An inventory management system works similarly as a human heart works and performs. Blood carries oxygen and other important nutrients that all body organs need to stay healthy and to work properly. Your heart is a muscle, and its job is to pump blood throughout your circulatory system.
The inventory management system is for all small and large business industries, especially eCommerce store owners and retail businesses. Its goal is to minimize the cost of holding inventory, managing stock throughout the supply chain, which comprises ordering stock or components from suppliers, sourcing, storing, and selling stock.
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Unfortunately, many businesses still are unaware of how integrating inventory management software into their business process can enhance their business performance. Your business might have many challenges like asset tracking and physical inventory needs for which you will require robust software, a feature-rich mobile application to support multiple sales channels, and managing multiple warehouses. We’ll learn more below.
Types of Inventory
- Before knowing about the types of inventory, let us first show you that you don’t know and should know about the inventory management software.
- Only 18% of small businesses use inventory management software.
- Businesses using RFID had a greater 95% inventory accuracy, luckily inventory management software offers RFID tracking to improve inventory accuracy.
- Inventory distortion results in an estimated $1.1 trillion loss worldwide.
- Human error is a leading problem in 46% of warehouses.
So now that we know what is inventory management and how strong an effect it can have on your business if applied to integrate with the facts above let us look at the common types of inventory you’ll be tracking.
Raw goods –
Raw goods are materials that can be further classified as indirect materials or direct materials that include wood, metals, plastics, or fabrics to create finished goods.
Cycle Inventory –
Total on-hand inventory = cycle stock + safety stock. Cycle inventory is used and replaced by new items, or turned over.
Work-in-progress (WIP) –
WIP represents all production costs: labour, machinery, raw materials, and other equipment. It describes a partially finished product awaiting completion.
Finished Goods –
Once WIP is complete, it becomes part of finished goods inventory that are those ready products available for customers to buy.
Anticipation Inventory –
Surplus stock of components, materials, or goods at hand to meet rising demand or to meet the shortfall caused by erratic.
Transit Inventory –
Goods shipped by a seller from one location to another but not yet received by a buyer.
Buffer Inventory –
Excess inventory of either raw material or final product as a protection against changing demand or unforeseen circumstances.
Decoupling Inventory –
Keeping safety stock of sorts to repair and maintain production equipment to keep going the manufacturing process smoothly without disruption.
Be it enterprise-level business or Retail business owner, almost all business have similar process and operation and deal with these types of inventory aiming to meet changing demands in the market and keep stock accordingly as suggested by the inventory management software.
What is an Inventory Management System?
Inventory management system is a technological solution in the form of software that helps small and big organizations account for all incoming and outgoing stock, track inventory levels, orders, sales and deliveries, take over many of the daily processes of managing stocks to better meet customers demand.
According to Micro Strategy report, 90% of participating business users said that data visibility and analytics are central to their organizations and the key reason behind the success and digital transformation initiatives.
One of the major advantages of integrating inventory management software is it gathers up useful data and metrics and provides accurate data visibility that improves the decision making process, enables workers to use technology to help them solve problems and eliminate mundane tasks, and finally allows and empowers organizations to understand the root causes behind problems and predict future outcomes.
There are many types of inventory management systems made considering specific business needs and daily operations. Some systems even come with supplier network access that benefit smaller organizations in competing with larger competition. Similarly there are many more advantages that every business size and model can gain implementing inventory management system:
- Increase the entire health of supply chain
- Strengthen strategies
- Forecast demand
- Optimize product storage spaces
- Reduce errors and cut costs
- Improves accuracy reducing manual efforts and interference
Studies show that a person will make at least one data-entry mistake every 250 keystrokes whereas a computer has an error of one error every 36 trillion characters scanned.
Businesses use barcode inventory management systems to assign a number to each product, speed up daily tasks, and efficiency. Inventory levels are automatically updated when the cashier scans a product in or out, associates several data points to the number, including the supplier, product dimensions, weight, and even gives variable real-time data so you can make proper business decisions throughout the day.
For mobility and flexibility, you can use a wireless scanner in the form of mobile scanners with all necessary features included that speeds up the scanning process. Check out a number of barcode systems benefits:
- Lesser mistakes compare to human manual entry
- Automatic real-time inventory updates
- Speedy scanning with mobile tools
- Optimized Documenting and reporting
- Efficient and transparent stock movement within and between warehouses
Radio Frequency Identification Systems:
RFID is a method of data collection and automatically identifies an object, data is sent and received with a system consisting of RFID tags, the tag transmits digital data which can be used to track inventory goods.
