Retail operators in 2025 are being squeezed on three fronts at once: (1) new import tariffs of 10-30 % that raise landed cost overnight, (2) record-high swipe fees that now skim more than $170 billion from merchants each year, and (3) a surge in organized retail crime (ORC) that has pushed shrink past $112 billion.
Together these headwinds turn every stale SKU into cash burn—exactly why ops leaders who say they’re “drowning in spreadsheets” need faster, AI-driven inventory decisions today.
Cost-optimized inventory management in 2025 means shielding gross margin from tariffs, swipe-fee inflation, and ORC by unifying demand signals, procurement, and finance inside an API-first ERP that automates manual reconciliations.
At Tailor, we’ve helped scaling brands clean up the mess and build inventory systems that actually work — not just today, but for the long haul. This guide is designed to do the same for you. Whether you're trying to automate reordering, streamline warehouse workflows, or integrate inventory with your financial systems, we’ll walk through what modern inventory management looks like — and how it impacts every part of your business, from operations to finance.
Today’s retail brands operate across DTC, wholesale, marketplaces, and retail stores. When you add in the additional operational complexity of made-to-order products and production requirements (we call this “light manufacturing"), it immediately becomes clear: the typical ops playbook was made for 10 years ago.
For modern retail and ecommerce operators, the lowest-hanging fruit we recommend addressing first are:
Reduce or remove manual work in all operational areas
Kill your spreadsheet and implement a dedicated inventory management tool
Based on our experience with retail operators trying to fix their retail inventory management, here are some common manual work pitfalls and how to eliminate them.
This looks like compiling data from style sheets, product quotes, and material information to create a purchase order breakdown sheet. This data is then duplicated across various systems for different sales channels, such as DTC and wholesale, and sent manually to manufacturers and warehouses.
How to Eliminate:
Implement Purchase Order Automation: Use an ERP system or order management app that can automatically generate POs based on predefined rules (e.g., reorder points or sales data). For example, Tailor’s purchase order management module can integrate with existing sales channels like Shopify, generating POs automatically when stock levels fall below a certain threshold.
Centralize Data Entry: Instead of entering the same data into multiple systems, use integrations between tools or tools that allow data synchronization across all channels. For example, product data entered into the system can be automatically shared across multiple Shopify stores and your warehouse management system, reducing manual input and the risk of errors.
If your inventory is physically split according to your operational needs (such as B2B vs. D2C), but managed manually, this is another operational fiasco waiting to happen. Frequent stock transfers between channels often require communication between multiple teams and updates to several systems, creating time and resource drag.
How to Eliminate:
Standardize Inventory Tracking Across Channels: One solution is to make sure your product information is uniform across all channels, with everything from descriptions, SKUs and prices standardized.
Enable Cross-Channel Visibility: If you’re offering custom pricing or bundling, you'll need a way for every sales channel to access your inventory levels at all times (without manually making stock transfers). Many operators use inventory tools like Unleashed, TradeGecko, Zoho Inventory or Cin7 coupled with custom integrations to accomplish this. Since Tailor is a headless, API-first solution, our inventory management module tracks all stock from a single dashboard with the ability to allocate stock automatically based on sales data and order types.
If your various team members rely on a single person for information about inventory, POs, or sales data, that's a red flag. A "single point of failure" will inevitably cause frequent interruptions and delays as team members waste time requesting and waiting for updates.
How to Eliminate:
Implement a self-service dashboard: By using a centralized inventory system, team members can access the information they need in real time.
Enable role-based access so that everyone involved in operations has appropriate access based on their role — and eliminate any reliance on a single person to distribute data.
Q: How can I reduce manual work in inventory?
A: While you can’t completely eliminate manual work in inventory, you can drastically reduce it with the right inventory management system and solid integrations built around your operations. But, especially in the initial setup or for smaller operations, modern software can solve many issues out-of-the-box and significantly streamline tasks, automate processes, and reduce human error.
However, good organization is a crucial step before implementing any software. No system, no matter how advanced, will save you time if your inventory is chaotic. For example, many operators lean on ABC grouping to categorize products based on their value and how quickly they move. This allows you to store high-demand or high-value items in easy-to-access areas, while slower-moving products are placed further out of the way. Proper organization ensures that employees spend less time searching for items, and it also simplifies inventory audits.
Learn more: Understanding the Types of Inventory Management
Q: Is there a way to automate reordering and stock updates across all channels?
