Selective Inventory Management

Selective Inventory Management: Optimizing Inventory Efficiency

By Team TranZact | Published on Apr 1, 2024

Manufacturing businesses need to optimize their inventory to minimize disruptions and improve productivity. Selective inventory management can fulfil your unique requirements and help run your business smoothly. You can use various techniques to improve the selective control of inventory and pay more attention to the important items.

In this blog post, you will learn everything about selective inventory management and how you can use it to optimize your inventory and increase efficiency.

What Is Selective Inventory Management?

Selective inventory management is a strategic approach that businesses use to optimize their inventory based on demand, value, and urgency. Selective inventory techniques like HML and ABC analysis can help identify the most valuable items. When you identify the most important inventory items, you can make sure of their availability to avoid production delays and improve demand management.

Importance Of Selective Inventory Control

Manufacturing businesses need to have a selective inventory control system to utilize their resources and time wisely. According to Pareto’s Principle, the most valuable items are usually about 20% of the total quantity in the inventory but generate 80% of revenue for the businesses. Selective inventory management allows you to focus more on important items for your business.

It also allows you to keep focused attention and keep minimum stock levels of low-value items to prevent holding costs. You can save money on storage with selective inventory control and improve demand management.

What Are The Common Selective Inventory Management Techniques

You can improve inventory management with various techniques. Here are the common Selective inventory control techniques that you can use.

  • ABC Analysis:

It categorizes inventory items into three categories, A, B, and C, according to their importance and value. Items in the A category are the most important and valuable, B items are moderate, and C items are less important.

  • VED Analysis:

It arranges items according to their criticality in the production process. V (Vital) items are the most important and have no substitutes for production. E (Essential) items are also important, but substitutes are available. D (Desirable) items improve your production process but are not very important.

  • HML Analysis:

It sorts inventory items based on their unit price. Items with high unit prices go into the H category, medium-price items in the M category, and low-price items in the L category.

  • FSN Analysis:

It classifies inventory items based on their consumption rate or usage patterns. F items are fast-moving, S items are slow-moving, and N items are non-moving in the production processes.

  • SDE Analysis:

It organizes inventory items according to the challenges in their procurement. S (Scarce) items are challenging to purchase, D (Difficult) items are also tough to find, and E (Easy) items are easily available.

More Selective Inventory Management Techniques

There are more selective inventory management techniques to choose from according to your business needs.

  • GOLF Analysis can help you arrange your products according to their source of procurement. You can arrange items in the following categories: G (Government), O (Ordinary), L (Local) and F (Foreign).
  • The First-In-First-Out (FIFO) technique allows you to use or sell your older items first.
  • You can use the Last-In-First-Out (LIFO) technique to sell newer items first.
  • The just-in-time (JIT) management technique allows you to order items exactly when needed.

All these selective inventory management techniques are helpful to use for your business’s specific requirements.

How To Implement A Selective Inventory Management Approach?

Implementing selective inventory management approaches can reduce unnecessary expenses for your business. Here is a complete guide to implementing it to increase your inventory efficiency:

1. Collect Accurate Data

First, you need to collect accurate inventory data for each item. This includes product descriptions, usage rates, costs, and suppliers. Make inventory lists and use techniques like ABC, VED, and HML Analysis to arrange items based on their value, demand, and criticality.

2. Apply Control Measures

Then, you must apply strict control measures to high-value items and make sure they are available to reach production targets and fulfil orders on time. Use simple control measures for medium-category items. You can avoid regular checks on low-value items and keep minimum stock levels to save time and costs.

3. Integrate Technology

You can integrate technology into selective inventory management approaches to get accurate data. Choose the Best inventory management software to conduct inventory analysis according to your business requirements.

Key Benefits Of Selective Inventory Management

Selective inventory management offers several benefits that can improve your business's profitability. Here are the key benefits of selective inventory management for businesses.

1. Reduces Inventory Costs

Selective inventory management helps you categorize your inventory items based on their importance. This lets you focus more on high-value items to make sure of their availability. When you have the correct data, you can avoid overstocking medium and low-value items.

