I haven't used an outline yet. The stories have, up until now, been short enough that they are easy to keep track off. Also up until now, there are few characters. The maximum I've played with is 5, and the action is only happening in one place at a time.
I write the story in either Word or WordPerfect; I also keep a Note pad application open with information like, how tall is Bob, what is the color of Martha's eyes, where did Mary go to school, that kind of thing.

As for the action of the characters, I try to create each character as fully as possible. For instance in one story I am working on there is this girl, who has been divorced twice, is aggressive and impulsive and because she intimidates men, she can't hold a relationship. Now, you wouldn't be able to tell this, because these facts do not come out in the story, but they determine what she will do, and how she will go about it, within the general parameters of the story idea.

I then try to place myself within the character and see what he/she would do at any given time.

I do not know if this would work for anything other than a short story. I will have to try something longer, when I get better at this.