Running a Magento store means keeping track of your products. If you don’t know what’s in stock, you’ll face angry customers and lost sales. That’s where Magento inventory management comes in.

This guide shows you how to use Magento 2’s inventory management software to control your stock, avoid overselling, and keep customers happy. We’ll cover everything from basic setup to advanced features that help you efficiently manage stock across multiple warehouses.

Understanding Magento Inventory Management

Magento 2 comes with powerful tools to help you manage inventory. The inventory management system tracks every product you sell, updates stock levels automatically, and alerts you when items run low.

Before diving into complex features, you need to understand how the inventory system works. The Magento inventory management software has two main areas: global settings that apply to your entire store, and individual product settings that let you control specific items.

Why Inventory Management Matters

Good inventory control helps you:

• Stop selling products you don’t have
• Know when to order more stock
• Track stock levels across different locations
• Save money by not over-ordering
• Keep customers happy with accurate information

A professional Magento 2 development company can help set up your inventory system correctly from the start, saving you headaches later.

Where to Find Inventory Settings

Log into your Magento admin panel. All inventory settings live in one place. Click Stores in the left menu, then go to Configuration. Under the Catalog section, you’ll see Inventory. This is your control center for managing stock in Magento.

How to Set Up Stock Options in Magento 2

Stock options control how your Magento web store handles inventory updates. These settings affect every product unless you override them individually.

Configuring Your Stock Options

Go to Stores > Configuration > Catalog > Inventory. You’ll see several important options in the Stock Options section.

Decrease Stock When Order is Placed

Turn this on. When someone buys something, Magento automatically subtracts it from your inventory. This prevents you from accidentally selling the same item twice. Without this, you’d need to manually update stock levels after every order.

Set Items’ Status to In Stock When Order is Canceled

Enable this setting. If a customer cancels their order, the product goes back into available inventory. This happens automatically without you lifting a finger.

Display Out-of-Stock Products

You have two choices here. Hide products when they’re gone, or show them with an “out of stock” message. Showing them can help with SEO and lets customers know you normally carry that item. Hiding them keeps your store looking cleaner.

Only X Left Threshold

Set a number like 5 or 10. When stock falls below this, customers see “Only 3 left in stock!” This creates urgency and pushes people to buy before it’s gone. It’s a simple psychological trick that works.

These stock options help streamline stock control across your entire Magento store. Set them once, and they work for all products.

Configuring Product Stock Options

Product stock options give you fine control over individual items. These settings override the global stock options for specific products.

Manage Stock

This is the master switch. Turn it on to track inventory for this product. Turn it off for digital downloads, services, or anything that doesn’t have physical inventory. Virtual products and downloadable items don’t need stock tracking.

Stock Status

Set this to “In Stock” or “Out of Stock.” Usually Magento manages this automatically, but you can override it. For example, you might mark something out of stock even if you have inventory because you’re saving it for a special promotion.

Quantity

Enter how many you have. This number goes down when orders come in and goes up when you receive shipments. Keep this accurate or everything else breaks.

Out-of-Stock Threshold

Set this to a number above zero, like 5. When inventory drops to this level, Magento marks it out of stock. This gives you a safety buffer so you don’t oversell while orders are processing.

Minimum Qty Allowed in Shopping Cart

Force customers to buy at least this many. Useful for wholesale products where selling one unit doesn’t make sense. If you sell by the case, set this to 12 or 24.

Maximum Qty Allowed in Shopping Cart

Limit how many one person can buy. This prevents bulk buyers from clearing you out. During hot product launches, this keeps things fair for everyone.

Qty Uses Decimals

Turn this on if you sell by weight or measurement. Customers can then order 2.5 pounds of coffee or 3.75 yards of fabric. Leave it off for items sold in whole units.

Backorders

Choose what happens when you run out. Three options:

• No Backorders – Stop sales when you hit zero
• Allow Qty Below 0 – Let people keep ordering without warning them
• Allow Qty Below 0 and Notify Customer – Allow orders but warn about delays

I recommend the third option. Being honest about wait times builds trust.

Notify for Quantity Below

Set a trigger number. When stock drops below this, Magento emails you. Set it higher than your out-of-stock threshold so you can reorder before you actually run out. If your threshold is 5, set notifications at 20.

Enable Qty Increments

Force purchases in specific amounts. If you sell eggs by the dozen, enable this and set it to 12. Customers can only buy 12, 24, 36, etc. Works great for products packaged in sets.

Working with Magento consulting services helps you configure these product stock options correctly for your specific products and business model.

Stock Availability Management

The key to good inventory management in Magento is keeping stock availability accurate. When your numbers are right, customers trust your store. When they’re wrong, you get angry emails and refund requests.

