Managing inventory can be a challenge, especially if your business is new or growing. Inventory management tools help you closely monitor the status of the products that are being sold. You’re able to take control of your inventory and know what you need and when.
There are certain software companies that offer cloud-based solutions and provide you with real-time information about what’s selling and where it’s being sold at.
This guide will cover what you need to know about inventory management systems. We’ll explain the types of systems there are, and which one might be best suited for you.
We’ll also talk about the main features you should look for in an inventory management system in order to ensure efficiency and overall customer satisfaction. Let’s take a look at some inventory basics first.
What Is Inventory Management System?
Inventory management systems are how you organize your whole business! It’s a way for you to be sort of an organizer. These help you organize all your assets, such as inventory, make sure they get from point A to point B, and always know where everything is along the supply chain.
You should definitely look into an inventory management system if it’s something you need in your business. There are various types of inventory management systems, they include:
Periodic Inventory Management Systems
One of the best ways to get a good picture of your inventory at any given time is through stock-taking. In particular, if you are short on time or would like a break from the dizzying pace that comes with managing inventory and supply chains, stock-taking will give you just what you need!
A typical periodic inventory management system sees firms counting their stock every few weeks or months, which can give you peace of mind as it shows inventory levels and values at different points in time.
Performing stock checks is never much fun, but it’s necessary. The job of an inventory manager will typically involve checking stocks fairly often and recording the relevant quantities for each good that the business owns.
The most frequently cited reason for performing these checks is so any problems with supplies can be corrected before they become too damaging to the business.
Of course, if your firm is always going to be selling items that are likely to remain in large quantities then periodic or irregular checks would be entirely appropriate.
Stocking inventory is like balancing a budget. You can either overspend or underspend, and both scenarios could leave you buried in bills that you simply can’t afford to meet.
Overspending occurs when there’s too little stock sitting on the shelves. When this happens, your business loses the precious space it could be used elsewhere to generate more revenue.
If there isn’t enough stock on hand, you may have no choice but to reject orders at peak season, which will only damage your reputation with customers.
Planning and tracking your inventory, or managing products you would sell can be very difficult at times.
Periodic systems might be able to help you keep a check on inventory as well as save on expenses when it comes to supplies, such as paper that you would need for taking notes on inventory.
Also, check out the 20 Best Business Management Software In 2022
Perpetual Inventory Management Systems
Another type of inventory management system is the perpetual inventory management system. With this system, you can track everything related to a firm’s supply chain and inventory in real-time. There are also regular updates of stock levels and associate reports.
There are different examples of automated inventory systems that operate perpetually without the need for human intervention. Let’s take a look at some of the primary ones.
- Manual, Low-Tech Inventory Management
Sometimes turning to simple, low-tech manual solutions is best. For example, popular solutions like a pen and paper can keep track of inventory for you.
Business owners take note of sales as they happen, and make sure the recorded sales match with the monetary values at hand on a ledger for accuracy!
That way you can easily figure out when it’s time to order more inventory or if you need to do more marketing in order to grow your business.
The main strength in this type of system is how simple and cost-effective the upkeep can be while the major weakness is a human error since there are no failsafe mechanisms that check if your records are correct.
- Inventory Management via Spreadsheet
Many businesses still track inventory manually via spreadsheets. Although there are plenty of dedicated inventory management software solutions out there, many aren’t ready to embrace them yet.
The way these people keep track of their inventory involves tracking stocks and sales data via spreadsheets like Excel.
- Dedicated Inventory Management Software
Inventory management is a key element of most modern firms. There is plenty of inventory management applications and software on the market to help retailers manage their supply chain more efficiently.
These inventory tracking solutions allow firms to organize their inventory more intricately while implementing solutions that are cloud-based and easy to scale up if necessary.
The best examples also offer top-notch features providing businesses with all they need right in one place. Below is a list of a few notable ones you should know of:
- They provide regular Real-time updates of stock levels
- They provide automated low stock notifications
- Tracking of Asset through barcodes or lot number
- Creating accurate records
Many previously time-consuming inventory management processes get automated. That saves staff hours and frees workers for other tasks. What’s more, human error is taken far more out of the equation.
With these systems, higher levels of accuracy can be easily achieved; therefore, the benefit for companies using this type of system is tangible.
There is less wasted effort and money, resulting in better productivity and more satisfied employees ensured by their feeling that their contribution to the organization is appreciated with better payment and working conditions as well as enhanced work satisfaction.
Inventory Management System Cost
Inventory management systems/software can cost several thousand dollars or more per year. Fortunately, some inventory apps offer free versions of their mobile-friendly applications with a manageable monthly cost (like $39/month) for access to additional premium features if necessary.
In order to be on the right track with your inventory software, you must figure out what features would benefit you the most.
Speaking of features and prices, it can add up quickly if you’re looking for those apps that have lots of additional features or those big-name brands, so don’t forget to play your cards right when managing your budget.
When considering your budget for inventory software, think about what is most important. Some questions to ask yourself: Do you need to reduce the cost of items by acquiring more of the same item at a discount?
Does your inventory need to be streamlined and simplified so that you may view it more efficiently? What number of people will make use of this software? What kind of equipment do you need, such as barcode scanners, etc.?
Inventory Management Features
When you’re considering the right software solution for your organization, be aware of the following features:
- Scanning of Barcodes
Knowing the current stock levels and knowing where the items are within your warehouse and how much is available for each product is a fundamental aspect of inventory management.
Often, software that can manage this aspect of your business comes with barcode scanners integrated directly into it, which means that when you’re looking at all these numbers on your software application and find out what’s going on in terms of actual stock levels for whatever product you’re dealing with, you can also scan a particular product’s barcode to see where exactly it is located within your warehouse.
- Regular Inventory Updating
Changes to stock levels and the movement of inventory are updated in real-time. When orders get placed or deliveries arrive, your system tracks them and distributes individual items progressively.
Products get sold in bundles or if they form part of a larger package, meaning that even when they’re received all at once, they’re processed separately as a means of precaution.
After all, there’s no point in having a shortage when you could store products more effectively and try to avoid the same problem from reoccurring by processing it piecemeal.
- Reporting in Advance
It may not be fun to manage, but once it’s in place, you can turn it into a gold mine of information.
By reporting important sales data, reorder levels, and more, inventory can let companies know how they are performing in the stock market, even letting them know which products are most popular at any given time.
Inventory helps businesses improve their marketing strategies by giving them the data to support changes based on what people want.
- Multichannel Sales Support
Today’s modern businesses are very complex and require a lot of different moving parts to operate successfully. Some e-commerce companies use extra gifts, for example, to boost sales on their own website.
They may choose to also sell their products via popular third-party sites such as eBay or Amazon using basic techniques like drop-shipping.
However, because of all the complexities involved, you need an inventory management system that is able to integrate with third-party channels so everything from stock levels to physical locations is completely accurate and up to date!
- Control of Multi-Warehouse Inventory
If you have one warehouse but more than one storage site, inventory management can get a little trickier. The best inventory management system will allow you to track stock at more than one site, not just the main distribution point.
It will enable you to see where specifically everything is located down to the last item, as well as provide live information like volume and quantity of stock on location!
- Inventory Demand Forecasting and Planning
A good inventory management system accounts for both by having built-in demand planning and forecasting features.
Data on seasonality, consumer trends, and more help to develop accurate forecasts of customer demand to ensure that you don’t invest in unwanted products when better ones could be purchased elsewhere at a lower price.
- Assembly Process Tracking and Provision of Raw Materials
Manufacturing firms that also take their products to market are also likely to own an inventory management system, but it won’t be identical to a solution for purely B2C or online retailers.
Inventory tracking solutions for these kinds of companies will inevitably have features specially adapted for handling raw materials in the supply chain and for tracking items as they move through assembly processes.
Also, see What Is An Income Statement? Overview, And How It Works
What Is Inventory Management Software?
