Running a distribution business is hard enough. Inventory shouldn’t be the thing that keeps you up at night.
But for most small distributors, it is. Stock levels are wrong. Products go missing. Customers get upset when you can’t deliver what you promised.
Here’s how to fix that.
Why inventory management matters
Your inventory is probably your biggest expense. It’s cash sitting on shelves. If you have too much, you’re wasting money. If you have too little, you’re losing sales.
Good inventory management means:
- You know what you have
- You know where it is
- You know when to buy more
- You don’t run out of things customers want
- You don’t have too much of things nobody wants
Simple, right? But most small businesses struggle with this.
Start with the basics
1. Count what you have
You can’t manage what you don’t know. Do a full inventory count. Yes, it takes time. Do it anyway.
Write down:
- What products you have
- How many of each
- Where they’re located
- What condition they’re in
This is your starting point.
2. Organize your warehouse
Put things in logical places. Fast-moving items near the front. Slow movers in the back. Similar products together.
Label everything. Shelves, bins, locations. When anyone can find anything, you waste less time.
3. Track what moves
Every time something comes in, record it. Every time something goes out, record it. No exceptions.
This is where most small businesses fail. They get busy and skip the tracking. Then numbers stop matching reality.
The spreadsheet problem
Most small distributors start with Excel or Google Sheets. It works at first. Then it doesn’t.
Signs your spreadsheet isn’t working anymore:
- Multiple people editing the same sheet
- Numbers that don’t match what’s on the shelves
- Hours spent on inventory tasks each day
- Mistakes in orders because stock levels were wrong
- No idea which products actually make money
If this sounds familiar, you’ve outgrown spreadsheets.
What good inventory tracking looks like
Know your numbers in real time
When you sell something, your inventory should update immediately. When you receive goods, same thing. No waiting. No manual updates.
See it from anywhere
You should be able to check stock from your phone. Your sales team should see availability when talking to customers. No calling the warehouse to ask.
Get alerts before problems happen
The system should tell you when stock is low. Before you run out. Not after.
Track costs properly
Know what you paid for each product. Including shipping and duties if you import. Without knowing your real costs, you can’t know your real profits.
How to set reorder points
A reorder point is the stock level that triggers a new order. Set it too high and you tie up cash. Set it too low and you run out.
Here’s a simple formula:
Reorder Point = (Average Daily Sales × Lead Time) + Safety Stock
Example:
- You sell 10 units per day
- It takes 14 days to get more
- You want 7 days of safety stock
Reorder point = (10 × 14) + (10 × 7) = 140 + 70 = 210 units
When stock hits 210, it’s time to order.
Dealing with dead stock
Dead stock is inventory that doesn’t sell. It ties up your cash and takes up space.
How to handle it:
- Run a report on what hasn’t moved in 90 days
- Discount it, bundle it, or return it to suppliers
- Don’t reorder it
- Learn from it so you don’t overbuy again
Some dead stock is normal. Too much is a problem.
Multiple warehouse tips
If you have more than one location:
- Track inventory by location, not just total
- Know what’s available at each site
- Make transfers easy to record
- See combined reports when needed
This is where software becomes essential. Tracking multiple warehouses in spreadsheets is a nightmare.
When to get inventory software
You need software when:
- Your inventory is worth more than $50,000
- You have more than 100 SKUs
- You have multiple warehouses or locations
- Your stock counts are regularly wrong
- You’re spending hours on manual updates
- You’ve lost sales because of inventory mistakes
The right software pays for itself quickly. Less mistakes. Less time on manual work. Better visibility.
What to look for in inventory software
For a small distribution business, you need:
Real-time tracking - See stock as it moves
Multi-location support - If you have more than one warehouse
Reorder alerts - Know when to buy before you run out
Cost tracking - Know what you actually paid
Easy to use - Your team needs to actually use it
Good reporting - See what’s selling, what’s not, and where your money is
Don’t overpay for features you won’t use. But don’t underbuy either.
Getting started
If you’re struggling with inventory, here’s what to do this week:
- Day 1-2: Do a physical count
- Day 3: Clean up your records to match reality
- Day 4: Set up basic tracking for everything that moves
- Day 5: Identify your top 20 products and set reorder points
Then decide if you need software. If your business is growing, you probably do.
The bottom line
Good inventory management isn’t complicated. It’s just consistent.
Track what comes in. Track what goes out. Know when to reorder. Don’t keep too much of what doesn’t sell.
Do these things well and you’ll have fewer surprises, happier customers, and more cash in the bank.
Need help managing your inventory? Get a demo and see how Magnofy helps small distributors take control of their stock.
