Factors Influencing Inventory Management

22/02/2020 0 By indiafreenotes

When managing your inventory processes, there are a variety of factors which you need to consider. Both external and internal factors can affect inventory management in different ways, and it is important to be aware of these variables. Let’s look at the main factors that can affect inventory processes.

Financial Factors

Factors such as the cost of borrowing money to stock enough inventory can greatly influence inventory management. In this case, your finances may fluctuate according to the economy, and it is wise to keep an eye on changing interest rates to help plan your spending.

The tax costs associated with stocking inventory is another factor that can influence inventory management. This is especially salient when preparing for the end of year tax returns.

Other financial factors include the expenses associated with warehouse operations and transportation costs changes in these factors may require you to alter your inventory management processes accordingly. Fluctuations in the cost of fuel, for example, may require you to rethink your transportation methods to reduce costs. You may choose to purchase your own trucks or use outside contractors for transportation, which again will change the way you manage inventory.


Suppliers can have a huge influence on inventory control. Successful businesses require reliable suppliers in order to plan spending and arrange production. An unreliable or unpredictable supplier can have huge knock-on effects for inventory control. It can be a good idea to ensure you have a reliable back up supplier to prevent product shortages or delays in the manufacturing process.

Lead Time

Lead time is the time it takes from the moment an item is ordered to the moment it arrives. Lead time will vary widely depending on the product type and the various manufacturing processes involved, and therefore changes in these factors can require changes to inventory management.

Outsourcing manufacturing processes to other countries due to lower production costs may result in longer waiting times. Producing the same goods locally may cost more but take less time, and therefore you may need to adjust your stock levels accordingly.

Product Type

Inventory management must take into consideration the different types of products in stock. For example, some products may be perishable and therefore have a shorter shelf life than others. In this case inventory must be managed to ensure that these items are rotated in line with expiration dates.


Ultimately, responsibility for managing your business’ inventory sits with you and any co-owners. While you may have multiple employees acting as managers to oversee inventory processes, they typically will not have the same stake in the business as you do.

External Factors

There are multiple external factors that may affect inventory control. For example, economic downturns may occur and this is something that you will generally have very little control over. Assessing the economy is a must in order to guard against stock outs or a buildup of excess inventory.

Other factors may include the real estate markets or the extent of local competition. These factors are also largely out of your control, so it is a good idea to assess the external climate regularly in order to stay prepared.