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Midsize business

Effective inventory storage solutions for retailers

No matter the retail business, there’s one crucial part of your operations you must decide on upfront — where and how to store your inventory. 

The storage space you decide on doesn’t need to stay the same forever, but knowing your options can help you make better decisions as you start out or look to relocate your inventory to a new home.

What is inventory storage?

The inventory you hold in your business is typically the finished goods waiting to be sold to your customers. How you choose to store inventory, manage it while it’s still part of your business assets, and track each step in the supply chain, from manufacture to shipping the product to the customer, is all part of your inventory storage system.

Inventory management and storage will largely depend on what type of products you’re selling, the quantity you need to keep on hand at any given moment, and where you’re planning to sell your goods. 

For instance, storage for cosmetics or fresh food items will look very different to businesses selling furniture or tech devices. Some products may need cold storage like refrigerators or freezers, or climate-controlled dry storage. Others can simply live on warehouse shelves or in bins until customers make a purchase.

Regardless of the physical kind of inventory storage being used, most businesses operate on one of two models for their storage options:

  1. First-in, first-out (FIFO): Products are moved out of the storage facility based on their age, with racks or shelves of inventory accessible from several access points. This means that the oldest inventory is what’s sent to customers ahead of the newest inventory. Retailers with products that have expiration dates are likely to use this method, as it mitigates inventory loss on products that may expire or lose value before sale.
  2. Last-in, first-out (LIFO): This type of inventory management assumes the newest inventory will be sold first. It’s the opposite of FIFO inventory storage, so is best for non-perishable goods.

What are the best options for inventory storage?

There are several types of inventory storage solutions that businesses can choose from. Depending on your goals and type of products, you may start with a more sophisticated system upfront. 

For others, particularly new businesses, a simpler solution may work well to begin with, before you outgrow this option and need to find a different storage area for business inventory.

There are three main kinds of inventory storage, with varying levels of involvement from the business in the process from receiving finished products to shipping out goods to customers.


Storing inventory in a warehouse is the most traditional form of inventory storage and management. While many businesses rent this type of space, others may purchase or build their own warehouse storage space to accommodate incoming stock and prepare it for shipping with their own team of workers.

Warehouse storage is one of the best ways to keep inventory in one central location and organized by product type or barcode, but it can be a costly upfront fee, along with being timely to set up and organize in the most efficient way. Despite these initial expenses, though, a warehouse can save money long-term if business forecasting looks favorable.

Using a warehouse is a beneficial step up for many businesses looking to move on, or who have outgrown self-storage options. Inventory management software can be used within the warehouse to better control and manage incoming and outgoing stock, and monitor inventory levels to prevent issues such as overstocking or losses from phantom inventory.

Third-party logistics (3PL)

For business owners who prefer to be more hands-off with their inventory solutions, outsourcing to fulfillment centers can be a great option. These companies usually hold stock for several businesses at one time, renting out the extra space in their own warehouses to other local companies.

Third-party logistics (3PL) providers take care of the work for you, from receiving, storing, and shipping inventory. One of the biggest benefits of using a 3PL provider is in using the inventory tracking and warehouse management systems (WMS) that many of these businesses already have in place. Many 3PL companies have years of experience, making both inventory storage and order fulfillment a streamlined, efficient process.

Another helpful benefit is that these companies already have shipping teams working in their warehouses and partnerships with local shipment firms. This means that businesses working under them often benefit from discounted shipping rates, saving costs long-term and allowing them to be able to pass these savings onto customers.

3PL providers are a good choice for growing businesses who want to hand over inventory management and shipping responsibilities to experts, freeing up time to focus on business growth.


One alternative for businesses that can create new inventory quickly is dropshipping. This is where ready-made products are bought from a supplier, then sent directly to the customer, rather than the business receiving finished products that then need to be packaged and shipped from their own warehouse. 

Amazon storefronts often make use of this type of inventory system, as it removes the need for the business to store products themselves or with a 3PL provider. This can be more cost-effective for new businesses, particularly if products aren’t created until a customer places an order. However, this system also means the business has little control over how or where inventory is stored, removing the possibility of product quality control.

Best practices for effective inventory management

Whichever inventory storage option you choose, you should aim to incorporate the best storage tips and best practices from the start. This will help you keep track of what inventory you have on hand, while also making it easier to fulfill customer orders as they come in and reorder inventory when stock becomes low.

Automate inventory management 

Implementing an inventory management system that can automate many of the day-to-day responsibilities of running a product-based business can change your whole operation.

The best inventory management software will provide solutions for tracking inventory and running inventory reports to help you stay on budget and with plenty of stock on hand. You can easily look at inventory metrics in real-time, especially when you integrate your inventory system with any point of sale (POS) software you’re running. 

This can help you identify bestsellers that may need to be ordered in larger quantities, along with any slow-moving inventory that you need to clear out of your warehouse storage to make space for better-performing products. 

Set reorder points for individual SKUs

Keeping your customers satisfied by having what they want in stock as much as possible means staying on top of your inventory numbers at all times. With inventory storage and management software, it’s easy to send orders to vendors when you reach the reorder point of individual SKUs.

When you work with a 3PL provider, many of these businesses already have this type of system set up within their warehouse. This removes any need for you to arrange your own inventory tracking. Instead, you can easily integrate into their existing software and begin gathering sales data that helps you plan inventory demand.

Audit inventory frequently

Mistakes happen, especially when you have many physical products to track. Even with the best inventory software out there, one human error can skew data and create costly inventory loss problems.

Implementing a system of routine inventory counts (like cycle counts) through audits of both your inventory software and the physical products in your storage facility can give you peace of mind and make mistakes easier to find. Once those mistakes have been identified, they can be addressed quickly to mitigate long-term issues.

Know when you’ve outgrown your current storage location

As your business continues to thrive, you will likely come to a point where you’ve outgrown the physical space of your storage facility or the capabilities that your current warehouse team can offer.

Keeping track of business growth and sales can help you predict when you might need to consider moving your inventory storage to a new location or even a different inventory storage type. Upgrading to a different facility ahead of any anticipated wide-scale growth can help make your packing and shipping process more efficient.

How QuickBooks Enterprise tracks inventory and reduces spoilage

Organizing your inventory in one centralized location is the most effective way to better understand existing stock levels and track inventory locations across one or more physical locations.

With QuickBooks Enterprise, retail businesses can quickly and easily review every piece of inventory associated with their business. From location tracking within your warehouse or storage facility to setting reorder points for every item, you’ll always know exactly what inventory assets you hold in your business and where they are.

Automated inventory forecasting can be accurately calculated to save you money, ensuring you only have the stock you need and can actually sell. You can also set expiration dates to help move inventory more quickly and reduce your overall losses. By using QuickBooks Enterprise as your inventory management solution, running your product-based business becomes more straightforward and efficient.

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