Inventory management has a handful of core methods that show up across almost every e-commerce context. Understanding what they are and when they apply saves beginners from making decisions based on guesswork.
FIFO: first in, first out
FIFO means selling the oldest stock first. This matters most for products with expiry dates or seasonal relevance. A store selling skincare or food products needs FIFO to avoid holding expired stock. For general merchandise, it is still a sensible default.
LIFO: last in, first out
LIFO is rarely used in Australian e-commerce and is not permitted under IFRS accounting standards. It occasionally appears in US-based discussions, so it is worth knowing the term exists even if it does not apply locally.
Just-in-time inventory
Just-in-time means ordering stock only when needed, keeping warehouse quantities low. It reduces storage costs but requires reliable suppliers with short lead times. For new stores with unpredictable demand, this carries real risk if a supplier is delayed.
Safety stock
Safety stock is a buffer quantity held above your expected minimum. If your average weekly sales are 30 units and your supplier takes two weeks to deliver, holding 80 units rather than 60 gives you a cushion. The exact number depends on how variable your sales are week to week.
Periodic versus perpetual tracking
Periodic tracking means counting stock on a schedule, such as monthly. Perpetual tracking updates stock levels with every transaction automatically. Most e-commerce software uses perpetual tracking, which is more accurate and less labour-intensive once set up correctly.