What Is the Role of Inventory Management in Supply Chain?

What is inventory management, and why is it so important?

Inventory management refers to the process of ordering, storing and using the company’s goods or materials.

Successfully managing inventory enables companies to meet their consumers’ demand levels with appropriate supply. Ineffective management can lead to excess inventory, leading to the risk of damage, damage, or demand shifts, leading to stock accumulation.

Supply-Chain Inventory Management丨ChinaDivision丨G2-Learning-Hub
Supply-Chain Inventory Management丨ChinaDivision丨G2-Learning-Hub

If the stock is not sold before these events, it is usually sold at the clearance price or destroyed.

 According to a survey by the Association for Supply Chain Management (ASCM), nearly 60% of respondents indicated that inventory management is one of the top technical skills in their field.

This is an essential part of keeping the supply chain running smoothly. Effective inventory management requires a reliable technology platform and communication between all relevant parties.

Without inventory management, companies will suffer higher levels of waste and additional storage costs. Without accurate and up-to-date information, it is impossible to communicate with customers about product availability and estimated delivery dates.

How to improve inventory management in the supply chain?

 Effective supply chain management starts with technology. Eliminating traditional human errors can save time and reduce the risk of errors.

Digital operation management makes it easier to share any information recorded in the entire supply chain. If your company has implemented a Transportation Management System (TMS), then you have already optimized the whole supply chain!



Transportation management and warehouse management are two fundamental parts of a successful supply chain.

The Transportation Management System (TMS) handles the movement of products throughout the supply chain and provides the necessary communication platform for carriers, shippers and manufacturers.

The stock management platform focuses on the quantity and type of products in warehouses or other storage facilities. These technologies form the basis for the company to deliver its products to customers as efficiently as possible.

For example, when a company uses TMS to respond quickly to a customer’s order, it will soon move out of the warehouse instead of occupying inventory space. 

The integration of inventory management and TMS can make it easier to track deteriorated or defective inventory. With the help of TMS, warehouse managers can easily track the movement route of products after they leave the warehouse by tracing SKUs.

When an item recalled, the warehouse management team will have all the relevant information needed to find and isolate the defective product. Real-time inventory information will help bridge the gap between inventory management and transportation management.

Advantages of Simplifying the E-Commerce Supply Chain

Does your e-commerce supply chain encounter the following situations:

  • Delivery is not on time
  • Slow adjustment of out of stock
  • Slow product packaging and delivery speed
  • Long shipping time

Although you may not have encountered these situations, are you willing to take the time to optimize your e-commerce supply chain to achieve greater sales growth?

What is an e-commerce supply chain?

E-commerce supply chain has a series of logistics processes, including product raw material production, manufacturing, warehousing, inventory management, order fulfillment, and last-mile delivery. The ultimate goal is to provide your customers with high-quality products and good customer experience. Every link in the supply chain is critical and depends on reliable partners.

What is e-commerce supply chain management?

E-commerce supply chain management refers to the logistics process of supervising product inventory, from manufacturing to order transportation. A highly optimized supply chain is highly optimized to help reduce costs and increase productivity, which may affect profitability and customer satisfaction.

E-Commerce Supply Chain丨The Leadership Network丨ChinaDividision
E-Commerce Supply Chain丨The Leadership Network丨ChinaDividision

Four advantages of simplifying the e-commerce supply chain

A simplified e-commerce supply chain can not only improve internal operations but also improve the customer experience. The four advantages of simplifying the e-commerce supply chain are listed below:

Higher transportation efficiency

Any delays in the supply chain can wait for improvement, especially transportation. The two main factors affecting transportation time include:

  • The location of each link is different (manufacturer, warehouse, customer)
  • Different transportation methods (air, sea, freight, etc.)

The right method of transportation can bring you a competitive advantage to win more customers, and even provide services similar to Amazon.

Cost-effective freight

An important point in optimizing the e-commerce supply chain is to find cost-effective freight to reduce transportation costs. Use appropriate packaging for the weight and size of the product, split the inventory geographically were cost-effective, and ask the carrier for shipping discounts based on the order volume, etc.

Accurate inventory management

Inventory management is a key link in the e-commerce supply chain. By optimizing inventory levels, you can:

  • Avoid unnecessary stock outs and discontinuations
  • Forecast future demand
  • Simplify inventory assessment

Methods to solve common e-commerce inventory challenges include: setting reorder points based on historical order data and future forecasts, regularly reviewing inventory, and implementing inventory management software.

