Inventory Management for Makers — The Complete Guide

You’re making things and selling them. That’s the good part. But somewhere between sourcing your materials and shipping your orders, something always seems to go wrong — you run out of a key ingredient mid-production, you lose track of what you actually have on hand, or tax time rolls around and you’re scrambling to figure out what your products actually cost to make.

That’s an inventory problem. And it’s something nearly every maker running a product business runs into sooner or later.

This guide covers everything you need to know about inventory management for makers — from the basics of counting stock to preventing stockouts, calculating COGS, organising your raw materials, and syncing across your sales channels. Think of it as the hub for the whole topic: each section links out to deeper resources if you want to go further.

What “inventory” actually means for makers

Most inventory guides are written for retailers buying finished goods wholesale and reselling them. That’s not you.

As a maker, you’re a manufacturer. You buy raw materials, transform them into finished products, and sell those products directly to customers. That means you have two distinct types of inventory to track:

Raw materials — the ingredients, supplies, and components you buy to make your products. Yarn, resin, fragrance oil, beeswax, hardware, packaging.

Finished goods — the completed products sitting ready to ship, waiting for a customer.

Some makers also have a third layer: work in progress (WIP) — items partially made, batches curing, orders being assembled. For most small-batch sellers, WIP tracking is less critical than nailing the other two, but it matters when you scale.

Understanding this distinction is important because most inventory tools are built for retailers, not manufacturers. A system that tracks finished goods but not raw materials will leave you constantly surprised when you run out of a key supply mid-production.

Why inventory management matters more than you think

Here’s what most makers don’t realise until it hurts: inventory isn’t just about knowing what’s on your shelf. It directly affects your profitability, your tax obligations, and your ability to take orders with confidence.

You can’t price correctly without it. If you don’t know exactly what it costs to make each product — materials, labour, packaging, overheads — you’re guessing at your prices. And guessing is how makers end up busy but broke. In our customer research, pricing accuracy was the #1 reason makers said they started tracking inventory. A proper inventory system tracks the cost of every material that goes into each product, so your pricing is based on reality, not optimism.

Your tax return depends on it. Cost of Goods Sold (COGS) is a key deduction on your Schedule C. To calculate it accurately, you need to know your opening stock, purchases during the year, and closing stock. Without inventory tracking, that number is a guess — and guesses that don’t hold up to scrutiny can become expensive problems.

Stockouts kill customer trust. Running out of materials mid-batch means delayed orders. Running out of finished goods means lost sales. Both damage your reputation. Knowing your stock levels in real time — and setting reorder points — means you catch problems before they become crises.

Overbuying ties up cash. The flip side of stockouts is overstocking. Money sitting in a pile of supplies you won’t use for six months is cash you could have used elsewhere. Good inventory management helps you buy what you need, when you need it.

Getting started: your first inventory count

If you’ve never formally tracked inventory before, the first step is a physical count. It’s not glamorous, but it’s the foundation everything else builds on.

The process: go through your entire workspace — shelves, drawers, storage tubs, the pile in the corner you’ve been ignoring — and count everything. Record each material, the unit of measure, the quantity on hand, and what you paid for it.

This sounds simple. In practice, most makers find the first full count takes 2–4 hours and reveals things they didn’t know (I had four rolls of that? I thought I had more of this.). That’s the point. You can’t manage what you haven’t counted.

Once you’ve done the initial count, you need a way to keep it current. Every time you receive a new supply order, you add stock. Every time you make a batch, you deduct materials. Every time you ship a finished product, you deduct finished goods. The system only works if you keep it up to date.

For a full walkthrough of getting your inventory set up from scratch, see our guide: Getting Started With Your Inventory.

Organising your raw materials

One inventory problem that doesn’t get enough attention: physical organisation. If you can’t find your materials quickly, your inventory tracking becomes academic.

A few principles that help:

Dedicate a storage location to every material. Random placement means random retrieval. Give every supply a home — a specific bin, shelf, or drawer — and always put it back there. When your storage system is consistent, you can count faster, pick faster, and spot gaps sooner.

