How can Data Analytics Help in Inventory Management?

Inventory management is one of the most vital aspects of operating a business. It includes having the proper inventory in the appropriate amount and at the correct location to cater to the supply and demand needs of items offered by the business. Investing in inventory tracking software helps to create a balance between the services a business offers and its inventory. The presence of inventory management helps to process a wide range of data from past sales and predict future inventory demands in real-time.

Better operational efficiency

With the aid of data analytics, inventory management managers can have access to real-time operations and a better understanding of the metrics. This enables the elimination of hurdles, which, in turn, can improve the efficiency of the sales of a business. Big data also helps supply chains actively improve their performance as compared to the traditional business models used by companies. Effective inventory tracking and management that includes data analytics helps solve problems like stockouts, overselling, delayed order fulfillment, and so on.

Sales maximization and substantial profit margins

In businesses, it is vital to have access to real-time data to handle sales maximization and profit margins with significant future anticipations. Investing in proper inventory tracking and management software also helps the business to earn huge profits with the aid of stock investments that have higher sales and also higher demands. This ensures the stocks always deliver more sales opportunities with the help of data analytics. Inventory management software helps a company initiate more sales and profits.

Eliminating inventory shrinkage

Shrinkage of inventory is a situation that can take place due to multiple reasons, like wrong counting, damaged stock, obsolete products, and theft. When the inventory management process is combined with data analytics and initiated, it helps prevent losses or shrinkage. When a company has the potential to track the inventory movement and the individuals associated with the inventory, the chances of theft and other issues can be reduced or eliminated. Regular inspection of inventory aids in recognizing discrepancies and finding solutions.

Curtailing expenses

Inventory tracking management with data analytics aids in handling the expense of the inventory. Some of the more expensive elements of inventory management are

  • Material handling expenses, whether leasing or buying tools and equipment, and manual labor for functioning machinery.
  • Warehousing and logistics costs like utilities, rent, labor, inventory tracking fees, and expenses related to shipping goods to customers.
  • Cost of the storage
  • Insurance expenses
  • Total capital for purchasing inventory
  • Expenses like obsolete stocks, shrinkage costs, and other risk-related costs.

Cost reduction is effectively possible with the help of real-time inventory data, which helps to predict/forecast demand and thereby determine the safety levels of stocks and reordering.


Utilizing data analytics in inventory tracking and management helps businesses transform their inventory management potential drastically.  Additionally, there is a reduction in expenses, improved operational efficiency, the elimination of inventory shrinkage, the maximization of sales, huge profit margins, etc. Such transformations can be noticed in inventory management incorporated with data analytics.