As per a recent study, RFID tagging can increase business operations from about 63% to 95%.
Watch out for some RFID features and functions:
- Tags can rigger alarm and notify you when moved
- Enables to automatically read and store data
- Items can be given individual identity and labelled but can be read at mass
- Tag data is compatible with ERP and WMS systems
- Prevents fraud as tags are difficult to reproduce/counterfeit
RFID and Barcode share similar functionalities except for one difference that is human intervention and line of sight. It is always a challenge for a company to choose the best fitting strategy and system that suits their business needs. To create a robust set of requirements that truly represents the needs of a company, you should follow the below-mentioned process before the system selection.
- Make sure you need a new system
- Identify your must-haves
- Narrow your criteria
- Evaluate systems that meet your criteria
- Make a decision
- Gather your stakeholders to help you make a final decision
- If the decision is positive, get ready for implementation and integrate the required system
Above are the points to follow if you need any inventory management system or not. Once you decide you need one then there are more questions you should ask yourselves first.
- How big is my business?
- What industry-specific niche do I deal in?
- What kind of inventory do I currently work with and which specific inventory management system will suit best to my business operations?
- What is my budget to implement a new management system?
- What kind of deployment strategy should I adopt?
Important to know: Keep your business requirement the foremost when considering a solution.
7 Must-Have Inventory Management Software Features to Consider
Before the advancement of technology and the digital era, every business was willingly and unwillingly relied on manual administration tasks but with the technology revolution small and business organizations can now manage their inventories by integrating the right inventory management software that is more efficient, time and money-saving.
These days inventory management system can take over daily business operations tasks and manage overall inventory-related business functions.
Every business is different and has different needs. And there are many Inventory management software available in the market that provides a set of tools to help businesses control their inventory process. It is a daunting task for you to decide which software will suit your business needs. To make the selection easier we have mentioned modern inventory system features you can read:
1) Cloud Infrastructure:
Cloud based software is the on-demand availability of computer system resources without hiring dedicated staff to manage virtual systems. It allows data storage, enables automated backups, secure access and real-time collaboration from anywhere across the world.
2) Digital Labelling:
Pressure-sensitive labels made using cutting-edge digital printing technology created features like GPS-enabled RFID tags and barcoding that allows organizations to track databases in real-time and generate paperless documents.
3) Internet of Things (IoT) Integrations:
Integration of Internet of Things (IoT) helps capture data from smart devices and move it into business applications to automate inventory controls, reporting, digital labelling, GPS tracking, and Bluetooth.
The technology is also useful in preventing fraud, build an extra security layer, supports in real-time monitoring, and apply analytics for insights.
4) Mobile Systems:
Mobile applications (iOS and Android) enables organizations to track shipment and stock in real-time, give immediate inventory alerts and notifications, allow front-end office employees and back-end office employees to communicate with ease to boost up the business operation and give better customer support service.
5) Machine Learning and AI:
Integrating AI into business helps organizations work more efficiently through its virtual agents (Chatbots) also raises revenue, decreasing operational expenditures, and engaging with customers.
ML empowers small and big organizations to record stock inventory, makes recommendations based on user history, and automates order fulfilment. It also helps to promote their products better and make accurate sales forecast. Integrating ML and AI allows you to control internal inventory and prevent shortages.
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“3 benefits simplified, centrlized, and streamlined under one solution thats Ecommerce inventory management for multi-channel brands”
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6) Point-of-Sale (POS) Systems for Inventory Management:
Inventory management using a POS system notably making it easier to manage retail businesses, save money, simplify daily business tasks, and facilitates your business operations. Using the right POS system with inventory management software for the business to track and organize the store’s information is success-oriented vision and decision.
Here are some advantages of procuring POS systems for inventory management for your business:
- Better Inventory Management
- Simple Invoicing
- Better Customer Management
- Quick Payments
- Better Customer Orders
- Better Purchasing / Supplier Order Management
- Better Security
- Better Customer Experience
- Better Customer Satisfaction and Loyalty
- Better Service
- Better Promotion Management
- