Introduction
Inventory mismanagement costs money twice—excess stock ties up capital and storage space; insufficient stock loses sales and damages relationships. Odoo's inventory module provides real-time visibility and automated workflows that transform supply chain efficiency.
Many companies underutilize Odoo's capabilities, managing inventory manually despite system presence. This guide covers key configurations and practices that maximize Odoo's inventory potential.
Inventory Valuation Methods
Odoo supports three valuation methods: FIFO (First In, First Out), LIFO (Last In, First Out), and Average Cost. Method selection impacts how cost of goods sold is calculated and therefore reported profitability.
FIFO assumes oldest stock is sold first—realistic for perishables and items where aging matters. LIFO assumes newest stock is sold first—common in industries where price stability matters more than age. Average Cost values inventory at the average purchase price—simplest to implement and most commonly used.
Choose once and be consistent. Frequent changes distort accounting records. Document the choice to ensure continuity.
Stock Locations and Warehouses
Organize inventory by location. A simple setup might have one warehouse with receiving, quality control, and storage locations. Complex operations might have multiple warehouses, locations within warehouses, and sub-locations.
Define locations to match physical reality. This enables accurate cycle counting and inventory audits. When warehouse staff pick an order, they physically navigate the warehouse layout that Odoo reflects. Misaligned locations create confusion and stock loss.
Stock transfers between locations flow through Odoo. When inventory moves from receiving to quality control, create an internal transfer. When stock transfers between warehouses, create an inter-warehouse move. This creates an audit trail and maintains accuracy.
Reorder Points and Safety Stock
Reorder points determine when automatic replenishment is triggered. Set reorder points based on lead time demand plus safety stock. If lead time is two weeks and daily demand averages 10 units, your reorder point is 140 units (10 daily × 14 days). Add safety stock for demand volatility—maybe 50 units. Reorder point becomes 190 units.
Odoo calculates reorder points automatically using average consumption and lead time data. Regularly review reorder points when demand or lead times change. Seasonal products need adjusted reorder points for different seasons.
Safety stock absorbs demand variability. Products with volatile demand need higher safety stock. Products with predictable demand can run lean. Balance safety stock against carrying costs—excess safety stock is expensive.
Purchase Order Management
Automated purchase orders reduce manual overhead and ensure stock availability. Configure Odoo to automatically create purchase orders when stock falls below reorder points. Vendors integrate directly—when purchase orders are confirmed, promised delivery dates trigger automated receipt expectations.
Vendor management is critical. Track vendor reliability—on-time delivery rates, quality issues, lead time consistency. Underperforming vendors increase supply risk. Maintain backup vendors for critical items.
Lot and Serial Number Tracking
Lot tracking is essential for traceability. Assign lot numbers at receipt so when defects emerge, you identify exactly which production run or shipment is affected. Recalls and quality investigations become targeted.
Serial numbers provide individual item tracking. Critical for high-value items, electronics, and products with warranty implications. When a customer reports a defect, the serial number identifies the specific unit and production date.
Implement lot/serial number tracking from day one. Retrofitting traceability to existing inventory is painful.
Cycle Counting
Physical stock counts reveal discrepancies between recorded and actual inventory. Large variances indicate theft, damage, or data entry errors. Regular cycle counts maintain accuracy.
Odoo generates cycle count instructions based on turnover rates—high-turnover items are counted more frequently. Staff count stock and enter results. Odoo highlights variances exceeding thresholds, allowing investigation before writing off inventory.
Cycle count frequency depends on inventory value and complexity. Simple operations might count quarterly. Complex operations with high shrinkage count monthly or continuously.
Dropshipping and Vendor-Managed Inventory
Dropshipping transfers fulfillment responsibility to vendors. Orders arrive at your fulfillment location (their warehouse); you invoice customers; they ship directly. Odoo tracks this—sales orders trigger purchase orders to vendors, but your warehouse never physically receives stock.
Configure dropshipping vendors in Odoo. When a sales order includes a dropshipped product, Odoo automatically creates a purchase order to the dropship vendor rather than consuming warehouse stock.
Vendor-managed inventory (VMI) is similar—the vendor maintains stock at your location but retains ownership until you consume it. Odoo tracks which items are consigned versus owned, ensuring accurate inventory valuation.
Integration with Sales and Fulfillment
When customers order, Odoo reduces available stock automatically. Customers see accurate product availability. When stock is insufficient for orders, Odoo flags backorders. Sales teams see immediately whether an order can be fulfilled or will be delayed.
Packing and shipping integrate with inventory. When you pack an order, Odoo decreases inventory. When customers receive shipments, you optionally update inventory to reflect return-in-transit risk.
Reporting and Visibility
Odoo's inventory reports surface critical insights. Stock valuation reports show total inventory value by location, product category, or vendor. Stock movement reports reveal which products are fast-moving and which are dead weight. Aging reports identify slow-moving or obsolete inventory that should be liquidated.
Dashboards provide real-time visibility into inventory health. Set up alerts for low stock, overstock situations, and slow-moving inventory. Management sees inventory status at a glance.
Conclusion
Odoo's inventory module, when properly configured and managed, eliminates the guesswork from supply chain management. Reorder points automatically trigger replenishment. Cycle counts maintain accuracy. Lot and serial tracking enable traceability. Integration with sales and purchasing creates a connected system where every transaction maintains inventory integrity. Invest time upfront in correct setup—defining locations, configuring reorder points, implementing lot tracking. That foundation pays dividends through reduced carrying costs, eliminated stockouts, and supply chain visibility that enables better business decisions.