A: Yes! This is where having a headless, or composable, ERP integrated into your business comes in handy. Because a headless ERP has a decoupled back-end (the code of the software) and the front-end (the visual elements), you’re able to integrate plugins from the other software solutions you utilize, such as Shopify, Amazon, and Zapier. In short, this means that different pieces of your tech stack can talk to each other, enabling you to set up automation for reordering and keeping stock consistent between your different points of sale.
Q: How do we streamline warehouse workflows, such as picking, packing, and shipping?
A: As suggested above, organizing your warehouse inventory is a fantastic start. But if your inventory is continually growing, it may be time to implement a barcode tracking system so that your inventory management software can tell your fulfillment workers exactly where inventory lives. Likewise, by using RFID technology to augment your inventory workflows, it’ll be easier for you to track inventory from shelf to shipment — minimizing the potential for lost or damaged goods.
Improving supply chain collaboration is about building transparent, real-time partnerships across suppliers, manufacturers, logistics providers, and retailers to align goals, synchronize operations, and proactively respond to disruptions.
By combining shared demand forecasting (CPFR), digital data sharing, and joint planning efforts, companies can reduce lead times, minimize stockouts and excess inventory, and cut operating costs.
When executed effectively, collaboration fosters resilience, agility, and innovation—63% of manufacturers report on-time delivery improvement above 95%, while strong supplier relationships can decrease disruptions by 20%
1. Vendor Managed Inventory (VMI) or Shared Forecasting
With VMI, your suppliers handle restocking based on your sales data, minimizing stockouts and smoothing out demand swings (a.k.a. the bullwhip effect). While VMI can be harder for mid-sized retailers to negotiate, it becomes more accessible when suppliers are under pressure—like during demand downturns.
2. Collaborative Planning, Forecasting, and Replenishment (CPFR)
CPFR unites suppliers, manufacturers, and retailers in a shared rhythm of planning, forecasting, and restocking so everyone benefits. When executed well, CPFR boosts forecast accuracy by up to 20%, slashes inventory costs and stockouts, and deepens strategic alignment across your partners.
3. Drop Shipping Partnerships
Drop shipping lets suppliers fulfill orders directly, cutting your warehousing burden and expanding your product range without inventory risk. Strong coordination is key to ensure fast, reliable delivery.
Learn more: 5 Inventory Challenges Shopify Store Owners Face — and How Composable Inventory Management Solves Them
Q: Can we customize workflows like PO approvals or vendor-specific terms?
A: Generally speaking, yes! There are some scenarios where this isn’t possible, but it’s largely dependent on the systems your vendors or suppliers utilize. In some cases, your vendors may have proprietary software that doesn’t have the ability to integrate into your tech stack (or your ERP/MRP system). However, this is a rare issue as it’s usually possible to achieve a workaround.
Of course, if your business workflows are integrated into a composable ERP, creating custom PO approval or vendor-specific workflows is exponentially easier than trying to sync them with a traditional, rigid ERP solution.
Q: What if our business model changes — will the system still work?
A: Because composable ERPs are designed to be flexible and customizable for your business, there’s almost nothing you could change in your business model that would cause your systems not to work. In the event that you do need to make changes, it’s important to consult with your system provider to make sure the changes you want to make can be accommodated. This is imperative to do if you’re using non-composable software solutions, as they tend to be more rigid and may not function optimally with certain business model changes.
Managing production and made-to-order processes can be a major challenge for growing businesses, especially during transitional periods. As your operations expand, more people become involved in workflows, which can quickly lead to disorganization in product data and inventory tracking. In particular, light-manufacturing businesses often struggle to keep production schedules on track, especially when dealing with unreliable vendors or delayed materials.
These issues create pressure that makes it hard to find a solution — but rest assured, refining your product management strategy can significantly reduce daily headaches. With the right processes in place and the right tools, you can streamline production, improve supplier relationships, and regain control over your inventory.
Q: How can I streamline inventory workflows to support fast growth?
A: Start by getting back to basics—organize your inventory, simplify workflows, and maintain honest communication with suppliers. Many fast-growing ecommerce and light‑manufacturing brands skip these fundamentals in favor of speed, only to hit avoidable roadblocks.
Most importantly, be patient. Strategic process improvements—rooted in clear communication, standardized data, and automation—help minimize friction and create operational clarity. That frees you to focus on growth with confidence, rather than firefighting backend issues.
Q: How do we keep our product catalog organized across SKUs, variants, and bundles?
A: Start by creating a clear, consistent catalog structure as the backbone of your operations. Use parent–child SKU relationships to link product variants under a central parent SKU. This simplifies reporting and inventory tracking across styles and sizes .
Regular catalog audits are essential: periodically review and remove inactive or obsolete SKUs, variants, and bundles to keep your system lean and accurate.