Check your inventory regularly. Set up those low stock alerts. Make sure your team knows how to update quantities when receiving shipments. These simple habits prevent most inventory problems.

Advanced Inventory Features

The advanced inventory section gives you powerful control over each product. Find it by editing a product and clicking the “Advanced Inventory” link below the Quantity field.

 

Stock Availability

Besides the basic in stock/out of stock status, you can set specific availability rules. This works with your quantity and threshold settings to give customers accurate information.

Automatically Return Credit Memo Item to Stock

When you refund someone, should the product go back into inventory? Usually yes. Enable this so returns automatically update your stock levels. Otherwise you’ll need to manually add inventory back after every refund.

Multiple Boxes for Shipping

Some products ship in multiple packages. Enable this if one item might need several boxes. It affects how shipping costs calculate and how warehouse staff process orders.

Managing Inventory Levels

Keep track of your inventory levels across all products. The Magento 2 inventory management system shows you current quantities, lets you adjust numbers, and tracks changes over time.

Go to Catalog > Products to see inventory for everything you sell. You can sort by quantity to quickly find items running low. Export this list to check inventory in Excel or Google Sheets.

Inventory System Integration

Connect your Magento inventory system with other tools you use. Popular integrations include:

• Accounting software like QuickBooks
• Warehouse management systems
• Shipping carriers for real-time tracking
• Point-of-sale systems for retail stores

A Magento development company can build custom integrations that sync data between systems automatically. This eliminates manual data entry and reduces errors.

Managing Multiple Warehouses

As your business grows, you might store inventory in multiple locations. Magento 2 handles this with Multi-Source Inventory (MSI). This powerful feature lets you manage stock across different warehouses, stores, or distribution centers.

Setting Up Inventory Sources

An inventory source is any location where you store products. Create sources for each warehouse, retail store, or fulfillment center.

Go to Stores > Inventory > Sources. Click Add New Source. Fill in:

• Source name (like “Main Warehouse” or “West Coast DC”)
• Contact information
• Full address
• Whether this source is enabled

Save it. Now you have a source in Magento 2 that can hold inventory.

Creating Stocks

Stocks connect your sources to sales channels. Think of stocks as rules that say “this website pulls from these warehouses.”

Navigate to Stores > Inventory > Stocks. Create a new stock. Give it a name. Select which sources belong to this stock. Link it to your website.

If you run multiple Magento stores, you can create different stocks for each. Maybe your US store pulls from US warehouses, while your European store uses EU warehouses.

Assigning Products to Sources

Edit any product. Find the Sources section. Here you assign quantities to each warehouse. You might have:

• 50 units in Main Warehouse
• 30 units in East Coast DC
• 20 units in West Coast DC

The inventory system adds these together to show total available quantity. When orders come in, Magento picks which source fulfills each order based on your rules.

Source Selection Algorithms

Magento uses algorithms to decide which warehouse ships each order. Two built-in options:

Distance Priority

Ships from the warehouse closest to the customer. This reduces shipping time and costs. Magento calculates distance automatically based on addresses.

Source Priority

You manually set priorities. Magento always tries your first-choice warehouse, then moves to second-choice if stock isn’t available there. Useful if you want to clear inventory from specific locations.

Warehouse Management Benefits

Managing inventory across multiple locations helps you:

• Reduce shipping costs by fulfilling from nearby warehouses
• Balance inventory based on regional demand
• Keep selling even if one warehouse runs out
• Expand into new markets without building everything from scratch
• Offer faster delivery to more customers

The inventory management solution in Magento 2 makes multi-warehouse operations practical for businesses of any size.

Advanced Inventory Management Across Warehouses

Track inventory levels at each location. Monitor which warehouses are running low. Transfer stock between locations to optimize your inventory. The inventory management system provides reports showing:

• Current stock at each source
• Products needing transfer between warehouses
• Which sources fulfill the most orders
• Inventory accuracy by location

This data helps you make smart decisions about where to store inventory and when to move stock around.

Best Magento Inventory Management Extensions

Magento’s built-in features are powerful, but third-party inventory management extensions add even more capabilities.

Amasty Multi-Warehouse Inventory

Enhances multi-location management with advanced reports, automated stock allocation, and better warehouse tools. Good for businesses with complex inventory operations.

Wyomind Advanced Inventory

Adds features for inventory forecasting, automated reordering, and advanced stock rules. Integrates with ERP systems. Strong choice for mid-size to large businesses.

Magestore Inventory Management

Complete inventory solution with purchase orders, supplier management, stock transfers, and barcode scanning. Works well for retailers managing both online and offline inventory.

Aitoc Multi-Warehouse Extension

Focuses on displaying product availability across locations. Shows customers which nearby stores have items in stock. Great for businesses with retail locations.

