Inventory Management

Inventory management in fashion is the process of controlling the flow of goods from manufacturer to warehouse to customer. It involves decisions about how much to order, when to order, how to store, and when to discount or liquidate unsold stock. Fashion inventory is particularly challenging due to seasonality, trend cycles, and size/colour complexity.

Key inventory concepts:

• SKU (Stock Keeping Unit): Each unique combination of style + size + colour
• Sell-through rate: Percentage of inventory sold within a period (target: 60–80% at full price)
• Weeks of supply: How many weeks current inventory will last at current sales velocity
• Dead stock: Inventory that hasn't sold for 6+ months — represents lost capital
• Inventory turnover: Number of times you sell through your entire inventory per year (higher is better)

Inventory management methods:

• Just-in-time (JIT): Order small quantities frequently, minimising holding costs
• Safety stock: Keep buffer inventory to prevent stockouts
• Economic Order Quantity (EOQ): Mathematical model for optimal order size
• ABC analysis: Classify products by revenue contribution — A items (top 20%) get closest attention
• Pre-order model: Sell before producing, eliminating inventory risk

Fashion-specific challenges:

• Size and colour fragmentation (1 style × 5 sizes × 4 colours = 20 SKUs)
• Seasonal demand fluctuations
• Trend sensitivity — styles may become unsellable quickly
• Long lead times — ordering 3–6 months before the selling season

Inventory management tools:

• Excel/Google Sheets: Sufficient for brands with <100 SKUs
• Unicommerce: Popular Indian inventory management platform (₹5,000–25,000/month)
• Zoho Inventory: Affordable, integrated with accounting (₹3,000–15,000/month)
• Shopify inventory: Built-in for Shopify stores
• ERP systems (SAP, Oracle): For brands at ₹5Cr+ revenue

3PL (Third-Party Logistics) partners:

• Delhivery, WareIQ, Shiprocket Fulfillment: Warehousing + fulfilment
• Cost: ₹15–40 per order for fulfilment + ₹8–15/unit/month storage
• Benefit: Professional storage, packing, and shipping without your own warehouse

Inventory carrying costs (often overlooked):

• Storage: ₹8–20 per unit per month (varies by city and warehouse type)
• Capital cost: Your money tied up in unsold inventory (opportunity cost of 12–18% annually)
• Insurance: 0.5–1% of inventory value per year
• Shrinkage: 1–3% loss from damage, theft, or mishandling
• Markdown losses: 20–40% discount on slow-moving inventory

Rule of thumb:

Carrying inventory costs 25–35% of its value per year. A ₹10 lakh inventory costs ₹2.5–3.5 lakh per year to hold. This makes lean inventory management a significant profit driver.