Inventory Management

When to Use This Skill

Use this skill when you need to:

• Set up an inventory tracking system for a product-based business
• Calculate reorder points and safety stock levels
• Create supplier management frameworks with lead time tracking
• Build stockout prevention systems and demand forecasting templates

DO NOT use this skill for warehouse layout design, shipping logistics, or supply chain optimization at enterprise scale. This is for solopreneurs and small businesses managing product inventory.

Core Principle

INVENTORY MANAGEMENT IS A CASH FLOW DECISION — TOO MUCH INVENTORY TIES UP CAPITAL, TOO LITTLE LOSES SALES. THE GOAL IS FINDING THE MINIMUM STOCK THAT PREVENTS STOCKOUTS.

Phase 1: Inventory Assessment

Understand the current inventory situation before building a system.

Required Inputs

GATE: Confirm assessment before designing the system.

Phase 2: System Design

Build the inventory tracking framework.

Product Catalog Template

## Product Catalog

| SKU | Product Name | Category | Unit Cost | Sell Price | Margin | Supplier | Lead Time |
|-----|-------------|----------|-----------|------------|--------|----------|-----------|
| [SKU-001] | [Name] | [Category] | $[X] | $[X] | [X]% | [Name] | [X] days |

Reorder Point Calculation

For each product, calculate the reorder point:

Formula: Reorder Point = (Average Daily Sales x Lead Time in Days) + Safety Stock

Safety Stock: Average Daily Sales x Safety Days (typically 7-14 days for solopreneurs)

## Reorder Points

| Product | Daily Sales | Lead Time | Safety Stock | Reorder Point | Reorder Qty |
|---------|------------|-----------|-------------|---------------|-------------|
| [Name] | 5 units | 14 days | 35 units | 105 units | 150 units |

ABC Classification

Categorize products by revenue contribution:

• A items (top 20% of products, ~80% of revenue): Tight control, frequent counting, optimized reorder points
• B items (next 30%, ~15% of revenue): Moderate control, monthly review
• C items (bottom 50%, ~5% of revenue): Loose control, quarterly review, consider discontinuing low performers

GATE: Present the system design for review.

Phase 3: Tracking Setup

Create the operational tracking templates.

Inventory Tracker Template

## Inventory Tracker

| SKU | Product | On Hand | On Order | Reorder Point | Status | Last Counted |
|-----|---------|---------|----------|---------------|--------|-------------|
| [SKU] | [Name] | [qty] | [qty] | [qty] | OK / LOW / REORDER | [date] |

Supplier Management

## Supplier Directory

| Supplier | Products | Lead Time | Min Order | Payment Terms | Contact | Reliability Score |
|----------|----------|-----------|-----------|--------------|---------|------------------|
| [Name] | [SKUs] | [days] | $[X] | [Net 30] | [email] | [1-5] |

Stock Alert System

Define alert thresholds:

• Green: Stock above reorder point — no action needed
• Yellow: Stock within 20% of reorder point — place order soon
• Red: Stock at or below reorder point — order immediately
• Critical: Stockout — activate backup plan

Phase 4: Prevention and Optimization

Deliver ongoing management frameworks.

Monthly Inventory Review Checklist

- [ ] Count A-items and reconcile with tracker
- [ ] Review products approaching reorder points
- [ ] Check supplier lead times (have any changed?)
- [ ] Review slow-moving C-items for discontinuation
- [ ] Update demand forecasts based on last 30 days
- [ ] Review cash tied up in inventory

Demand Forecasting (Simple)

Provide a basic forecasting approach:

• Use 3-month rolling average for stable products
• Apply seasonal multipliers for seasonal products
• Flag any product where actual sales deviate more than 30% from forecast

Stockout Prevention Checklist

• Maintain backup supplier contacts for A-items
• Keep safety stock at minimum 7 days for bestsellers
• Set calendar reminders for reorders based on lead times
• Create a "what to sell when out of stock" list (alternatives, bundles, pre-orders)

Anti-Patterns

• Not tracking at all — "I know what I have" stops working past 20 SKUs. Track everything.
• Over-ordering to feel safe — excess inventory is dead cash. Calculate reorder points, do not guess.
• Single supplier dependency — if your only supplier is delayed, you are out of business. Have backups for A-items.
• Ignoring slow movers — C-items that sit for 6+ months should be discounted, bundled, or discontinued.
• Manual counting without schedule — if you do not count regularly, your tracker becomes fiction.

Recovery

• User has no sales data: Start with best estimates and refine after 30 days of tracking. Any estimate beats no system.
• User is already experiencing stockouts: Prioritize the top 5 revenue products. Calculate reorder points for those first, handle the rest later.
• User has too many SKUs to track manually: Recommend inventory management software (Sortly, inFlow, or Shopify inventory for e-commerce).
• Supplier lead times are unpredictable: Increase safety stock to 21 days and track actual lead times to find the real average.
• User does dropshipping: Adjust the framework — focus on supplier reliability monitoring rather than physical stock tracking.