What is Stock Management? Importance and Key Aspects (2025)

Running out of products cost businesses around $1.2 trillion in 2024, according to the IHL Group. That's more money than the entire economy of the Netherlands produces in a year.

With the World Data Lab predicting $3.2 trillion in additional consumer spending this year, any time you don't have products available, your customers might go to your competitors instead. This can cause huge losses in online sales.

The good news is that with the right stock management tools and apps, you can predict your sales more accurately and keep the right amount of safety stock on hand to prevent these problems.

What is stock management?

Stock management determines and properly manages how much stock a company should have at any given time. It involves all the processes associated with ordering, tracking, controlling, and storing inventory. 

Stock management involves:

• Tracking fluctuations in your stock
• Monitoring the condition of your stock
• Understanding customer demand for stock
• Determining costs for materials
• Calculating shipping, handling, and storage costs

Proper stock management makes it possible to meet customer demands without wasting money on excess stock.

Stock management vs. inventory management

Stock management is a subset of inventory management. It focuses on tracking quantity, condition, and demand of final goods ready for sale.

Inventory management encompasses the entire process, including product tracking, customer demand, fulfillment, forecasting, and supplier information.

While stock management monitors items on shelves, inventory management tracks all products in real time, including those in stock, out of stock, back-ordered, or on sale.

Why is stock management important?

Efficient stock management helps businesses run smoothly. It makes sure products move easily from buying to selling without problems. Keeping accurate counts, businesses avoid selling too much or too little, and keep customers happy.

Research shows that companies with strong inventory management practices see higher operational efficiency, better cash flow, and increased responsiveness to customer demand. While some companies still rely on Excel or basic spreadsheets, modern software solutions can provide far more powerful forecasting and analysis for effective inventory management.

Customer satisfaction

Good stock management leads to happy customers. When customers find what they want, when they want it, they trust your business and come back. A study cited in Mason Frye’s research highlights that improving inventory efficiency can increase productivity by 25% and boost stock usage efficiency by 30%.

Using a unified system that connects online stores, physical stores, and other channels means inventory updates happen everywhere at once. Customers can access products regardless of which specific store or warehouse holds them, and orders can be fulfilled from the location closest to the customer, often through an integrated point-of-sale system.

Cost

Having too much stock ties up money, increases storage costs, and risks items becoming outdated. Having too little leads to lost sales and unhappy customers.

Businesses can use platforms like Shopify to look at current stock, past sales, and future trends to make smart buying decisions. They can easily determine when to reorder products and reduce holding costs. The result is better cash flow, less excess, and fewer costly stockouts.

Sales

Staying on top of timely replenishment helps you avoid lost sales. An effective stock management system makes tracking popular products easy across all channels, helping businesses predict demand accurately.

Unified stock control also leads to:

• Higher conversion rates: Better product availability means more completed sales.
• Reduced excess inventory: Optimized stock levels across the network
• Lower markdowns: More full-price sales with less end-of-season discounting

Taxes

Stock management affects taxes, too. Businesses must record inventory values at the start and end of each tax year to calculate income correctly. Getting these values wrong can cause compliance problems or penalties. 

Different types of inventory vs. stock

As mentioned above, inventory and stock are slightly different. Inventory is all-encompassing; it’s anything you use to make your products or run your business. It can include the raw materials you use to make a product, the final product itself, and the packaging that goes on the finished goods.

Stock, on the other hand, is the finished goods you sell to your customers. In other words, stock is part of your inventory. But, not all of your inventory is your stock.

There is some debate about how many different types of inventory there are. Let’s look at the four main types of inventory (one of which is stock).

1. Raw materials and components inventory

Raw materials and components include any part of your inventory that you use to make your finished products, consisting of direct and indirect materials.

Direct materials are a separate piece of the final product. For example, if you sell sunglasses, the lenses would be an example of a direct material.

Indirect materials are used to make the products, but aren’t part of the final product for sale. For example, lens cleaning supplies would be an indirect material.

2. Work-in-progress inventory

Any material used to create a finished product is work-in-progress (WIP) inventory. If you stick with the sunglasses example, all of the glasses that are partly assembled—but not fully ready—are considered WIP inventory.

WIP inventory isn’t raw materials, but it’s also not a fully assembled product that’s ready for the shelves.

3. Packaging

Packaging includes anything you use to hold your product, and box up and ship your product. For example, if you sell sunglasses, the case would be packaging.

Packaging inventory could also include labels, tissue paper, and cardboard boxes.

