designed with different goals in mind. Although both systems integrate with shipping and logistics systems to improve order accuracy and customer satisfaction.

Inventory Management Systems (IMS)

1. Automate demand forecasting
2. Integrate with POS, ERP, and eCommerce systems
3. Track and replenish inventory
4. Provide alerts for low stock or expiring items

Warehouse Management Systems (WMS)

1. Include barcode and RFID scanning
2. Use robotics and automation for picking
3. Optimize layout and storage zones
4. Monitor employee performance and workflows

Focus

Inventory management focuses on product-level data and availability across your entire operation. Basically, it’s concerned with what you have, where you have it, and when you’ll need more.

Warehouse management focuses on physical processes, location-level control, and movement within a specific facility. It’s all about how efficiently you can move products from point A to point B within your four walls.

Technology Use

IMS platforms are typically cloud-based to maintain accurate stock levels across all sales channels. They often include tools for:

• Balancing stock levels based on sales trends
• Coordinating with demand planning systems
• Preventing inventory shrinkage and loss

WMS platforms leverage advanced tech to run your warehouse at peak efficiency. They are specifically designed for handling warehouse operations and improving throughput.

• RFID and barcode scanners
• Automated conveyor systems
• Cross-docking to expedite shipments

Complexity Levels

Inventory management systems are often simpler to implement and scale. Most growing businesses can implement inventory management without major operational disruption.

Warehouse management systems are more complex and require more setup. They are typically used in large-scale operations where the complexity of movement and fulfillment is much higher.

Inventory Management Systems vs. Warehouse Management Systems (IMS vs. WMS)

The main difference between IMS and WMS software solutions is what they’re designed to optimize. It all comes down to their real-world applications and the problems they solve for different types of operations.

When to Use Inventory Management vs. Warehouse Management

In many cases, businesses use both systems in tandem. This combination provides complete visibility and control, from procurement to picking to shipping.

You should consider an Inventory Management System (IMS) if:

• You operate multiple sales channels or locations
• You need to align inventory levels with demand forecasts
• You’re looking to optimize reordering and reduce dead stock
• You want to integrate with eCommerce, POS, or ERP systems

You should consider a Warehouse Management System (WMS) if:

• Your priority is to improve warehouse labor efficiency
• You need to enable efficient picking and packing of goods
• You’re running a large warehouse or fulfillment center
• You want to minimize handling times through organized layout

Which System is Right for Your Business

Choosing between inventory and warehouse management systems depends on your current scale, growth trajectory, and operational pain points.

1. Consider your product volume: If you’re moving hundreds of orders daily with complex SKU variations, then a WMS is essential. For businesses with steady but manageable order volumes, IMS may offer a better ROI.
2. Evaluate your warehouse complexity: Simple operations with straightforward pick-pack-ship processes are suitable for inventory management alone. Multi-zone warehouses with complex workflows need a WMS.
3. Assess your growth trajectory: Fast-growing businesses should consider systems that can scale with them. Starting with a robust IMS and adding WMS capabilities as you grow often makes more sense than trying to implement everything at once.
4. Budget considerations: IMS typically requires lower upfront investment, while WMS implementations can be more expensive but offer greater operational efficiency gains.

PRO TIP: Start with the system that solves your biggest pain point today, and look for solutions that can scale with you.

Key Takeaways

• Inventory management focuses on what you have across all locations, while warehouse management focuses on how efficiently you move products within your facility
• Choose based on your biggest pain point: stock availability issues point to IMS needs, while operational inefficiency suggests WMS priority
• Using both systems together provides end-to-end control over your supply chain.

Frequently Asked Questions

Can Inventory Management Systems Integrate with Warehouse Management Systems?

Yes, IMS and WMS can be integrated for complete end-to-end visibility and control. This allows businesses to sync inventory data with warehouse operations, which improves both forecasting and fulfillment accuracy.

Is Warehouse Management a Part of Inventory Management?

Not exactly. While the two are related, warehouse management is typically considered a complementary system to inventory management. It’s focused on the execution side of the supply chain, specifically inside the warehouse.

Which System is More Important for Optimizing Logistics?

It depends on your business priorities and current operational challenges. IMS is crucial for ensuring product availability and informed purchasing decisions. WMS is essential for fast, accurate fulfillment and warehouse efficiency.

Inventory Control: Types, Methods, and Techniques

Jul 16, 2025 | Blog

From the moment stock enters your warehouse to the second it ships out, inventory control is the backbone of a smooth, error-free supply chain.  

