How to manage inventory in a small shop comes down to seven steps, done in a fixed order. First list, code, place and count every product once. Then record every movement, set reorder levels and recount part of the stock each week, checking each step before the next.
What are the seven steps at a glance?
Each step has an output and a test that tells you it is finished. Move to the next step only when the test passes.
| Step | You produce | Done when |
|---|---|---|
| 1. List every product | One line per product, with cost and price | Nothing on your shelves is missing from the list |
| 2. Code it and set its units | A unique code and a selling unit per product | No two products share a code, and every carton converts to pieces |
| 3. Give it a place | A location code for every product | A new staff member can find any product from its code |
| 4. Count it once | Opening stock, per location | Every line on the list has a counted quantity |
| 5. Record every movement | A record of sales, deliveries, returns, damages and moves | The stock figure changes only through a recorded movement |
| 6. Set reorder levels | A reorder level for every product you buy again | Your 20 best sellers each have one |
| 7. Count part of it every week | A weekly count of one section, and a monthly review | Records and shelves agree on the products you count |
The worked example below follows one shop through all seven: a mini-supermarket in Sinza, Dar es Salaam, with about 180 products and two staff. Its figures are illustrations, in Tanzanian shillings.
How to manage inventory, step by step
Step 1: List every product
Write one line per product you sell: name, cost price and selling price. Walk the shop and the store room shelf by shelf, so nothing is missed.
For example, the Sinza shop's walk finds 180 products. Forty have no maker's barcode: loose sugar, rice by the kilo, local snacks.
Step 2: Give every product a code and a unit
Use the maker's barcode as the code where one is printed. For the rest, make a short code of your own, such as SUG-001 for loose sugar. SKU management covers code schemes in depth.
Then decide the unit you sell in. If you buy soda by the crate and sell by the bottle, the bottle is the unit and the crate a pack of 24.
For example, a delivery of 5 crates then adds 120 bottles. Without the conversion, the record says 5 and the shelf says 120.
Step 3: Give every product one home
Label each shelf with a short location code, such as A1 for the front shelf and B2 for the back store rack. Put the fastest sellers nearest the counter. Inventory storage has more layouts.
Keep only one carton of each product open at a time. Sealed cartons count in seconds; loose items take the time.
Step 4: Count everything once
Count after closing, one location at a time, and write the quantity beside each line of your list. Count sealed cartons and multiply by the pack size, then add the open one.
This first count is your opening stock. Every later figure starts from it, so a careless count here stays wrong for months.
Step 5: Record every movement the day it happens
Stock changes for six reasons: sales, deliveries, customer returns, returns to suppliers, damages, and moves between branches. Record each one the same day, with a name against it. Goods taken on credit are still a sale, recorded under the customer's name.
Check every delivery against the delivery note before you sign. For example, the note says 10 cartons of cooking oil and 9 arrive: record 9, and write the missing carton on the note.
Step 6: Set a reorder level for each product you buy again
A reorder level is the stock at which you order, so the delivery lands before the shelf is empty. It equals daily sales times the delivery time, plus a safety buffer.
For example, the shop sells 48 bottles of soda a day, gets next-day delivery and keeps one day as a buffer: 48 × (1 + 1) = 96 bottles. How to avoid overstocking and stockouts shows how to size the buffer and the order.
Step 7: Count one section every week, and review monthly
Count a different shelf or category each week, so the whole shop is counted every few months without closing. Count your best sellers every week. How to perform a cycle count gives the schedule.
For example, the record says 48 bottles of cooking oil and the shelf has 45. At TZS 6,500 a bottle, the gap is TZS 19,500, and the reason matters more than the money.
The USAID Logistics Handbook gives the rule for gaps: if records don't match the stock, count more often and fix the record-keeping. Once a month, also check slow sellers and inventory turnover.
What mistakes undo an inventory system?
Five habits break the seven steps, and each has a simple fix.
- Counting before listing. A count without a product list has nothing to compare against. Do step 1 first.
- One reorder level for everything. A product that sells 48 a day and one that sells 2 a week need different levels.
- Recording sales but not damages. Broken and expired goods then look like theft. Record them as damages, with a reason.
- Changing the stock figure without a note. Every correction needs a reason and a name, or the next gap can't be traced.
- Signing for deliveries unchecked. A short delivery you signed for becomes your loss.
How to do the seven steps in ArmPOS
Each step has a screen in ArmPOS, and each screen has a Help center guide.
- List: create products one by one, or import the list from Excel (Add your first products, Import products from a spreadsheet).
- Code and units: scan the maker's barcode into Code Product, or generate one. Make the crate a unit built on the bottle, Multiply 24 (Categories, brands and units).
- Labels and places: print barcode labels for products without one (Print barcode labels). Add racks in Settings › Warehouse Locations (Your warehouse and its locations).
- Opening stock: enter it per warehouse on the product form, or import it from a file in Products › Opening Stock.
- Movements: sell through the POS, record deliveries as purchases with status received, and record breakages under Damages (Record a purchase, Record damaged stock). Returns put stock back (Returns and refunds).
- Reorder levels: set each product's Stock Alert, then reorder from the Product Quantity Alerts report (Reports to check every day).
- Weekly counts: Products › Count Stock makes a sheet for one warehouse and category. Correct the gaps with an adjustment and a note (Count and adjust stock).
ArmPOS runs in the browser on Android phones, iPhones and computers, and the phone camera scans barcodes. ArmPOS in Tanzania shows the local setup.
Frequently asked questions
What are the 5 steps of inventory management?
One common five-step version names forecasting, tracking, replenishing, ordering and reconciling. They cover the same work as these seven, with listing, coding and storage folded into "tracking".
What is the difference between inventory management and supply chain management?
Inventory management covers stock once it is yours: what you hold, where, and when to reorder. Supply chain management covers the whole path from maker to customer, including suppliers and transport.
Do I need barcodes to manage inventory?
No. Every product needs a unique code; a barcode only makes the code faster to enter. Start with short codes of your own and add labels when the till gets busy.
What should I do when a count doesn't match the record?
Recount first, then trace the movements since the last count: a delivery not entered, a damage not recorded, a sale keyed wrong. Correct the figure with a note, and count that product weekly until it matches.
Which step matters most?
Step 5. A list, codes and counts all decay within weeks if movements go unrecorded.
Start with step 1 today: walk the shop and list what is on the shelves. When the list is ready, create a free ArmPOS account and import it.