4. Finished goods (this is your stock)

Finished goods are any product you sell in its complete form. If you sell dressers, then the entire dresser with all its parts intact would be a finished good. Finished goods are the part of your inventory that is ready to hit the shelves.

Stock management techniques

Effective stock management uses several techniques to keep stock at the right levels and reduce waste. Here’s how each method helps businesses balance supply and demand:

First in, first out (FIFO)

The oldest stock gets sold first. FIFO is suitable for businesses selling perishable items like food, who need to prevent spoilage. It ensures older products leave the warehouse before newer ones, preventing stock from sitting too long on shelves.

Example: A national grocery distribution company uses automated warehouse management software that tracks every product by receipt date across their 12 regional warehouses. The system ensures older stock ships to stores first, preventing waste while maintaining accurate records for regulatory compliance.

Economic order quantity (EOQ)

EOQ is a formula that calculates the perfect amount to order to keep costs lowest. It helps businesses know how much stock to reorder each time to avoid paying too much for storage and prevent running out of products.

Example: An electronics manufacturer calculates EOQ for thousands of components across multiple product lines, balancing high shipping costs against expensive warehouse space. Their system determines ordering 50,000 microchips monthly is more cost-effective than 150,000 quarterly.

Minimum order quantity (MOQ)

MOQ establishes the smallest amount a supplier will sell to you in one order. It helps get better bulk pricing but requires careful planning to avoid ordering too much inventory.

Example: An international hotel chain negotiates MOQs with their amenity suppliers, requiring a minimum of 100,000 shampoo bottles per order. The procurement team distributes these strategically across their 500 properties based on occupancy forecasts to avoid stockouts.

Just in time (JIT)

Stock is only ordered when it's needed, minimizing storage costs. This works well for businesses with changing demand or limited storage space, but requires accurate tracking and reliable suppliers.

Example: A national fashion retailer uses predictive analytics to forecast demand for seasonal items across 500 stores. Their JIT system automatically places orders for specific sizes and colors just three weeks before each seasonal launch, with shipments going directly to stores rather than distribution centers.

Materials requirement planning (MRP)

This is a method that calculates what materials and components are needed for production based on what customers are expected to order. It’s commonly used in manufacturing to ensure materials are available exactly when needed.

Example: An aerospace manufacturer uses MRP software to analyze thousands of components needed for aircraft production. The system automatically schedules raw material deliveries to align perfectly with their 18-month production timeline across multiple facilities.

Days sales in inventory (DSI)

This metric measures how long inventory stays in stock before being sold. Lower numbers mean stock moves quickly, while higher numbers suggest products are selling slowly, which can cost more in storage.

Example: A multinational retailer tracks DSI across 75,000 products in real time. When winter coats hit 60 days in inventory versus the target 40 days, the system automatically adjusts future purchase orders and triggers regional promotional pricing.

Stock management tips

1. Adopt a unified inventory management software

Unified inventory means linking all your stock information together. Not just within your company, but across all places where your products are stored, sold, and delivered. Instead of each store or warehouse working separately, everyone can see exactly what products are available and where they are in real time.

When all your stores (both physical and online) and warehouses share the same stock information, customers can find what they want more easily. Connecting your stock with partners (like letting some products ship straight from suppliers), allows you to offer more products without keeping extra stock yourself.

Shopify’s built-in inventory tracking lets you monitor stock levels in real time, preventing oversells and ensuring you don’t run out unexpectedly. If your business uses Shopify POS Pro, you can leverage the Stocky app for more advanced tasks, such as demand forecasting, purchase orders, stock adjustments, and vendor management.

2. Audit inventory

Even when all your inventory systems are connected, it's still important to regularly check that your actual physical items match what your computer system says you have. If you have a lot of warehouses, stores, and online marketplaces, discrepancies can add up fast.

Perform cycle counts, where you audit different product categories on a rotating schedule. This can catch errors more quickly compared to massive, less frequent, full-warehouse counts. 

When you discover differences between physical stock and computer records, look closely at your processes. The problems might come from theft, incorrect receiving procedures, or simple typing mistakes.

Stocky, the free inventory management app for Shopify, shows your stock on hand report.

3. Set minimum stock levels

Set minimum stock levels throughout your network to handle unexpected increases in demand or short-term supply problems. These floor levels help each location keep enough products available without spending too much on storage costs.

Calculate the safety stock you need at each location based on current demand information, restocking time, and seasonal patterns. In a unified system, each location's status updates your main system automatically, helping you adjust minimum inventory levels as needed.

👉 Explore Shopify’s inventory alert apps.