Done right, it prevents issues like mis-picks, spoilage, mis-shipments, out-of-stocks, overstocks, and costly delays. Done poorly and you’ll be fighting fires daily: dealing with wrong shipments to customers, running out of bestsellers during peak season, watching perishable goods expire on shelves, the list goes on.

A strong inventory control system ensures that you’re always working with the right amount of stock, not too much, not too little. It enables your business to prevent stockouts with timely replenishments, reduce excess stock and shortages, and make cost-effective purchasing decisions driven by real-time insights.

Read on as we break down the different types of inventory control systems and explore proven methods for managing inventory more effectively, helping you find the right fit for your operations and scale smarter.

Types of Inventory Control Systems

Inventory control systems can be categorized into two primary types: periodic and perpetual. Each has its place depending on your operational scale, available resources, and business model.

As defined by the CSCMP, these systems help businesses track stock levels and streamline warehouse operations through either manual periodic counts or continuous real-time monitoring.

Periodic Inventory Control

With a periodic inventory system, inventory counts are done manually at regular intervals. Think monthly, quarterly, or annual physical inventory checks. 

This traditional approach involves physically counting all stock to update inventory records and is typically used by small businesses with low inventory turnover. If your operations are straightforward, periodic control may work.

Pros:

• Low cost and simple to implement
• No need for advanced software or infrastructure

Cons:

• Lacks real-time visibility
• Prone to human error
• Delayed reporting may lead to stockouts or overstocking

Perpetual Inventory Control

A perpetual system uses technology for real-time tracking of inventory as items are received, moved, or sold. This often includes barcode scanning, RFID technology, and integrations with inventory management platforms, such as ShipHero. 

Perpetual control requires an upfront investment in software and employee training, but the benefits of accuracy and automation far outweigh the costs.

Benefits include:

• Enhances visibility in multi-location tracking
• Supports cycle counting for accurate records
• Enables automated reordering based on thresholds

Best Inventory Control Methods

If you’re struggling with overstocking, constant reordering, or poor forecasting, it’s time to re-evaluate your method. But choosing the right inventory control method isn’t one-size-fits-all. It depends on your business size, industry, product mix, and the degree to which demand fluctuates.

In this section, we break down the most effective inventory control methods used across industries today.

First-In, First-Out (FIFO)

FIFO ensures the oldest inventory is sold or used first. It’s especially effective for perishable goods or products with expiration dates (e.g., cosmetics, food, pharmaceuticals). This method reduces the obsolescence of inventory items by maintaining proper stock rotation.

ABC Analysis

ABC Analysis categorizes inventory based on value and consumption:

• A-items: High-value, low-quantity
• B-items: Moderate value and quantity
• C-items: Low-value, high-quantity

This method allows prioritization based on product demand and supports cost-effective purchasing decisions by allocating resources where they’ll have the biggest impact on profitability.

Economic Order Quantity (EOQ)

EOQ is a formula-based method that calculates the ideal order quantity to minimize warehouse storage costs. It’s particularly effective for businesses with steady demand and predictable lead times. 

While EOQ works best for steady, predictable demand, it improves cash flow through better stock control by balancing capital investment in inventory and preventing rush orders at premium prices.

Fast, Slow, and Non-Moving (FSN)

FSN classifies inventory by how quickly it moves:

• Fast-moving: Frequent sales or usage
• Slow-moving: Occasional movement
• Non-moving: No movement in a set period

This approach provides data-driven insights on demand patterns, revealing which products move quickly versus those gathering dust. This method optimizes space utilization in warehouses by strategically placing fast-moving items in prime picking locations.

Vendor-Managed Inventory (VMI)

With VMI, suppliers take responsibility for maintaining stock levels and replenishing inventory based on usage data. This collaborative approach works particularly well for high-volume, predictable items where supplier expertise can enable consistent stock levels, reducing your inventory management workload.

Batch Tracking

Batch tracking monitors inventory by lot or batch numbers throughout the supply chain, which is critical for regulated industries.

Benefits of this method include:

• Enhances traceability
• Essential for recalls and quality control
• Ensures compliance with industry regulations

Key Techniques for Inventory Control

The inventory methods we discussed above are already powerful. But they become even more effective when combined with tactical techniques that enhance performance and accuracy.

