Identifying or classifying inventory is usually done using Pareto principle or ABC analysis. This principle deals with finding out about the “trivial many and critical few”. This simply means that in any business, there are a few specific types of product that greatly contributes to the earnings of the company because of the high demand for them. In effect, there are also many products whose demand for them is identified at a minimal level. With this principle, the operations team can be able to know which products to focus on regarding inventory and which ones do not require much inventory. Deciding to focus on the critical many may prove to be very profitable for the company.

Keeping accurate records can only be done if the operations team is well informed about the inventory system. The team should be knowledgeable about what goods are on hand and what goods are starting to diminish. They should be able to determine the reorder value such that if the inventory reaches below that value, the stocks should be replenished. This can help to the company to prevent the scenario of incurring losses such that if there is a demand, the company should have a supply for it.

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