Better customer experience

Simplifying the e-commerce supply chain ensures that you can provide the best customer experience for every order. By optimizing the supply chain, transportation costs are reduced, delivery time is shortened and the risk of human error due to improper chain operation is reduced.

As your e-commerce supply chain becomes stronger, you can focus on improving customer communication by tracking orders in real-time to provide them with the latest information from processing orders to delivery.

How to Reduce Supply Chain Costs?

One of the best ways to reasonably control company expenditures is to reduce supply chain costs. Fortunately, this goal can be achieved in some simple ways.

However, what you need to understand when you start with this part is where the key points are because the correct reduction with a clear understanding will bring the greatest return in the future.

Next, this article will make some suggestions for reducing supply chain costs and increasing profits.


1. Cut unnecessary space costs

Making full use of the space you have will save you money every day. As we all know, renting a warehouse to store materials requires daily rent, which will be a lot of money for a long time. Evaluate the utilization rate of your current warehouse space and find a warehouse that is more in line with actual needs that can save some money.

2. Process automation

Warehouse automation is not only a fashion trend, but it can also help you achieve the purpose of reducing supply chain costs. Ask professionals to provide assessment and advice on how to implement automation.

3. Make timely adjustments to customer needs

One of the ways to reduce supply chain costs is to make timely adjustments to customer needs. As the season changes, you will find that customer needs are constantly changing. You can follow these changes to make more accurate sales policies.

4. Minimize product damage rate

The improvement of the product packaging level will help reduce the probability of damage to the product during transportation. Make sure that the staff responsible for this area pack your products correctly to minimize breakage rates.

Artificial Intelligence (AI) in Supply Chain and Logistics

The increase in data accuracy makes artificial intelligence more and more widely used in logistics and supply chains.

With the increasing complexity of the supply chain, the room for data errors is rapidly decreasing. The fierce competition in the industry has caused more and more supply chain and logistics companies to choose to use artificial intelligence in their logistics systems. According to Gartner, supply chain organizations expect that the level of machine automation in their supply chain processes will reach 200% in the next five years. At the same time, a recent study shows that by 2020, the annual industrial Internet of Things (IIOT) expenditures of developing companies are estimated to reach $500 billion.

Artificial Intelligence (AI) in Supply Chain and Logistics丨ChinaDivision

Artificial Intelligence (AI) in Supply Chain and Logistics

With the increasing application of artificial intelligence and machine learning, it will change the face of the industry to a deeper degree, and will further aggravate the gap between large and small enterprises in the industry.

Artificial intelligence and machine learning eliminate the problems of inefficiency and inaccurate data to a greater extent and provide more possibilities for companies to deal with supply chain problems. The application of AI in the supply chain has improved production efficiency and product quality, reduced costs, and created safer working conditions.

In the face of a pandemic like this year’s COVID-19, AI helps companies understand what changes and plans should be made to the original plan of the supply chain to better tide over the difficulties.

According to data from the Organization for Economic Cooperation and Development (OECD), the coronavirus may severely threaten the global economy, and multiple industries will face fatal blows. As the spread of the coronavirus has become more widespread, preventive measures (travel restrictions) aimed at preventing the further spread of the virus have resulted in the forced disruption of the global food, retail, and medical supply chains and the freezing of income.

The Advantages of Artificial Intelligence (Ai) in the Supply Chain

1. Improve the accuracy of inventory management

Accurate inventory management can ensure that the correct materials enter and exit the warehouse, and prevent problems such as excessive inventory, insufficient inventory, and unexpected shortages.

2. Improve warehouse efficiency

AI simplifies complex work processes and speeds up work. Artificial intelligence systems can solve multiple warehouse problems faster and more accurately than humans. Besides, in addition to saving valuable time, automated work driven by AI can also greatly reduce the demand and cost of warehouse staff.

3. Improve safety

AI-based automation tools can ensure smarter work plans and effective warehouse management, which can improve the safety of workers and materials.

4. Reduce operating costs

This is the automated intelligent operation of the AI ​​system that can work without errors for a long time, thereby reducing the number of errors and workplace accidents. The higher speed and accuracy of warehouse robots achieve higher productivity.

5. Delivery on time

The artificial intelligence system can automate the system to accelerate the traditional warehouse process, achieve the delivery target with the minimum effort, thereby eliminating the operational bottleneck in the value chain.