Just-In-Time (JIT) Inventory

JIT supports just-in-time (JIT) methodologies by receiving goods only as needed for immediate use or sale. This technique is ideal for companies looking to minimize warehouse storage costs and reduce tied-up capital. 

Risk Alert: JIT is sensitive to supply chain disruptions. Consider backup plans or safety stock buffers.

Safety Stock and Reorder Points

Simply put, safety stock acts as a buffer against supply delays or sudden demand surges, while reorder points trigger automated replenishment when inventory hits a certain level. This approach stabilizes operations and ensures customer satisfaction even during demand spikes.

Why it matters:

• Uses safety stock to mitigate risk
• Enables automated reordering based on thresholds
• Aligns stock with production schedules

Inventory Audits and Cycle Counting

Instead of shutting down operations for full physical counts, cycle counting involves regularly auditing portions of inventory. Cycle counting also allows continuous verification of stock levels, which helps catch discrepancies early. This technique improves accuracy with minimal disruption. 

Average Costing

Average costing values inventory based on the weighted average cost per unit. This technique simplifies accounting and cost-of-goods calculations, smoothing out price fluctuations over time. 

Use case:

• Ideal for businesses with frequent purchases of identical items
• Helps standardize reporting and margin tracking

How to Choose the Right Inventory Control Method

Many businesses rush into inventory control methods without proper evaluation, resulting in expensive false starts and frustrated teams. The truth is, your ideal approach depends on a range of variables, including your inventory size, product diversity, order volume, and the level of visibility and automation you want. 

But how do you know what works best for your operations? Here’s how to approach that evaluation and choose the right fit.

1. Inventory size and turnover: High-turnover businesses may benefit from perpetual inventory systems and methods, such as FIFO or EOQ.
2. Product variability: Diverse product lines may require ABC Analysis and FSN for better categorization.
3. Order frequency: Frequent orders benefit from JIT and automated reorder systems.
4. Technology access: Businesses with access to inventory software should consider perpetual systems for real-time tracking and data insights.

OUR BEST TIP: Start by piloting one or two methods. Test methods on a subset of SKUs before full implementation, then monitor performance and adjust based on what aligns best with your operations and goals.

Key Takeaways

• Inventory control enhances inventory accuracy and efficiency while reducing waste and supporting smarter decision-making.
• The right combination of systems, methods, and techniques can optimize space utilization in warehouses and enhance cash flow through improved stock control.
• Success stems from aligning control strategies with a business’s size, industry, and customer demand.

Frequently Asked Questions

What is the Most Commonly Used Inventory Control Method?

FIFO and periodic inventory control are widely used due to their simplicity and ease of implementation. FIFO is especially common in industries that handle perishable goods, while periodic control is more commonly used by smaller businesses.

How Do Inventory Control Techniques Improve Business Efficiency?

When your inventory is under control, everything else falls into place. Inventory control methods, such as cycle counting and automated reordering, eliminate the hidden costs and operational friction that drain resources daily. They help streamline every stage of your operations from purchasing to fulfillment.

The result?

• Fewer stockouts and overstocks, leading to better customer satisfaction
• Lower holding costs, thanks to smarter purchasing and optimized stock levels
• Improved cash flow, because capital isn’t tied up in unsold inventory
• More accurate planning, driven by real-time, data-informed insights

Can Multiple Inventory Control Methods Be Used Together?

Yes. Many businesses combine various methods and techniques to meet their diverse operational needs. For example, a retailer may use FIFO for perishables, ABC for prioritization, and JIT for high-demand items to strike a balance between efficiency and flexibility.

How Does Inventory Control Differ from Inventory Management?

Inventory control focuses specifically on tracking, regulating, and optimizing stock levels to ensure your system matches what is actually on your shelves. 

Inventory management is a broader umbrella that encompasses control, as well as strategic decisions such as forecasting demand, negotiating with suppliers, planning seasonal inventory builds, and optimizing the entire supply chain.

Perpetual Inventory vs. Physical Inventory: What is the Difference?

Jul 16, 2025 | Blog

What happens when your inventory records don’t match what’s actually sitting on your shelves? Orders get delayed. Customers get frustrated. And your bottom line takes the hit.

That’s why your choice between perpetual inventory vs. physical inventory impacts your entire business. Inventory tracking is crucial for operations, profitability, and customer satisfaction; so, selecting the right method is essential.

In this guide, we’ll break down what each inventory method involves, how they differ, and when to use one over the other. That way, you reduce discrepancies and streamline inventory management better than ever.

