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The warehouse is always an integral part of any business, especially retail businesses. A warehouse operation can be either an important tool to speed delivery and control expenses or a perpetual problem depending on how it is set up and managed.

Organizing and controlling warehouse inventory effectively is the foundation for a successful business. How to set up warehouse inventory? How to do inventory? How do I keep track of my inventory? This article will help you find the answer to those challenging questions.

What is warehouse inventory management?

how to set up warehouse inventory

Warehouse inventory management is the process of setting up, receiving, tracking, auditing, and managing stock stored in a warehouse or other storage facility for order fulfillment. Warehouse management also offers stock replenishment when specified minimum amounts are achieved. It allows you to renew your inventory to ideal levels based on previous sales data.

On the other hand,  inventory management refers to the whole process of managing items from the time they are ordered to the warehouse to their final destination. Therefore, warehouse inventory control can be considered a subset of inventory management with narrower concerns on the arrangement and tracking of stock in storage.

Retailers nowadays typically do warehousing and inventory management by using POS software systems or ERP systems as all-in-one solutions. It strengthens inventory management as well as other aspects of business operations management. POS software may help you in both warehouses and store inventory management as well as record all sales transactions. Whereas an ERP system can help you manage all parts of your business, including inventory, human resources, accounting, and purchasing, among other things. In some circumstances, POS and ERP software can be found in the same package. We can take Magestore as an example which can combine Magento’s capabilities and transform them into an ERP platform. It depends on each business’s capacity to choose a suitable supporting system.

The importance of managing warehouse inventory

how to set up warehouse inventory

Warehouse inventory management plays a vital role in general inventory control and business operation in the long term. An effective warehouse inventory management can bring numerous benefits to the business as following:

  • Increase employee productivity and reduce turnover rate: With a well-organized warehouse and working checklist, employees know exactly what they need to do and where to find the products. This increases productivity and also their job satisfaction.
  • Reduce lost items: If your warehouse is a mess, products can be misplaced or lost without recognition. Cleaning up the warehouse and employing quality control techniques ensures that all products are tracked and ready to ship. It’s also a good idea to keep high-volume merchants moving in and out of your warehouse.
  • Better shipping efficiency and speed: Warehouse staff do their jobs better and save much time as they know exactly where everything is and apply a smooth system from packaging to shipping.
  • Cost savings: Managing warehouse inventory effectively can help businesses reduce inventory carrying costs which can be caused by dead stocks, inefficient use of warehouse space, and waste time to find the items.
  • Customer satisfaction: A structured warehouse ensures that all orders are delivered to the correct locations in the quickest time. As a result, your vendors and clients will be happy.

How to set up warehouse inventory and what is an effective inventory management process?

how to set up warehouse inventory

Managing your warehouse inventory can have significant effects on general inventory control and business performance. So it is necessary to apply an effective warehouse inventory management process to set up and manage a warehouse. Here below are some recommended steps and a warehouse setup checklist:

1. Warehouse layout

A good warehouse layout should ensure a clear and smooth flow of goods by dividing them into 5 separate areas: 

  • Receiving: Incoming goods should be downloaded immediately into the receiving area to avoid congestion. This receiving area has to be separated from fulfillment and shipping.  With this setup, the path for incoming and outcoming trucks is clear and you won’t have to worry about new inventory getting in the way of loading, either. Moreover, goods should not stay in the receiving area for long.
  • Storage: Items that are ordered frequently should have a specific amount set aside in a smaller storage location for easy access which is normally called forward picking area. To decrease travel time and maintain the flow of goods through the warehouse, this section should be located as close as feasible to your packing stations. Slower-moving items, on the other hand, can be stored in a bigger bulk storage area and later should be moved to the forward picking area frequently basing on needed stock level
  • Picking: The situation where people getting in each other’s way normally happens in an unorganized warehouse which can cause cross-traffic and delay of the workflow. You have to create a specific path from the receiving dock to storage, down-forward picking area, packaging, and eventually shipping to accomplish this. 
  • Packing and shipping: The packing area should be arranged in such a way that goods enter one end and completed packages leave from the other end. From pick to pack to ship, and then out the door, there should be no gaps. Separate spaces should be set aside for “shipping” and “ship staging”. A package should be kept aside once it contains the correct labels and shipping information to have it ready for pickup at any moment as well as keep products flowing by unblocking the ship station.
  • Free area: The warehouse should have a space without any specifically assigned functions where people or machines can move freely.  As businesses grow, this free space can be converted to other workstations to remove congestion.