Inventory management software is a must-have for any business that wants to keep track of the millions of products it takes in and out of storage during a given year.
These businesses need all the help they can get when it comes to managing, tracking, and monitoring each individual product from its origin to its final destination stocked on shelves or stored away in vaults.
That’s why this type of software aims to streamline the data collection and processing systems for inventory management.
This type of software eliminates the double entry of data from spreadsheets and accounting software. It streamlines tracking the location of your products and raw materials, as well as helps you implement an order-management plan so you never have too much or too little of a particular item in stock.
Also, Explore the Top 10 Small Business Accounting Software in 2022
Benefits Of Inventory Management System
Automated inventory is often used in manufacturing companies so as to not risk over-or under-stocking their products. The benefits of using an inventory management system include:
- Over-stocking
A slip-up in your inventory management system can mean losing track of just how much in stock you have.
This could lead to a situation where you place a new order when you weren’t really supposed to – which means overstocking! This just won’t do!
To prevent such waste, make sure your inventory tracking is always up to date and that the information on the shelves is correct too by using an inventory management system properly.
- Under-stocking
The worst thing you can do as a small business is turned down customers because you don’t have enough stock. This sends the wrong message to your clients or consumers, who will believe that they are not important to you.
The second requirement is to let your website users know that one or more items are out of stock. A customer who is searching for an item will become frustrated and leave a site if what they want isn’t available.
- Knock-On Effects
It’s a simple breakdown in inventory management that leads to labeling errors, short-rolling, and theft within the supply chain.
The best way around this is to use a reliable inventory system. There are wide ranges of solutions to streamline your supply chain and keep everything accurate and on time, no matter what you manufacture.
If inventory management isn’t handled properly, it can ruin your company’s reputation and drive away customers.
Nowadays, people are very fast to abandon brands they don’t like or trust. The vast majority of them stop buying more from a brand after one negative experience.
And this is the reason why Yelp and other similar services are so powerful consumers share their opinions about brands all over the internet nowadays!
- Multichannel Inventory Management
If you use your site, Amazon, or any number of other channels to sell your products to customers, the question of inventory control is one that runs through the minds of most entrepreneurs.
And while many enjoy building and maintaining spreadsheets keeping track of how much stock they have in their warehouse or whether orders need to be shipped out, isn’t always a priority.
This is why many companies turn to automated inventory software that allows these crucial decisions to be made without having to manually count inventory or move around boxes of items.
This way you can replace some manual labor with people who are better suited for things like customer service and staff behind the scenes.
Frequently Asked Questions On How Much Does An Inventory Management System Cost?
You should have an inventory management system because it can help you prevent fraud, and theft, lower costs and speed up fulfillment. Also, it gives you insight into the items in your warehouse and which items are going in or out of your warehouse.
Yes, Excel can be used as a low-cost inventory management solution. It is capable of handling small businesses’ basic inventory management due to its integrated tools, formulas, and features that can make spreadsheets become more interactive and dynamic.
The three inventory management techniques used by most manufacturers to operate their businesses include the push strategy, the pull strategy, and the just-in-time strategy.
The inventory management 80/20 rule implies that companies or businesses earn roughly 80 percent of their profits from 20 percent of their products.
Yes, small businesses can also keep track of inventory as far as they produce, sell or purchase products.
There are three most commonly used inventory management systems, they include ABC analysis, Inventory Production Quantity, and Economic Order Quantity.
Conclusion
A lot of people work at retail sites because they enjoy interacting with customers, but it has its challenges too, especially when you don’t have the correct inventory to sell.
There’s nothing more fundamental to a shopping experience than having all the goods you need for sale, which is why we need to make sure that whatever products we intend to sell are available in enough supply at the right locations and times in order to meet our customers’ needs.
References
- www.brightpearl.com– The Complete Inventory Management System Guide
- www.businessnewsdaily.com– The Best Inventory Management software of 2022
- www.softly.com– How Much Does Inventory Software Cost?
- www.freshbooks.com– 8 Best Inventory Management Software for Small Businesses
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