What is Perpetual Inventory?

Perpetual inventory is a system that involves continuous updates to inventory levels as transactions occur. Every time an item is sold, returned, or received, your inventory system logs that movement instantly.

This method relies on automated tracking systems, such as barcode scanners, RFID tags, and point-of-sale (POS) integrations, to track, record, and update inventory data in real-time.

Because it provides real-time stock information, you get instant visibility into your goods, making it easier to detect issues, avoid overstock and stockouts, and manage inventory purchases effectively. Plus, it reduces human error in stock counts by minimizing manual intervention.

Perpetual inventory is widely used in large-scale retail and warehouses due to its accurate, scalable, and technologically driven capabilities. 

In fact, a study found that implementing an Electronic Inventory Management System (EIMS) in an oncology pharmacy business resulted in a 6.02% increase in inventory accuracy and a 98% improvement in inventory visibility. Perpetual inventory is the go-to solution for any company with high inventory turnover and complex operations.

What is Physical Inventory?

In contrast, physical inventory is the old-school, manual approach. It requires manual counting at specific intervals, like once a month, quarterly, or annually, to assess inventory levels.

It doesn’t rely on live data or automation. Instead, it provides a detailed snapshot of your stock at a given moment. This method is especially common during audits, financial reconciliations, or when a business lacks integrated tech tools.

While it’s more labor-intensive, physical inventory is still used across industries for verification, loss detection, and ensuring accuracy in cases where tech may fall short.

Common Physical Inventory Methods

• Full Inventory Counts: Everything is counted at once. Thorough but disruptive. Typically done once a year.
• Cycle Counting: Rotating schedule where sections of your inventory are counted regularly to help maintain accuracy with less interruption.
• Spot Checks: Random checks on specific items or locations to quickly validate data or detect issues.

Difference Between Perpetual Inventory and Physical Inventory

The main difference between perpetual inventory vs. physical inventory is how and how often inventory data is collected, updated, and used to manage your operations.

Let’s take a look at how these differ from the other:

Process and Frequency

With perpetual inventory, your inventory records are updated automatically and continuously. Every item scanned in or out is instantly reflected in your system. It aligns inventory levels with sales in real-time.

Physical inventory, on the other hand, depends on scheduled counts. It could be cycle counting or a full audit, which happens at specific times, not continuously.

Accuracy and Real-Time Updates

Perpetual systems give you real-time, dynamic data, but errors can occur due to incorrect scanning or software glitches. However, they allow for immediate detection of stock issues and quick adjustments.

Physical counts offer a precise, point-in-time assessment. However, once counted, your inventory data becomes outdated until the next count, resulting in gaps in visibility.

Human Involvement

Perpetual inventory minimizes human effort. Technology, automation, and integration with other tools reduce the need for manual work.

Physical inventory is highly labor-intensive. Staff must physically count and verify each product, which increases the risk of human error. It also requires operational downtime.

Cost

Perpetual systems involve upfront costs for software, equipment, and training. But over time, they’re cost-effective. These systems reduce the need for manual labor and mistakes.

Physical inventory may seem cheaper at first, but labor, errors, and time lost during counting add up in your budget, affecting expenses, revenue, and even net income.

Speed

If you need fast answers, perpetual inventory gives you real-time, automated updates. In contrast, physical inventory can slow you down. You may need to pause warehouse activities to count, reconcile, and analyze your inventory, resulting in lost time and increased costs.

Size of the Organization

Small businesses with limited inventory might get by with manual counts. However, larger organizations, especially those with multiple warehouses, benefit significantly from real-time tracking, seamless integration, and scalable automation that support both inventory management and warehouse management.

Pros and Cons of Perpetual vs. Physical Inventory

The best type of inventory system depends on your company’s size, structure, and needs. Here are things to consider:

Which Inventory Method is Best for Your Business

Choosing between perpetual inventory vs. physical inventory isn’t one-size-fits-all. The right method depends on how your business operates, the resources you have available, and the complexity of your inventory. 

Here’s how to decide what fits best:

• Inventory Size: If you manage thousands of items, go with automation. Small inventory? Manual counting may suffice.
• Business Locations: Multi-location companies need centralized, integrated systems. For one location, periodic counts could be enough.
• Transaction Volume: High volume = frequent transactions = need for real-time tracking. Go perpetual.
• Budget: If you can invest in technology, it’ll pay off long term. Otherwise, consider a hybrid. Use perpetual inventory on a daily basis, supplementing it with periodic physical inventory checks.