AppJetty MageMob Inventory

Mobile inventory management with barcode scanning. Your warehouse team can use phones or tablets to receive shipments, count inventory, and update stock on the go.

Choosing the Right Extension

Think about your needs:

• How many locations do you manage?
• Do you need barcode scanning?
• Does inventory need to sync with accounting software?
• Do you want automated reordering?
• Do retail stores need to see online inventory?

For help choosing and installing inventory management extensions, work with professionals who understand both Magento and your business requirements.

Integration with Third-Party Systems

Beyond extensions, you can connect Magento to external inventory management software. This works well if you already use specific warehouse management tools or ERP systems.

Common integrations:

• SAP for enterprise resource planning
• Oracle NetSuite for cloud ERP
• Microsoft Dynamics for business management
• ShipStation for order fulfillment
• Custom warehouse systems built for your business

Advanced Inventory Strategies

Having good inventory management software isn’t enough. You need smart strategies to use it effectively.

Just-In-Time Inventory

Order products only when you need them. This reduces storage costs and prevents inventory from sitting around gathering dust. It requires reliable suppliers who deliver quickly.

Set your reorder points carefully. When stock hits a certain level, immediately order more. The goal is receiving new inventory right before you run out.

First In, First Out (FIFO)

Sell older inventory before newer inventory. This matters for products with expiration dates or items that can become outdated. Use Magento’s inventory tracking to ensure older stock ships first.

Label your inventory with receive dates. Train warehouse staff to pick older items first. Update your inventory system to track which batches are oldest.

Setting Par Levels

Par levels are minimum quantities you always keep on hand. When inventory drops below par, you reorder. This prevents stockouts of important products.

Calculate par levels based on:

• How fast the product sells
• How long suppliers take to deliver
• Seasonal demand patterns
• Cost of holding inventory versus cost of stockouts

ABC Analysis

Categorize products by importance:

A Items – High-value products that need constant monitoring. Check these daily. Never let them run out.

B Items – Medium importance. Check weekly. Maintain reasonable stock levels.

C Items – Low-value products. Check monthly. It’s okay to run low occasionally since they don’t drive much revenue.

Focus your energy where it matters most. Spend 80% of your time managing A items, even though they might only be 20% of your products.

Demand Forecasting

Look at historical sales to predict future demand. Magento’s reports show:

• Best-selling products
• Seasonal trends
• Growth patterns

Use this data to order smart. If a product sells 100 units per month, keep at least that much in stock. If sales are growing, increase your orders. If demand is falling, reduce inventory to avoid excess stock.

Safety Stock

Always keep extra inventory beyond what you expect to sell. This safety stock protects against:

• Unexpected demand spikes
• Supplier delays
• Quality issues requiring returns
• Shipping problems

Calculate safety stock based on how much risk you can handle. Critical products need more safety stock. Items with reliable suppliers and steady demand need less.

Regular Stock Audits

Count physical inventory regularly. Compare it to what Magento shows. Discrepancies mean theft, damage, or data entry errors.

Small businesses should count high-value items monthly and everything else quarterly. Large operations might use cycle counting, where different products are counted each week.

Managing Seasonal Inventory

Seasonal products require special planning:

Before Season

• Analyze last year’s sales
• Forecast this year’s demand
• Order early to avoid supplier backlogs
• Plan warehouse space for incoming inventory

During Season

• Monitor stock levels daily
• Reorder fast-moving items quickly
• Watch for unexpected trends
• Be ready to pivot if something sells faster than expected

After Season

• Clear remaining inventory with sales
• Don’t wait too long – markdown early
• Analyze what worked and what didn’t
• Plan improvements for next year

Inventory Turnover

Track how fast inventory sells. High turnover means products move quickly. Low turnover means inventory sits too long.

Calculate turnover: Cost of goods sold ÷ Average inventory value

Aim for healthy turnover rates. Too high means you’re running out often. Too low means you’re tying up cash in inventory.

Wrapping Up

Good inventory management in Magento 2 keeps your business running smoothly. Use the stock options to control global behavior. Configure product stock options for specific items. Take advantage of advanced inventory features and multi-warehouse management when you need them.

The inventory management software built into Magento offers everything most businesses need. Add extensions when you need extra capabilities. Follow smart inventory strategies to optimize stock levels and reduce costs.

Remember these key points:

• Set up stock options correctly from the start
• Use advanced inventory for detailed control
• Enable multi-source inventory when managing multiple warehouses
• Monitor inventory levels regularly
• Set up automated alerts for low stock
• Count physical inventory to catch errors
• Use reports to understand trends
• Plan ahead for seasonal products

Start with the basics and add complexity as your business grows. The Magento inventory management system scales with you from a small startup to a large enterprise with multiple warehouses.

