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What is inventory tracking? How to start tracking your inventory.

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Inventory Management
An image of a man in a warehouse tracking inventory with a tablet.

With supply chains worldwide suffering unprecedented disruption, it’s more important than ever before to have a system that can accurately track your inventory. Fail to do that, and you’ll be battling to balance customer demand for fast shipping with falling stock levels. The effect this can have on your business is drastic.

If you’re looking for a solution, improving your inventory tracking strategies can make the difference between a thriving business and a failing one. 

Implementing efficient inventory tracking can help you stay in control, meet customers’ expectations, and never run out of stock again. 

Let’s take a closer look at how to effectively start tracking your inventory can help drive the growth of your business.   

What is inventory tracking?

Every product in your warehouse should have a stock-keeping unit (SKU). This unique identifier—often a scannable barcode—can be used to track your inventory as it moves through your warehouse and beyond. This means you can track how many of each product you have and in which location.  

Sometimes this can be achieved manually, but that’s a time-consuming and data-heavy process that isn’t that efficient. Inventory tracking can also be completed faster and more efficiently by using an inventory tracking system instead.  

What is an inventory tracking system?

An inventory tracking system is a software, application, or program that helps you manage your stock at each stage of your system. This gives you an overview of your stock levels to help you manage your supply chain efficiently.

It also gives you the ability to track each and every item through multiple warehouses and sales channels.  

An inventory tracking system also helps you anticipate the demand for specific items by using your historical data as a benchmark. This makes it much easier to predict the potential demand for specific items at specific times.   

What is an example of inventory tracking?

Let’s go over an example of an inventory tracking system that needs improvement and one designed to perfectly fit a company’s needs. See if you can tell the difference (it’s pretty easy). 

Business X uses a manual system to log new products as they come into the warehouse. This system usually works okay, but some staff forgets to note when a new shipment of seasonal items is received. The items have already been listed on the company website, but no one can find the shipment when the orders start coming in. Orders must be refunded, and customer experience is negatively impacted. Eventually, the shipment is found, but it’s too late to fulfill the orders, and the items are now unsellable until next year.    

Business Y uses an inventory management system to create a central hub that tracks every single product they sell. They can split their stock into different groups, track the movement of each item across the entire order and delivery process, and transfer stock between different warehouses. They know when they need to order more stock and the amounts they need to match forecasted customer demand. They’re in control, meeting targets and working efficiently.  

With its inventory tracking software, Business Y is doing a much better job of managing its inventory. They understand the benefits that inventory tracking can bring to their business.   

The benefits of inventory tracking. 

If you’re on the fence about investing time and money into more accurate inventory tracking, rest assured it can bring plenty of benefits to your business. 

Allows for optimal order placement.

Efficiently managing your supply chain means knowing how much stock you have, as well as forecasting sales and demand. Accurately tracking your inventory allows you to place your orders at the optimal time. This helps you keep to your advertised shipping times, plan for seasonal changes, and maximize sales. 

Saves you money.

In the long run, anyway. While implementing an inventory tracking system requires an initial investment, you’ll save money in the long run. Not having to pay staff to check every product manually means less spend on salaries. Being able to run the correct sized warehouse without excess stock saves on rental costs. And knowing exactly how much stock you have on hand means you don’t need to over-order. 

Helps warehouse staff. 

Giving your warehouse staff deeper-level insights into your inventory levels and where each item is located within the warehouse means they can do their jobs more efficiently. If it’s easier for them to find specific products because your system shows where they’re located, that means shipping times are optimized, and your customers are happy because their items arrive sooner than they expected. 

The challenges of inventory tracking. 

As with anything, inventory tracking comes with its fair share of challenges as well as benefits. So let’s take a closer look at those.  

It’s a financial investment. 

Deciding to upgrade from your paper-based manual inventory tracking to a more sophisticated version can feel like a big step, and it requires some initial investment financially. However, while this might be an initial challenge, this investment will be recouped over time thanks to increased efficiency, not having to over-order, and saving staff time and wages on time-consuming manual inventory tracking.   

There are many moving parts.

The whole aim of your business is to get stock moving out of the door, so it’s no surprise there are many moving parts when it comes to tracking your inventory. Your inventory needs to be tracked over multiple locations from the manufacturer, distribution, warehouses, shipping, and returns. If you don’t have a sophisticated system, it can be a challenge to maintain precise stock levels. There’s then a higher risk that stock gets lost, orders are delayed, or you end up with a surplus of product.    

It’s time-consuming.

The more your business grows, the more time you’ll need to dedicate to tracking your inventory. Suppose you’re using a manual tracking system. In that case, this impacts the amount of time you have to spend on activities to build your business, like creating ads, discovering new products, or optimizing your customer experience. While investing in tracking software takes time as you initially train your staff, it’s a more efficient system in the long run.    

How to create an inventory tracking system.

If we’ve convinced you that now is the time to create an inventory tracking system for your business, here are a couple of options to get you started. 


Love it or hate it, Microsoft Excel has all the functionality you need to get a (very) basic inventory tracking system up and running. Using a spreadsheet to track your inventory will work just fine if you’re working with low volumes. 

You can create a spreadsheet with the SKU of each item listed, along with details about the quantity of each item. It’s also a good idea to list their location to be found when orders come in quickly. You’ll need to do a stock check at least twice per month - so you can establish your base stock level at the start and then calculate how many of each item you’ve sold over the course of the month. Don’t forget to account for received inventory as and when shipments arrive.  

If you have multiple sales channels or warehouse locations, then you may quickly outgrow this basic system because it doesn’t offer all the functionality you need.  


If you sell across multiple channels and are looking for a solution that can track all your sales and inventory across all of these, then investing in an inventory management system like Linnworks is going to help automate your operations and maximize your efficiency. 

Using software like this helps you accurately track your inventory across every sales channel you use. This saves time because there’s no need to reconcile inventory levels manually. But the major game-changer is how you can use the data provided by the platform to inform business decisions. 

Use the data to:

  • Forecast demand. Analyze historical sales data, follow seasonal trends, and see which products similar to yours are selling well. 
  • Prevent overselling. Never again sell more products than you hold using real-time consumption data to track inventory levels across all sales channels.
  • Coordinate warehouse transfers. If you have multiple locations, you can easily transfer inventory between warehouses and track their status while in transit.   
  • Optimize your inventory levels. You can avoid incorrectly estimating how many of each item you need to keep in inventory by tracking inventory levels.       

Transform your inventory tracking.

It might not seem as important as sales, but every successful business relies on a solid inventory tracking system. This data can help you make smart decisions about how to balance supply and demand, estimate the lead time for specific products, and allow you to stay in control of your supply chain. 

Choosing the right inventory tracking system to help you successfully manage your product-based business can make the difference between business success and business failure. With more people shopping online than ever before, being able to accurately track and manage your inventory to optimize the customer experience can make your business stand out as one of the best.  

Discover Linnworks automated inventory management system

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