Ensure that you combine this with an inventory control method to achieve a more efficient inventory management system.

If you’re looking for a reliable way to implement perpetual inventory without the tech headaches, ShipHero’s Warehouse Management Software is built to simplify inventory tracking with real-time updates, automation, and seamless integrations. Whether you’re scaling fast or managing multiple locations, ShipHero helps you stay accurate, efficient, and in control.

Key Takeaways

• Perpetual inventory offers real-time, automated, and accurate tracking using modern technology.
• Physical inventory provides detailed, manual snapshots ideal for auditing and verifying stock.
• Your choice affects more than just your inventory count, as it impacts your cost, operations, and bottom line.

Frequently Asked Questions

Is Perpetual Inventory More Accurate Than Physical Inventory?

Yes and no. Perpetual inventory can be more accurate due to real-time tracking, provided that processes are executed properly, as it offers ongoing visibility into stock levels. Physical inventory is accurate at the time of count but does not reflect live updates or losses occurring between counts.

How Often Should Physical Inventory Counts Be Performed?

Physical inventory counts should be performed at least annually to meet financial reporting and regulatory requirements. Many businesses also utilize cycle counting, which involves regularly counting subsets of inventory throughout the year, to maintain accuracy and minimize disruptions. 

Can a Business Use Both Perpetual and Physical Inventory Systems Together?

Yes. A business can use both perpetual and physical inventory systems together. Perpetual systems track inventory continuously, while periodic physical counts validate records, reconcile discrepancies, and support audits. Using both methods improves accuracy and balances real-time monitoring with verification.

Which Industries Benefit the Most from Perpetual Inventory?

Industries that benefit most from perpetual inventory include retail, e-commerce, manufacturing, and distribution. These sectors manage high-volume, fast-moving stock that requires real-time visibility to help avoid overstock and stockouts and maintain accurate records.

Top Inventory Management Techniques & Methods for Success

Jul 16, 2025 | Blog

Have you ever wondered why your business can be doing everything right and still end up with stockouts or piles of unsold goods? Well, it’s all about how you manage your inventory. 

Here, we’ll explore various methods to help you optimize your inventory management process and solve your stock problems once and for all. Implementing the best inventory management techniques & methods is the key to turning a good business into a great one. In fact, it directly impacts your profitability, efficiency, and customer satisfaction. 

What is Inventory Management?

At its core, inventory management is about making sure the right products are available at the right time, in the right quantity, and at the right cost. It is the process of overseeing the flow of goods from manufacturers to warehouses and ultimately, to the point of sale.

Part of inventory management is that businesses should optimize stock levels and ensure timely replenishment so that:

• Operations run smoothly.
• Customer demand is met.
• Costs are kept under control. 

This ensures that your business doesn’t run into issues like stockouts or wasteful overstocking, as well as missed opportunities. 

And because proper inventory management has a direct impact on your business, it acts as one of the backbones of your business’s ability to grow and succeed.

Inventory Management Techniques

Now, let’s take a look at some of the common and widely used methods you can use to manage your inventory more effectively.

Just-in-Time (JIT) Inventory

Just-in-time (JIT) inventory helps reduce stock levels by receiving goods only when they are needed for production or to fulfill customer orders. 

The idea here is to keep inventory levels low, cut storage costs, and reduce waste. This method improves stock efficiency by making sure you’re not sitting on piles of unsold stock.

However, JIT isn’t without its risks. For example, a disruption in your supply chain could leave you without the products you need at a critical moment. But when it works, it can reduce excess inventory and keep your warehouse more organized.

ABC Analysis

Another method is the ABC analysis, which helps you categorize your inventory based on value and turnover. Think of it as a way to prioritize your stock into three categories:

• A items: high-value, low-quantity (e.g., luxury items)
• B items: moderate value, moderate quantity
• C items: low-value, high-quantity (e.g., fast-moving consumer goods)

This way, you can focus on the most valuable items and make sure that they are always stocked in sufficient quantities, while still keeping an eye on the less critical goods. 

This technique supports demand forecasting as it shows you which items are more important and which ones can wait a little longer.

Economic Order Quantity (EOQ)

If you want to figure out the optimal order size to minimize ordering and holding costs, use the economic order quantity (EOQ) formula, so you can control the reordering process without spending too much on excess inventory.