Label everything. Including things that seem obvious. Memory is unreliable, especially when you’re tired or you’ve been away from the studio for a while.

Use bin numbers. Bin numbers (or location codes) are a simple way to reference physical locations in your space. Rather than writing “blue shelf, third from the left”, you write B-03. It’s fast, unambiguous, and works even if your shelving changes.

Consider FIFO. First in, first out: older stock gets used before newer stock. Important for materials with expiry dates (fragrance oils, cosmetic ingredients, food-safe supplies), but it’s a good discipline for everything.

For a deeper dive on this topic, including specific storage ideas for crafters: 6 Simple Ways to Organize your Raw Material Inventory as a Crafter.

The recipe approach to inventory: understanding BOMs

Here’s where inventory management for makers gets genuinely different from retail inventory management.

When you make a product, you consume specific amounts of specific materials. A batch of 12 candles uses a certain amount of wax, fragrance oil, wicks, and jars. A set of four greeting cards uses specific paper stock, ink, and packaging.

These relationships — product to materials — are captured in a Bill of Materials (BOM), sometimes called a recipe in craft contexts.

Your BOM does two powerful things:

1. It automates stock deductions. When you record a manufacturing run in a system that uses BOMs, it automatically deducts the right quantities of every material from your stock. No manual subtraction, no forgetting to update one ingredient.

2. It calculates cost per unit. If you’ve entered the cost of each material, your BOM lets the system calculate exactly what each finished product costs to make. That’s your foundation for pricing.

Building BOMs takes some upfront work, but it pays back every time you make a batch. A good recipe costing system means you always know your true cost — not a rough estimate, not last year’s number, but the current cost based on what you actually paid.

Best practices for keeping your inventory accurate

Counting once is easy. Keeping inventory accurate over time is where most makers struggle. A few habits that help:

Update stock when materials arrive, not later. It’s tempting to leave the receiving process until you have time — but “later” tends to mean “never.” When a supply order arrives, log it straight away.

Record manufacturing runs as they happen. Same principle. If you made a batch today, deduct the materials today. Letting it pile up creates a backlog that’s hard to reconstruct.

Do a regular stock count. A full physical count once or twice a year catches discrepancies — materials that were damaged, used without being recorded, or simply miscounted. More frequent spot-checks (one category per week, say) keep things tighter without the big effort of a full count.

Set minimum stock levels. For your most-used materials, define a quantity below which you want to be notified to reorder. This is your reorder point: the stock level that should trigger a purchase order before you actually run out.

For a comprehensive look at the habits and processes that underpin good inventory management: Best Practices for Managing Your Craft Inventory.

Preventing stockouts before they happen

Running out of materials mid-production is one of those avoidable problems that still happens to most makers at some point. It’s disruptive — you stop a batch half-made, delay an order, pay rush shipping on emergency supplies.

The mechanics of stockout prevention aren’t complicated:

1. Know your current stock levels (requires tracking)
2. Know how quickly you use each material (requires sales history)
3. Know your supplier lead times (requires records)
4. Set a reorder point that accounts for all three

The formula is: reorder point = (average daily usage × supplier lead time) + safety stock

Safety stock is the buffer you keep for variability — a spike in sales, a supplier delay, a measurement error. The right buffer amount depends on how predictable your demand is and how reliable your suppliers are.

A reorder point isn’t a one-time calculation. As your business grows and your production volumes change, you revisit it. A maker using 10g of fragrance oil per day in January might be using 40g per day in November ahead of peak season — the reorder point needs to shift too.

For a full guide to stockout prevention, including how to calculate safety stock and reorder points for your specific business: The Complete Guide to Stockout Prevention for Small Makers.

Calculating COGS for your products

COGS — Cost of Goods Sold — is the total direct cost of the products you sold during a period. It’s a critical number for two reasons: it affects your gross profit margin, and it’s a deductible expense on your business taxes.

