Do you find it difficult in keeping your inventory stocked at an adequate level? If so, it could be that increasing demand has you on the back foot, and your lead time is slowly increasing with each fulfillment. Or maybe you have some finished goods stocked that aren’t selling so well and are taking up space.

If these problems sound familiar to you, it’s time to audit your inventory management practices. In this article, you’ll learn all the essentials to adopting top inventory management practices, with a choice of three to get you started on this path.

FIFO- First In, First Out

FIFO is one of the most common inventory management methods used in stock operations. This techniques is designed to help ensure that the oldest products are used first, reducing the chance of spoilage or obsolescence.

FIFO is actually an inventory valuation method in which assets are sold, used, or disposed off in the order in which they are acquired. This method is often used for accounting purposes, offering a more accurate picture of an organization’s inventory levels and costs.

LIFO- Last-in, First-Out

LIFO is a method used to calculate the cost of inventory for the cost of goods sold. Just as the name implies, the LIFO inventory valuation method sees that the last items placed int inventory are sold first.

This leads to higher costs being assigned to good sold in periods of inflation since the most recent purchases have been made at the highest prices. LIFO can lead to lower taxes since the IRS allows businesses to deduct the higher costs of inventory from their taxable income.

Economic Order Quantity (EOQ)

Economic Order Quantity models help businesses determine the optimal order quantity for their inventory. This method views various expense factors, such as holding and ordering to help businesses find the most cost-effective way to manage their stock levels.

The EOQ is the optimal order quantity for a company to minimize its total costs related to ordering, receiving, and holding inventory. Actually, this technique considers the trad-off between the cost of ordering inventory and the cost of carrying inventory. However, it is important to note that there are a few different ways to calculate EOQ, but the most common is the EOQ formula develop by economist Harold A. Hotelling in 1931.

Be sure to research more about other top inventory management practices to leverage.