2. Increases Production Efficiency

Selective inventory control methods allow you to have sufficient stock of valuable items to avoid disruptions in the production process. You can keep safety stocks of high-value items by sorting them accurately. You can also have alternate suppliers to get high-value items in emergencies.

3. Improves Decision Making

It gives you a clear picture of important products that need more attention and care. It helps you improve inventory restocking of critical products at perfect timings to avoid supply chain disruptions.

4. Improves Customer Satisfaction

It can reduce lead time in inventory and improve your production process. Reaching production targets on time can improve your demand management. It can also make your customers happy and encourage them to deal with your business again.

Improve Your Inventory With TranZact Inventory Management Software

Selective inventory management is the way to optimize your inventory in the best order. TranZact inventory management software comes with the components of selective inventory control methods. It can provide accurate inventory data from inquiry to dispatch. It also helps you categorize items based on their importance.

Using TranZact, you can avoid inventory shrinkage of high-value items to fulfil orders on time. Make informed decisions for your business with TranZact inventory management software.


1. What are selective inventory management techniques?

Selective inventory management techniques are the strategies to organize each item based on its value, demand, and urgency to prioritize them accordingly.

2. What are the 4 techniques of inventory control?

The four techniques of inventory control are:

  • ABC Analysis
  • HML Analysis
  • VED Analysis
  • FSN Analysis

3. What are the two methods of inventory control?

The two methods of inventory control are Physical and Perpetual inventory controls.

4. What is VED analysis for selective control of inventory?

VED analysis for selective control inventory is arranging products that are vital (V), essential (E), and desirable (D) to run the production process smoothly.

5. What are the ABC and FSN systems for selective inventory control?

ABC system categorizes inventory items into three categories based on their usage value. Items in the A category are the most important and valuable, B items are moderate, and C items are less important. The FSN system arranges items as fast-moving (F), slow-moving (S), and non-moving (N) based on their consumption rate.

6. What are the 3 major types of inventory management strategies?

The three major types of inventory management strategies are Just-In-Time (JIT), Economic Order Quantity (ECQ), and ABC Analysis.

7. What are the 4 types of inventory management systems?

The four types of inventory management systems are as follows:

  1. Manual Inventory Management System
  2. Perpetual Inventory Management System
  3. Barcode Inventory Management System
  4. RFID Inventory Management System

TranZact Blogs

Subscribe to Our Blog
Related Blogs
Inventory Forecasting

Inventory Forecasting: Methods, Formulas, Best Practices and Strategies

Explore inventory forecasting methods, formulas, best practices, and strategies for...

inventory control models & techniques

What Are the Most Common Inventory Control Models & Techniques?

Discover the most common inventory control models and techniques for...

Delivery Challan Under GST

Delivery Challan Under GST: Meaning, Uses, and Format

Learn about delivery challans under GST, their format, purpose, and...

What Is Closing Stock

Closing Stock: Meaning, Formula, Calculation, Valuations & Examples

Learn about closing stock meaning, valuation methods, formulas and examples....

Inventory Management Mistakes and Tips to Avoid Them

10 Common Inventory Management Mistakes and Tips to Avoid Them

Learn how to avoid common inventory management mistakes with tips...

Best Practices For Managing Delivery Challans in Manufacturing Business

Best Practices For Managing Delivery Challans in Manufacturing Business

Discover best practices for managing delivery challans in manufacturing. Learn...

Inventory Management in Excel

Inventory Management in Excel: Templates, Formulas, and Automation Techniques

Explore inventory management in Excel with templates, formulas, and automation...

ABC Analysis in Inventory Management

ABC Analysis in Inventory Management: Techniques, Advantages & Examples

Learn about ABC Analysis in inventory management, its techniques, advantages,...

Inventory Management: TCS vs. TranZact

Inventory Management: TCS vs. TranZact Automation Benefits

Compare TCS and TranZact for inventory management automation. Discover which...


TranZact is a team of IIT & IIM graduates who have developed a GST compliant, cloud-based, inventory management software for SME manufacturers. It digitizes your entire business operations, right from customer inquiry to dispatch. This also streamlines your Inventory, Purchase, Sales & Quotation management processes in a hassle-free user-friendly manner. The software is free to signup and gets implemented within a week.