4. Use ABC analysis 

When you have thousands of different products (SKUs), you need a way to decide which ones deserve the most attention. ABC analysis divides your products into three groups:

• "A" items bring in most of your money.
• "B" items perform moderately well.
• "C" items have less impact on your business.

Spread high-priority items across more locations or share them among partners for better availability. Keep your slower-selling items in fewer locations to reduce costs. 

📌Pro tip: Shopify’s inventory reports can automate ABC analysis for you. Analyze inventory across all sales channels—including multiple retail stores, your ecommerce website, and social media storefronts—to find those most valuable to your business.

Get an ABC analysis for your inventory within Shopify.

5. Build partnerships with suppliers

Good communication and trust with suppliers give you more flexibility when restocking and handling unexpected situations. If you suddenly need more products or face shipping problems, suppliers who understand your business can speed up deliveries or offer better payment options.

Suppliers can plan their production better by seeing your sales forecasts and knowing how quickly products are selling. Strong supplier relationships also help you find alternative suppliers or different supply arrangements if your main supplier faces material shortages or international trade problems.

6. Consider regional demand

When you sell in different areas, some products may sell better in one place than in others. Things like weather, what local people like, and special events can change what people want to buy. Looking at your sales information can help you put your products in the right places.

Shopify has a tool called fulfillable inventory that helps with stock allocation. It lets you control what products customers see based on where they are. For example, if you sell winter coats in Canada but beach towels in Florida, customers will only see what's available in their area. This also stops you from selling more than you have in any location.

To use this tool, you need either:

1. A shipping profile with at least two different shipping zones serviced by different shipping centers, or
2. A store location where customers can pick up items or get local delivery

7. Work with a 3PL partner

Use a shipping and logistics partner to better manage stock. These experts store products and send orders to customers from warehouses in different locations. Your products will be placed strategically, customers will get orders faster, and shipping will cost less. 

Fortunately, you don’t need to look far for a 3PL provider. Shopify Fulfillment Network connects your store with Flexport, a leading logistics company, to manage the entire process for you.

8. Plan for the future

Customer preferences change quickly, and so do supply chain conditions. Good planning means looking at past sales patterns and using current data from your inventory system to predict future demand.

Think through the best and worst-case scenarios (like if your product suddenly becomes popular on social media) so you can place your stock in the right locations and move it quickly when demand increases. Make sure your supply network can handle increases in both online orders and in-store pickups.

9. Monitor sales and performance 

Pay close attention to how your products are selling across all channels and partner nodes. The real-time data from a unified inventory system can help you spot trends and problems early.

• If a particular warehouse or store frequently runs out of a product, check if you need to adjust reorder points or allocations.
• If a product category isn't selling as expected, consider repositioning it or using promotions.

Regular monitoring creates a good base for constant improvement. Each piece of data allows you to fine-tune your inventory management, whether by changing order quantities, moving stock between locations, or adjusting how you work with suppliers.

Find each product’s sell-through rate in Shopify analytics.

Make stock management easy with an IMS through third-party logistics

Stock management is an integral part of your overall inventory management technique. When you can track the data behind your brand’s unique supply and demand, you get an accurate look at exactly how much stock you need on hand and when.

While there are several ways to approach stock management, every brand should use an inventory management system (IMS). Even better, find a third-party logistics (3PL) partner who will take on managing inventory for you.

Illustration by Melanie Peters

FAQ on stock management

How are stock management and inventory management different?

Stock management is the process of tracking, managing, and storing complete products to meet consumer demand. Inventory management keeps track of all the items you use to run your business.

All stock is inventory, but not all inventory is stock, making stock management part of the larger inventory management process.

What are the three most common problems brands have with stock?

There are three main problems brands face when managing their stock.

1. 1. Overstocking: Ordering too much inventory leads to extra storage and transportation costs.
2. 2. Understocking: Not having enough stock results in lost customers or excessive spending on stock replenishment.
3. 3. Obsolescence: When stock becomes outdated, no longer in demand, expired, or unsellable.

How does a 3PL help ecommerce stores with stock management?

A 3PL (third-party logistics) provider offers warehousing and distribution services to businesses. By working with a 3PL, ecommerce stores can outsource stock and inventory management across multiple suppliers and customers.

This helps businesses, both large and small, save time and money by reducing their reliance on internal logistics operations.

How do you make stock management of your ecommerce store easy?

Running an online shop can be highly profitable, but customers expect instant availability of products.

To meet customer demands, it’s crucial to accurately forecast stock levels. The best approach is to use an inventory management system or a 3PL provider to ensure smooth operations.