Part 1 of 3 in our inventory management series.

Inventory Management Basics for B2B Distributors and Brands

For distributors and brands that sell B2B, inventory isn’t just what’s on the shelf—it’s the link between what you can promise and what you can deliver. Good inventory management keeps orders flowing, reduces stockouts and overstock, and supports strong relationships with retail and wholesale partners. This post covers the basics: what “good” looks like and how it ties into orders and shipping.

Why Inventory Management Matters in B2B

In B2B, your customers are other businesses. They send purchase orders (often via EDI 850), expect accurate ship notices (EDI 856), and pay on invoices (EDI 810). If your inventory data is wrong or out of date, you risk:

• Overselling: Accepting orders for product you don’t have, leading to backorders, late shipments, and chargebacks.
• Under-selling: Thinking you’re out of stock when you aren’t, so you turn down or delay valid orders.
• Poor planning: You and your partners can’t plan replenishment or promotions when they don’t trust your numbers.

Solid inventory management gives you a single, reliable view of what you have, so you can say “yes” or “no” with confidence and keep the order-to-cash cycle running smoothly.

What Good B2B Inventory Management Looks Like

One Source of Truth

Inventory should be tracked in one primary system—whether that’s a WMS, ERP, or a dedicated inventory module—and all order and fulfillment processes should use that same source. When EDI 850s are processed, they should check and (where appropriate) reserve against that same inventory. When you send inventory advice (e.g., EDI 846) to retailers, it should reflect the same numbers.

Accuracy and Timeliness

• Accuracy: Counts and locations should match physical reality. That usually means cycle counts, receiving and shipping discipline, and correcting errors quickly.
• Timeliness: Updates (receipts, picks, shipments, adjustments) should be recorded as they happen so that “available to sell” is current, not yesterday’s snapshot.

Clear Definitions

Define and use terms consistently:

• On hand: What’s physically in the building (or location).
• Available / available to sell: On hand minus reserved or allocated.
• In transit: Ordered but not yet received, or shipped but not yet delivered.

When you report to retailers (e.g., in EDI 846) or talk to internal teams, everyone should mean the same thing by “in stock.”

Connection to Orders and Shipping

Good inventory management doesn’t live in a silo. It should:

• Feed order acceptance: When a purchase order (850) comes in, you should be able to check availability and either confirm or flag shortages.
• Support allocation: Allocate or reserve inventory to specific orders so you don’t oversell.
• Drive ship notices: When you ship, your system should update inventory and send an EDI 856 so your customer’s system is in sync.

When inventory, orders, and shipping are connected, you reduce manual work and errors and give partners visibility they can rely on.

How Inventory Fits with EDI 850 and 856

• EDI 850 (Purchase Order): The retailer is asking for product. Your ability to fulfill depends on inventory. Checking availability at order entry (and optionally reserving) keeps promises realistic and reduces surprises.
• EDI 856 (Advance Ship Notice): When you ship, you’re reducing on-hand and possibly in-transit. Updating inventory and sending the 856 keeps your numbers and the retailer’s expectations aligned.

Getting the basics right—one source of truth, accuracy, clear definitions, and tight links to 850 and 856—sets you up for the next step: visibility and reporting. In Part 2: Inventory Visibility and Reporting, we cover stock levels, reorder points, and how EDI 846 and system sync improve visibility for you and your retail partners.

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Series: How to Manage Inventory

• Part 1: Inventory Management Basics (this post)
• Part 2: Inventory Visibility and Reporting
• Part 3: Inventory and Order Fulfillment