For makers, COGS includes:

• Materials — the raw inputs used to make your sold products
• Labour — direct production time (often undertracked by makers)
• Packaging — boxes, bags, tissue paper, tape
• Manufacturing overheads — a proportional share of costs like electricity for your kiln, depreciation on equipment, consumables

The traditional COGS formula is:

COGS = Opening stock value + Purchases during the period − Closing stock value

In practice, getting to an accurate COGS number requires that your inventory is tracked properly throughout the year. If you haven’t been tracking, you’re estimating — and estimates that diverge significantly from reality are a liability.

Tools like Craftybase handle COGS calculation automatically once your materials and recipes are set up: every manufacturing run deducts materials at their recorded cost, every sale records the product cost, and your COGS report is always current.

Syncing inventory across Etsy and Shopify

Many makers sell on more than one channel — Etsy for handmade community traffic, Shopify for their own branded storefront, sometimes Amazon or a local market as well. Managing inventory across multiple channels manually is a headache: you update stock in one place, forget to update it in another, and end up overselling.

Channel syncing solves this by connecting your inventory records to your sales channels. When an order comes in on Etsy, stock is deducted automatically. When you list a product on Shopify, the same product record tracks inventory across both platforms.

The catch: most generic inventory tools treat Etsy and Shopify listings as finished goods, not as products made from raw materials. That means they track sellable units, but they don’t connect back to the materials you used to make them. For makers, that’s a significant gap.

For a practical guide to setting up inventory sync across your sales channels: How to Sync Your Etsy and Shopify Inventory.

Tips and tools to get your time back

Inventory management shouldn’t eat your week. The goal is a system that runs quietly in the background, updating itself as you receive supplies and record production, and surfaces the information you need when you need it — without constant manual effort.

A few approaches that help:

Use a dedicated system, not a spreadsheet. Spreadsheets work for very simple inventory. Once you have multiple products, each made from multiple materials, with orders flowing in from multiple channels, spreadsheets break down. Formulas get broken, versions diverge, and manual updates pile up. Purpose-built software handles the complexity.

Automate order importing. Manual order entry is the single biggest time sink in maker inventory management. If your software integrates with Etsy and Shopify, orders import automatically and stock levels update without you touching anything.

Batch your admin. Rather than updating inventory every time you make something, some makers prefer to batch their admin: do it once a day, or once per production run. Find the rhythm that works for your workflow.

Use reports, not memory. Don’t rely on knowing your stock levels from memory. Run a stock report before buying supplies. Check your low-stock alerts before starting a big production run. Let the data do the work.

For more practical inventory tips from makers who’ve been through it: Inventory Management Tips and Tricks for Makers.

Choosing the right inventory management software

At some point, the spreadsheet stops working and you need something purpose-built. The right software for a maker is different from the right software for a retailer or a large manufacturer.

What to look for:

Raw material tracking — not just finished goods. If the system can’t track what you buy to make things, it’s missing the most important layer.

Recipe/BOM support — so the system knows which materials go into which products and in what quantities. Without this, every manufacturing run is a manual update.

COGS calculation — automatic, based on actual material costs, not estimates.

Sales channel integration — Etsy and Shopify at minimum, ideally Amazon and others depending on where you sell.

Made for small businesses — enterprise manufacturing software is overkill and priced accordingly. You want something that fits a 1-5 person operation.

Craftybase was built specifically for makers and small-batch manufacturers. It handles raw material tracking, recipe costing, order importing, COGS reporting, and more — all in one place, without requiring a degree in supply chain management.

Frequently Asked Questions

Ready to get your inventory under control?

If you’re still tracking stock in a spreadsheet — or not tracking it at all — you’re running your business with a blindfold on. You don’t know your true costs, you can’t catch stockouts before they happen, and every tax season is a scramble.

Craftybase is inventory and manufacturing software built specifically for makers and small-batch sellers. It handles raw material tracking, recipe costing, automatic order importing from Etsy and Shopify, COGS reporting, and more — all in one place.

Try it free for 14 days, no credit card required.

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