Need help setting up your inventory system? A professional Magento 2 development company can configure everything correctly, integrate with your existing tools, and train your team on best practices. This investment pays off in fewer errors, better stock control, and happier customers.

Efficient stock management isn’t just about software – it’s about having the right processes, using the right tools, and making data-driven decisions. Use this guide to build an inventory system that supports your business growth.

Frequently Asked Questions

Does Magento 2 have inventory management?

Yes, Magento 2 includes comprehensive inventory management software built into the platform. You can track stock levels, manage multiple warehouses, set up automatic alerts, handle backorders, and control how products display when out of stock. The inventory management system is powerful enough for small businesses and large enterprises alike.

How do I manage stock in Magento?

Log into your Magento admin panel. Go to Stores > Configuration > Catalog > Inventory to set global options. Then edit individual products under Catalog > Products to manage specific items. Use the Advanced Inventory section for detailed control over each product’s stock settings.

What are inventory sources in Magento?

Inventory sources are physical locations where you store products. Each warehouse, store, or distribution center becomes a source in Magento 2. You create sources at Stores > Inventory > Sources. Then assign inventory quantities to each source. Magento tracks stock at each location separately.

How do I check inventory in Magento 2?

Go to Catalog > Products in your admin panel. You’ll see the current quantity for each product. Click any product to edit it and see more details. For low stock items, check Reports > Products > Low Stock. This shows everything approaching your reorder threshold.

How do I add inventory in Magento?

Edit the product at Catalog > Products. Find the Quantity field and enter the new amount. For multi-warehouse setups, scroll to the Sources section and assign quantities to each location. Click Save. The inventory updates immediately and reflects on your storefront.

What is the inventory source in Magento 2?

An inventory source in Magento 2 represents any physical location holding inventory. This includes main warehouses, backup storage facilities, retail stores that fulfill online orders, or third-party logistics partners. Each source has its own contact details, address, and enabled/disabled status.

Can I manage inventory for multiple locations?

Yes, Magento 2’s Multi-Source Inventory lets you manage stock across unlimited locations. Create a source for each warehouse. Assign products to sources with specific quantities. Set up stocks that connect sources to websites. Magento handles the rest, routing orders to appropriate warehouses automatically.

How do backorders work in Magento?

Backorders let customers order products that are currently out of stock. Configure backorders at Stores > Configuration > Catalog > Inventory. Choose from three options: no backorders, allow without notification, or allow with customer notification. You can also set backorder options per product in Advanced Inventory.

What happens when stock reaches zero?

When quantity hits zero, Magento marks the product out of stock. Customers can’t add it to their cart unless you’ve enabled backorders. If backorders are on, customers can still order but may see a message about delayed shipping. The inventory system prevents overselling by tracking reserved quantities from pending orders.

How do I set up low stock alerts?

In product Advanced Inventory settings, set the “Notify for Quantity Below” field to your desired threshold. When stock drops below this number, Magento sends an email alert. You can also check Reports > Products > Low Stock to see all items needing attention. Set different thresholds for different products based on importance.

Can I import inventory updates in bulk?

Yes, use Magento’s import feature at System > Data Transfer > Import. Create a CSV file with product SKUs and new quantities. Upload it and Magento updates everything at once. This is faster than manually editing hundreds of products. Export your current inventory first to get the correct format.

How does Magento prevent overselling?

The inventory management system tracks salable quantity, which is total stock minus reserved quantities from pending orders. When someone adds an item to their cart, Magento reserves that quantity. Even if stock shows as available, reserved quantities won’t be sold to other customers. This prevents overselling during order processing.

What reports help track inventory?

Magento provides several useful reports under Reports > Products:

• Low Stock shows items approaching reorder points
• Products Ordered shows what’s selling
• Bestsellers highlights top performers
• Views shows customer interest

Use these reports to make informed decisions about inventory purchasing and management.

Can retail stores see online inventory?

Yes, with proper configuration. Set up sources for each retail location. Assign inventory to those sources. Staff at each store can log into Magento to check what’s in stock at their location and at other warehouses. Some extensions add better interfaces for retail staff.

How do I handle damaged or lost inventory?

Edit the product and reduce the quantity to reflect actual stock. Add a note explaining why (damaged, stolen, returned, etc.). This keeps your inventory accurate. Some businesses create separate sources for damaged goods to track losses more carefully.

What’s the best way to organize inventory data?

Use consistent SKUs, clear product names, and proper categories. Add custom attributes for important details like supplier, cost, and reorder lead time. Keep notes about each product’s inventory characteristics. Good organization makes reports more useful and inventory management easier.