Getting Started With Inventory Management - A Step-by-Step Guide for Makers

Every small batch maker hits the same wall when production starts ramping up: managing all of the stuff. Raw materials, packaging supplies, components, tools — and the growing pile of finished products waiting to ship.

And where are you keeping all of it?

If you’re like most makers, you don’t have the luxury of a warehouse or a dedicated production facility. You’re working from a spare room, a garage, or a shared studio. That means materials compete for space with everything else in your life.

A disorganized setup also makes it harder to run your actual business. Think about it — how much time do you lose hunting through supplies to find one particular item when you need it most?

Inventory management for makers is both a skill and a system that you need to pick up as soon as possible if your business is going to grow. Whether you make candles, soap, cosmetics, food products, or any other small batch goods, this guide will walk you through exactly where to start.

For makers diving into cosmetics specifically, we’ve written a detailed step-by-step guide to starting a handmade cosmetics business — covering everything from formulation and FDA compliance to pricing and building your inventory system.

Jewelry makers in particular will want to check out our dedicated guide to jewelry inventory software once you’ve got the basics down — the component-level tracking requirements for stones, wire, and findings add a layer of complexity worth planning for early. When you’re ready for dedicated software, see how Craftybase handles jewelry inventory with component-level BOMs and automatic COGS tracking.

Last updated: March 2026

Why Does Inventory Management Matter?

Inventory management can mean the difference between a part-time side hustle and a sustainable small business.

Without exaggeration, a solid inventory process can:

• Speed up your production
• Cut overhead costs
• Improve profit margins
• Make your products more consistent
• Eliminate clutter from your workspace
• Simplify taxes and COGS calculations

Here’s the thing most people don’t say out loud: inventory isn’t just a chore for “serious” businesses. It’s actually what tells you whether your craft business is growing or just staying busy. Busy and profitable are not the same thing — and your stock records are often the first place that truth shows up.

Ready to get started? Let’s go.

Step 1: Take Your First Stock Count

You can’t manage what you don’t know you have. The very first thing to do is count everything currently in your studio or storage space — raw materials, packaging supplies, components, and finished products ready to ship.

This is your baseline. It might feel tedious, especially if things have been piling up for months. But it only needs to happen once at this level of detail. Everything after this is maintenance.

A few tips for making your first count less painful:

• Work in zones. Count one shelf, one bin, or one category at a time. Don’t try to do the whole studio in one pass.
• Write it down as you go. A simple spreadsheet with columns for item name, unit of measure, quantity on hand, and supplier is enough to start.
• Don’t skip the weird stuff. That half-used bottle of fragrance oil? The leftover ribbon from a custom order? Count it. It all has value.

Once you have a count, you can assess whether you’re overstocked on certain materials (money sitting idle on a shelf) or understocked on others (a surprise you’ll want to avoid mid-production). This is also a good time to review whether you’re happy with the quality and cost of what you’ve been buying.

Step 2: Organize Your Storage

Some makers brag about having an “organized mess” of a workspace. But if you’re going to run an efficient business, you need to do better than that.

Store raw materials and supplies in separate, clearly-labeled bins or shelves. Arrange things so the most commonly used materials are the most accessible — everything else can live further back.

Good organization does two things at once: it speeds up production (no more hunting for that one dye), and it speeds up future stock counts (you know exactly where to look). Both matter more than you’d think once orders pick up.

A simple labeling system beats a complex one every time. If you have to think too hard to use it, you won’t use it consistently.

Step 3: Build Your Materials Register

A materials register is just a list of every raw material or component you use, along with the key details: supplier, unit cost, unit of measure, and current stock level.

This is the foundation of your inventory system. Without it, you’re flying blind on costs. With it, you can:

• See exactly what you have on hand at any moment
• Know when you’re running low before you run out
• Calculate how much each product actually costs to make

You don’t need special software to build this. A spreadsheet works fine early on — just make sure you update it consistently every time you receive a delivery or use materials in production. Inconsistent data is worse than no data.

If you sell on Etsy or Shopify, our guide to the best free Etsy inventory spreadsheets covers templates you can adapt for your materials register.

Step 4: Track Your Costs (COGS)

One of the biggest reasons to do inventory management — beyond just knowing what you have — is understanding what your products actually cost to make. That number is called your Cost of Goods Sold, or COGS.

Here’s why it matters: if you don’t know your real costs, you’re either pricing too low and quietly losing money, or pricing without confidence and guessing at margins. Neither is a good place to run a business from.

4 Common Pricing Mistakes Makers Make →

To calculate COGS properly, you need to account for:

1. Materials — the cost of every ingredient or component used in that product (this is where your materials register from Step 3 pays off)
2. Labor — the time you actually spend making it, at a reasonable hourly rate
3. Overhead — a portion of your indirect costs (packaging, tools, electricity, studio rent)

Once you know this number, pricing becomes a lot less guesswork. You can see how much you’re spending on materials and supplies, and understand exactly how much profit margin you’re actually working with.