For organizational efficiency:
Together, strong naming structures, parent‑child groupings, audit discipline, and logical bundling form a catalog that scales seamlessly as your business grows.
Q: How do we turn inventory into a growth advantage instead of a liability?
A: To turn inventory into a growth advantage, leverage these three pillars:
Organization: Maintain an easy-to-track, well-structured catalog with regular audits and clear categorization for different product types.
Forecasting: Use historical data and predictive analytics to understand demand patterns and minimize the risk of stockouts or overstocking.
Automation: Implement systems that trigger automatic reorders based on stock thresholds and demand forecasts. This ensures that you always have the right amount of inventory to meet demand without tying up capital in surplus stock.
Q: What’s the best way to manage light manufacturing or kitting?
A: Begin by standardizing your kit definitions and raw material inventory—clearly list each kit’s components and maintain organized storage for quick access and accurate assembly. Next, map and automate repetitive tasks such as material requisition, inventory updates, and work order creation. This ensures consistent, error-free kit production, reduces labor time, and enables scalability without adding complexity.
Managing the difficulties (and massive benefits!) of omnichannel operations can be a dubious juggling act. If you were successful in scaling up quickly but lacked certain key infrastructure, you might be feeling that your inventory is fragmented across platforms like Shopify, marketplaces, and B2B systems. Your customers may experience delays or order cancellations because of inventory syncing errors. Worst of all, your omnichannel tools might be really bad about talking to each other.
If you resonate with any of this, we hear you. And there are a number of solutions that can streamline your operations and help you manage your omnichannel growth more efficiently.
Inventory discrepancies across Shopify, marketplaces, and B2B platforms
Overselling and misallocations of stock
Difficulty tracking inventory across multiple locations
Syncing issues between different platforms and tools
Centralize Your Data: Integrate Your Platforms: Instead of managing separate tools for each sales channel, consider integrating them into one central system. This creates a single source of truth for inventory data, making updates across Shopify, marketplaces, and B2B platforms seamless and real-time.
Leverage API-Enabled Tools: Prioritize API-driven integrations when evaluating third-party apps or dedicated order and inventory management software to get as close as possible to real-time inventory levels syncs — which reduces errors and manual work. Brands like Glossier and Warby Parker pioneered using integrated systems to manage their product data and inventory across online stores and physical locations.
Optimize Stock Allocation: If you have multiple locations, make sure you can ship from the best source. A centralized inventory system allows you to track inventory in real-time and allocate stock based on availability or demand — making it easier to fulfill orders from the most efficient location.
Automate Replenishment & Order Management: To avoid overselling or running out of stock, set automatic reorder points based on sales data. Many retailers use inventory management tools to track product movement and trigger orders when stock levels dip below a certain threshold.
Remove Fragmented Systems: Replace underperforming tools with a unified, customizable system that can scale with your business. For example, consider adding a warehouse management system (WMS) or advanced demand forecasting tools to improve operational efficiency.
Learn more: Inventory Best Practices That Actually Scale, A Playbook for Growth-Ready Brands
Q: How do we avoid overselling as an omnichannel retailer?
A: Overselling is a common challenge for omnichannel retailers, especially when marketing, sales, and ops aren’t aligned. To avoid stockouts and frustrated customers, you need three things working together: (1) Real-time inventory syncing: Your systems must update inventory across all channels—Shopify, Amazon, in-store, etc.—as soon as a sale happens. (2) Clear stock allocation: When planning promotions (especially channel-specific ones), allocate inventory in advance. Use channel-specific buffers or dedicated stock to prevent one channel from draining availability. (3) Tight internal coordination: Marketing shouldn't launch a flash sale before confirming with ops and purchasing. Establish a promotion planning workflow that includes cross-functional signoff so finance, ops, and customer service all know what’s coming.
Cost and waste are two of the most significant challenges in any business. Unsold inventory ties up capital that could be invested elsewhere, and often ends up either on clearance or collecting dust in storage. This often creates a vicious cycle: stockouts resulting from a lack of the right inventory and markdowns and storage costs resulting from the wrong inventory.
At the same time, poor inventory practices can cloud the financial visibility and profitability of your business. How do you break this cycle? The answer lies in optimizing your inventory strategy.
Think of inventory as an investment. The goal is to maximize returns by focusing on Gross Margin Return on Inventory Investment (GMROII) — how much margin you earn per dollar invested in inventory. Understanding and improving GMROII can help guide purchasing decisions and help prevent overstocking or stockouts.
Focus on high-margin products: Prioritize inventory that offers the highest margin per dollar invested.
