What is Inventory Tracking?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 12 October 2019
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Inventory tracking is the process of maintaining a system that not only addresses the addition of items to an inventory, but also any disbursements from that existing inventory. The tracking also normally provides information that makes it possible to replenish the inventory in a timely manner. The goal of any successful tracking effort is to make sure the inventory is kept at a level that helps the business meet its goals. Since there are many different types of inventories, the strategies used as part of inventory tracking will vary from one setting to the next.

When it comes to tracking activity in a finished goods inventory, the inventory methods applied will make it easy to account for any goods that are recently produced and added to the total inventory, as well as document any shipments of goods to customers that reduce the total inventory. Traditionally, this involved keeping detailed production records that were applied to a running inventory listing, as well as subtracting goods pulled from inventory to fill customer orders. Today, computer inventory software makes it possible to link directly with production and ordering systems to adjust the inventory balance in a real time fashion, a process that helps to reduce the margin for error with the inventory balance.


Raw stock or materials inventories are also maintained using various types of inventory tracking methods. Here, the focus is on receiving the materials into the inventory as they arrive at the plant, while also accounting for any raw materials that are issued to various departments within the plant when and as needed. Many strategies for maintaining the inventory call for reordering raw materials when they reach a certain minimum level. Referred to in some circles as ordering by usage, this method helps to ensure that materials vital to the operation of the plant are always on hand, with new materials arriving just before the existing inventory is exhausted. If structured properly, ordering based on usage helps to prevent a high inventory that is subject to additional taxes, but also avoids the expense of having to shut down the operation temporarily due to a lack of materials.

The essentials of inventory planning can be adapted to just about any situation. The same general principals that govern the inventory tracking efforts of a large manufacturing plant can also be utilized to create effective modes of inventory management for a small office. The most effective inventory tracking strategies make it possible to function with a relatively lean inventory that is replenished in time to meet the needs of the business, but not so far in advance that the items sit on the shelves for long periods of time.


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