# What is Inventory Management?

What is Inventory Management? Tracking, ordering, and maintaining inventory. Too much means cash tied up. Too little means stockouts.

## How it works in practice

ABC Analysis: A = 20% of products × 80% of revenue — track daily. B — weekly. C — monthly.

## Related metrics

- SKU — the base unit
- Lead Time — when to order
- Demand Forecasting — how much to order
- Cash Flow — inventory is money not in the bank

## Common misconception

'More inventory means more security.' Excess inventory costs: storage, insurance, tied-up capital.

## How to fix it

Run ABC analysis: export 12 months of sales, sort by revenue, divide into A/B/C.

## Real-world example

A camping store had $50,000 in stuck inventory. ABC analysis revealed 15 SKUs generated 78% of sales. Clearing the other 120 SKUs freed up $39,000.

## Where to start

Do an ABC analysis today. 2 hours that can change purchasing strategy.

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Category: Operations · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/inventory-management