Quantify lost sales: Measure the opportunity cost of stockouts to justify optimal stock levels.
Move slow-moving inventory: Identify stagnant stock and take action—whether through markdowns, liquidation, or bundling strategies.
Modern inventory management systems offer features that directly address these needs:
Together, these process and tech enhancements help retailers move from reactive to proactive inventory control, cutting inefficiencies, trimming holding costs, and maximizing sales opportunities.
Q: How do we avoid over-ordering inventory that ties up cash or ends up on clearance?
A: We wish we had a silver bullet that stopped over-ordering, it’s inevitable from time to time. The key is minimizing these occurrences by addressing key vulnerability points: manual data entry and lack of smart forecasting.
Manual data entry is prone to human error, which can lead to inaccurate purchase orders or miscalculations of stock needs. By automating as much of this process as possible—using inventory management software or integrated systems—you reduce the risk of these errors. This also frees up time for your team to focus on strategic decisions instead of mundane tasks.
Smart forecasting takes avoiding surplus to the next level by using historical sales data to paint a more informed view. AI-powered forecasting tools can predict future demand with greater accuracy, factoring in seasonality, market trends, and past sales patterns. This helps you place more informed orders and ensures that you're not over-committing to inventory you won't sell.
Q: How do we forecast demand more accurately?
A: Accurate forecasting requires data-driven methods. Here are a few options:
Time-based formulas and calculations: Techniques like * Exponential Smoothing and Regression Analysis help predict future sales based on historical trends.
Market Research: This includes insights from customers, competitor analysis, and social media monitoring to gauge future demand.
Forecast Outsourcing: Collaborating with experts for more nuanced, reliable predictions, known as Delphi Forecasting.
By combining quantitative forecasting and qualitative market insights, you’ll be much better positioned to meet customer demand without overstocking.
Q: What’s the best way to prevent stockouts during busy seasons or product drops?
A: Like solving over-ordering, seasonal stockouts are prevented through a combination of data-driven methods and software solutions. Many inventory management solutions can set stock threshold minimums, meaning whenever you hit a certain amount of inventory left, a new order is automatically placed (or surfaced for approval if you want to maintain more control). When you’re launching a new product, you can leverage AI forecasting to get an idea of how your customer base might react to it based on past sales trends.
Q: Does Just-in-Time (JIT) inventory management make the most sense for my business in order to minimize waste?
A: Just-in-Time (JIT) is certainly still valuable as a concept for efficiency, it’s not always the best approach in the face of current supply chain volatility. JIT focuses on minimizing inventory levels to reduce holding costs, but with factors like tariffs and supply chain disruptions, it can increase your risk of stockouts and missed opportunities.
In today’s environment, Work-in-Progress (WIP) inventory can act as a buffer to mitigate these risks. While having more inventory or WIP is often seen as inefficient in JIT systems, it can provide you with a cushion against supply and demand fluctuations. Look at WIP inventory as a “shock absorber” for your business, giving you time to address supply-side issues without disrupting your sales.
So, in short: JIT focuses on efficiency, while having more inventory (even if it’s WIP) gives you a layer of risk management—a balance that’s especially important in today’s uncertain market.
Managing finances effectively is a core pillar of your business’s success — but when your financial tools aren’t connected to your other business operations, they become a major roadblock. Disconnected tools lead to manual errors, inaccurate inventory tracking, and unnecessary headaches for your finance team.