You’ll also notice patterns in your spending habits — maybe you chronically under-buy certain supplies and run out at the worst times, or you over-buy slow-moving materials and end up writing them off. Knowing your costs is what makes those patterns visible.

Step 5: Choose the Right Inventory System

Now that you’ve counted your stock, organized your storage, built a materials register, and started tracking costs — you need a system to maintain all of it going forward.

The right system depends on where you are in your business. A few options:

Pen and paper works for the very beginning, when you have a handful of materials and one or two products. The limitation is obvious: it doesn’t scale, and manual tracking means manual errors.

Spreadsheets are the most common starting point. A well-built spreadsheet handles materials lists, stock levels, and basic cost calculations reasonably well. The tradeoff is that every piece of data needs manual entry, and formulas break. Our stocktaking strategies ebook covers how to build a solid spreadsheet-based system.

Dedicated inventory software like Craftybase’s inventory tracking software for makers picks up where spreadsheets leave off — syncing orders automatically from Etsy and Shopify, calculating COGS per product, tracking material usage across every manufacturing run, and generating reports for tax time. The setup takes a little effort upfront, but it stops being something you have to maintain manually.

Creating a Bill of Materials for each product is a natural next step regardless of which system you choose — it connects your materials register directly to your production process and makes cost calculation automatic.

A stockout prevention strategy is also worth setting up early — knowing your reorder points before you run out of materials mid-order is something you want sorted before you need it.

Common Inventory Mistakes New Makers Make

Most inventory problems don’t come from not caring — they come from patterns that seem fine at first and only cause trouble later. Here are the ones worth watching for.

Counting once and never again. Your first stock count is a baseline, not a permanent record. Materials get used, deliveries arrive, and products ship. If you only update your records occasionally, your counts become fiction. Even a quick monthly reconciliation keeps things accurate enough to be useful.

Mixing purchase price with cost per unit. You paid $40 for a bottle of fragrance oil. But how much of that bottle goes into each candle? That’s the number that matters for pricing. A lot of makers track what they spent on supplies without breaking it down to a per-product cost — and then wonder why margins feel tight.

Ignoring packaging in COGS. Boxes, tissue paper, labels, stickers, thank-you cards — all of it costs money. It’s easy to track ingredients carefully and then forget that your packaging is eating 15% of your margin. Raw materials get all the attention; packaging rarely does.

Over-ordering to get bulk discounts. Buying in bulk makes sense for items that are used frequently, store well, and offer a genuine price advantage. It doesn’t make sense for materials with a short shelf life, materials you’re still testing, or anything you’re buying just because the price felt good in the moment. Money tied up in supplies you won’t use for six months isn’t really savings.

Skipping the register when you’re busy. The times you’re most tempted to skip updating your records are exactly the times accuracy matters most — a rush of orders, a new product launch, a big wholesale batch. Build the habit of updating as you go rather than catching up later. Later never comes.

When to Move Beyond Spreadsheets

Spreadsheets are a perfectly reasonable starting point. But there are a few clear signals that you’ve grown past them.

You’re managing more than 20 materials. Once you hit a certain number of materials, keeping a spreadsheet accurate becomes a part-time job in itself. Every formula has to be maintained, every column has to stay consistent, and one accidentally overwritten cell can corrupt your data.

You sell on multiple channels. If you’re selling on Etsy and Shopify and at markets, keeping stock counts synchronized manually is almost impossible. You’ll either oversell or hold back inventory unnecessarily. If Shopify is one of your channels, see our dedicated guide to Shopify inventory management for handmade businesses — it covers raw material tracking, bills of materials, and how to connect a manufacturing system to your store.

Tax time is painful. If calculating your COGS at year end means manually pulling data from order histories, supplier invoices, and a spreadsheet that’s drifted from reality — that’s the clearest signal your system isn’t working. COGS calculations should be something you can pull in a few clicks, not something that takes a weekend.

You’re making multiple products with overlapping materials. When the same fragrance oil goes into six different candle scents, tracking material usage across all of them in a spreadsheet gets complicated fast. Dedicated manufacturing inventory management software handles this automatically by tying each manufacturing run back to its Bill of Materials.

You hired someone. The moment a second person is involved in production, the “I’ll just remember it” approach is over. You need a system other people can use, not just one that lives in your head.

Craftybase was built specifically for makers at this transition point — small enough that enterprise manufacturing software would be overkill, but big enough that spreadsheets are creating more work than they save. If you’re in that spot, the free trial is worth exploring.

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