EOQ Formula:

EOQ = √(2DS / H)

Where:

• D = Demand (units per year)
• S = Ordering cost per order
• H = Holding cost per unit per year

EOQ helps you balance holding costs and availability, so you get stock levels that are aligned with demand.

Cycle Counting

On the other hand, cycle counting is the systematic process of keeping track of inventory without full physical counts. Here, you check small portions of your stock periodically instead of shutting down operations for bigger counts.

Cycle counting is a continuous process that enables real-time tracking and helps you adjust stock levels before things get out of hand.

Safety Stock

Now, safety stock is the buffer or extra inventory you keep on hand to handle unexpected demand surges or supply delays. 

To calculate the safety stock quantity:

Safety Stock = (Maximum Daily Demand x Maximum Lead Time) – (Average Daily Demand x Average Lead Time)

Monitor safety stock levels to avoid tying up unnecessary cash in goods you don’t need.

Reorder Point Formula

Next, the reorder point formula determines the exact moment when you should reorder products before running out so there’s never a delay in fulfilling customer orders.

Formula:

Reorder Point = Lead Time Demand

Where:

• Lead Time Demand = Average demand per period × Lead time in periods

Knowing when to reorder gives you the confidence that you won’t run out of stock at the worst possible moment.

Perpetual Inventory System

If you’re looking for a more automated solution, a perpetual inventory system can help you keep tabs on every movement of your goods. 

Examples of inventory tracking systems include:

• Barcodes
• RFIDs

This responsive method allows you to track your goods in real time, and it also integrates with warehouse management systems like ShipHero for seamless inventory control. That way, you get to adjust inventory based on demand and make smarter decisions about stock replenishment.

Materials Requirements Planning (MRP)

Lastly, Materials Requirements Planning (MRP) is a dynamic software system used primarily for manufacturing processes. 

For example, a furniture company uses MRP to plan production schedules and track the materials needed for each order. The software calculates the quantity of raw materials required, like wood, screws, and upholstery, based on the number of pieces to be produced. 

If the company’s stock of wood falls below the required level for an upcoming order, MRP generates a purchase order to replenish the stock before production begins. 

MRP ensures that raw materials and components are available for production without overstocking. 

Advanced Inventory Management Methods

Now, when your business starts scaling up, consider more advanced methods for managing inventory. These techniques are often used by larger businesses or those with specialized inventory needs.

How to Choose the Right Inventory Management Technique

The ideal inventory management technique depends on your company’s size, industry, and specific inventory needs. Key factors to consider include:

• Product type
• Sales volume
• Supply chain complexity
• Business goals

In many cases, using a combination of methods works best. You might use ABC analysis to categorize your products, while also using JIT to manage high-turnover items and safety stock for more unpredictable demand. 

Such a hybrid approach lets you adapt and meet customer demand without facing shortages, as well as create a scalable inventory management process for your business.

Best Practices for Inventory Management Success

Lastly, follow these tips to ensure long-term success:

• Use accurate data and forecasting to predict demand and adjust inventory strategies accordingly. 
• Perform regular stock checks to ensure accurate inventory records.
• Build strong relationships with suppliers for better pricing and timely stock replenishment.
• Improve your warehouse design to streamline the movement of goods and reduce handling costs to maximize space utilization.
• Track key performance indicators (KPIs) like inventory turnover and order accuracy.
• Stay flexible and adapt to market trends, technological changes, and shifts in customer demand.

Inventory management is the heart of your business’s ability to stay competitive, reduce costs, and meet customer needs. Without it, even the best strategies and products can fall short. 

Optimize your inventory management today, and you’ll see the difference.

Key Takeaways

• The right inventory management techniques can significantly improve efficiency and reduce storage costs.
• Methods like JIT, ABC analysis, and EOQ can help businesses balance inventory levels and demand forecasting.
• Regular audits, good supplier relationships, and effective warehouse optimization ensure your inventory management system operates smoothly.

Frequently Asked Questions

Can Automated Inventory Systems Eliminate Human Errors in Stock Management?

Yes, automated inventory systems help reduce human errors like miscounts and misplaced stock by tracking items in real-time and streamlining inventory control.

Can Perpetual Inventory Systems Improve Decision-Making?

Yes, perpetual systems provide real-time updates, enabling businesses to make better decisions regarding purchasing and sales strategies.

Does FIFO Help Reduce Product Waste in Warehousing?

Yes, FIFO minimizes waste by ensuring that older products are sold or used first, reducing the chance of spoilage or obsolescence.