| Challenge | Summary | Impact |
|---|---|---|
| Inaccurate Financial Reporting | When your financial tools (QuickBooks, Xero, etc.) are not integrated with your inventory or sales systems, manual data entry becomes inevitable. This leads to discrepancies, inconsistent reporting, and delayed insights. | Misaligned data can affect key financial decisions, like budgeting, forecasting, and cash flow management. It can also increase the risk of audit errors and lead to compliance issues. |
| Slow and Error-Prone Order Processing | Non-integrated systems require manual reconciliation between sales data, inventory levels, and financial records. This often results in inaccurate order fulfillment, delayed shipments, and order cancellations. | Customers experience frustration, leading to higher return rates, poor customer satisfaction, and lost revenue. |
| Inventory Valuation Challenges | Without integration, inventory and financial tools work in isolation, making it difficult to track the actual value of stock. Valuations are often done manually, leading to errors in COGS (Cost of Goods Sold) calculations and gross margin tracking. | Incorrect inventory valuations distort profit margins, which can mislead decision-making on pricing, sales strategy, and future investments. This also makes tax reporting more complicated and time-consuming. |
| Cash Flow Uncertainty | Disconnected systems make it harder to track how much cash is tied up in unsold inventory, outstanding purchase orders, and accounts payable. This limits visibility into available capital and makes cash flow forecasting difficult. | Poor cash flow visibility can lead to inefficient stock purchases, missed opportunities, or an inability to cover operational expenses when needed. It also puts a strain on financial planning. |
| Lack of Real-Time Data and Reporting | Manual processes and non-integrated systems often result in outdated financial data, making it difficult to get real-time insights on business performance. | Decision-makers are left working with stale data, leading to missed opportunities for optimization and growth. A lack of accurate, real-time reporting also affects investor confidence and decision-making. |
| Increased Operational Costs | Manually reconciling data across systems is time-consuming and resource-intensive. As a result, accounting teams end up dedicating excessive time to tasks like data entry, correction, and reconciliation instead of focusing on strategic initiatives. | Operational efficiency is reduced, and employees spend less time on value-added activities, leading to higher labor costs and slower business growth. |
| Difficulty Scaling | As companies grow, financial operations become more complex. Scaling becomes more difficult without integrated systems. Manually managing multiple sales channels, inventory locations, and financial records only leads to bottlenecks. | Business growth is constrained by the limitations of fragmented systems, and scaling operations can become more cumbersome and error-prone. Long-term, this affects profitability and the ability to expand. |
Fortunately, you have options. Whether you're using spreadsheets, standalone accounting software, or a full ERP system, there are multiple ways to improve financial integration and accuracy.
Use Pre-Built Integrations. Many accounting tools offer built-in integrations with ecommerce platforms, inventory systems, and banks. These can often be configured quickly without technical help.
Adopt an Integration Platform. Tools like Zapier, Make, or Celigo help connect disparate systems through automated workflows — no custom code required.
Work with a Consultant or Developer. For complex businesses, hiring an implementation partner to build and maintain custom API integrations may be a smart investment.
Evaluate Modular ERP Systems. If your current systems are too siloed or brittle, consider transitioning to a modular or composable ERP that can consolidate and automate your core operations.
Q: How do we keep our inventory in sync with QuickBooks or Xero?
A: You can automate real-time inventory sync by connecting your composable ERP via API to your accounting system. This ensures stock levels, costs, and adjustments flow seamlessly between platforms—eliminating manual entry and preventing reconciliation pain. When discrepancies arise, the integration flags them in your ERP, enabling quick resolutions and maintaining accurate financial records.
Q: What’s the actual value of our inventory at any given time?
A: The actual value of your inventory is calculated as your COGS (or Cost of Goods). This is determined through a few different calculation systems — which are dictated by how you track your inventory. You might utilize FIFO or Weighted Average calculations to determine the value of your inventory, but in some limited circumstances, you may also use Last-in-first-out (LIFO). LIFO tends to lead to inaccurate value calculations unless you’re a business that experiences rapid depreciation of goods, such as a car dealership.
Q: How can we support more advanced accounting like landed costs or COGS rollups?
A: If you’d like to start tracking landed costs and COGS accurately (and without doing regular napkin math), you’ll want to integrate software solutions like Quickbooks, Xero, or a composable ERP that comes with an inventory management module.
Scaling isn’t just about rising demand—it’s about having the infrastructure to support it reliably and profitably. Here’s your readiness check:
“Spreadsheet-based operations are a shaky foundation for optimizing inventory beyond $1M in revenue — after that, you need real data infrastructure to support growth,” Yo says. “We see a lot of flawed cost allocation within the inventory management process, which ultimately leads to mispricing. But many companies don’t realize they don’t need a ton of back-office staff to manage their purchasing and inventory. They just need the proper setup and a few effective tools.”
You don't need an MBA in Supply Chain Management or a background in software engineering to get your inventory management ready for 2025 and beyond. We've seen companies from every retail niche quickly adapting to their customer's needs and getting creative with their operations to drive growth — without overextending their teams or budgets.
The key is operational clarity. That means:
Automating the basics like reordering, vendor communication, and landed cost tracking
Standardizing your data so financials, inventory, and fulfillment speak the same language
Unifying systems so your purchasing team isn’t flying blind when demand spikes or tariffs shift
Integrating financials to better track inventory costs and ensure every dollar of inventory is pulling its weight
Smart retail operators treat inventory like capital, not clutter. With the right systems in place, you’ll spend less time second-guessing your margins and more time planning your next move.
Tailor’s inventory management solution gives fast-growing retail brands real-time visibility, smarter forecasting, and seamless financial integration — all in one flexible platform. Book a demo today.