In addition, to maintain effective operation and inventory control, a warehouse’s inventory structure must be revised at least once a year. Over a year, your company will introduce new product lines and phase out others. When this happens, it’s natural to stack additional products wherever available space allows. During a review of the warehouse’s layout, you can rearrange merchandise so that everything is in a handy location.

2. Label boxes and create a map

Your inventory control numbers should be written on the boxes. You could also want to take digital photos of each thing and post them where the item is kept. Finally, make a map of the warehouse that shows where each category of merchandise is located.

3. Using employee tracking and personal identification

This is a method of monitoring employees to ensure that only those who are permitted on the floor are present. Having too many employees in one location causes congestion. They get in each other’s way, slowing down those who are attempting to work. As a result, both productivity and efficiency suffer.

4. Creating reorder points

Reorder points are considered a good warehouse inventory tracking tool. It helps business owners define the minimum amount of product that the warehouse can hold in its inventory at any one time. If the stock quantity falls below reorder points, the warehouse may not have adequate stock to fulfill orders so the owners need to work with suppliers to get more stock.

5. Applying FIFO technique

FIFO means first-in, first-out. The first stock that arrived at the warehouse will first go out of the warehouse. This method is growingly applied by almost all businesses since it is suitable for all product types.

6. Using warehouse inventory management system or software

Applying a suitable inventory management system is the best way to help business owners manage warehouse stock efficiently. This system is normally a cloud-based software that provides you with real-time data updates on arriving and outgoing inventory.  With this information, you can make informed decisions. Besides, warehouse inventory management systems can be a part of a bigger system called the Enterprise Resource Planning system which is very popular with businesses nowadays.

7. Perform physical count of warehouse inventory

Physical counts of inventory in the warehouse should be performed monthly, quarterly, or annually to reduce the discrepancies between real stock and stock data from the system. In addition, this is also a chance for the employees to go through all warehouse sections, label, and set aside all damaged and outdated stock.

>> You also may like these best inventory management solutions to streamline inventory control.

What is the best program to keep track of inventory?

Basing on their supporting features, the 3 followings inventory management programs or software are highly recommended:

1. Magestore

Magestore is one of Magento Inventory Management Solutions. It is a fully functional and primary inventory control system. It helps retailers boost sales while lowering inventory holding costs. It also comes with several important stock management features:

  • Streamline multi-channel selling
  • Maintain an accurate inventory
  • Save audit time by the stock movement
  • Use barcodes to improve stock visibility.
  • Organize your procurement.
  • Provide employees with a variety of access options.
  • Provide real-time inventory data

2. Zoho

Zoho Inventory is an online inventory management software that offers both a free and paid version. Zoho Inventory is the greatest free option for small businesses because it allows you to add items, fulfill orders, and view inventory from any device. Its top inventory management features can be listed as follow:

  • Automatically check and order new items when it is out-of-stock 
  • Notify buyers in real-time about their orders.
  • Dropshipping and composite items are handled.
  • Real-time synchronization of inventory across all channels
  • Comes with a customer relationship management (CRM) program
  • Can take backorders for items that are out of stock.
  • Inventory, customer, and sales reports are all available.
  • Available for barcode scanner

3. NetSuite

NetSuite is an all-in-one business management solution that can assist you with inventories, finances, and marketing. NetSuite is useful for businesses of all sizes and types. It provides some outstanding characteristics that benefit a lot to business:

  • Support in multiple languages
  • Revenue recognition
  • Built-in business intelligence
  • Retail inventory management
  • Global support
  • Forecasting
  • Production identification
  • Multi-warehouse support
  • Integrated POS
  • Order management
  • Supply chain management


In general, warehouse inventory management has a substantial impact on overall inventory control and can serve as a solid foundation for corporate success. With the decade’s technology advancements, investing in a proper warehouse inventory management software solution is a sensible way to improve warehouse inventory control, lower inventory carrying costs, and increase customer satisfaction. These initial investments will bring large payoffs in the long run. By this post, we hope that new retailers will have a better understanding of how to set up warehouse inventory and where to begin managing warehouse inventory successfully.

Author Kate N.

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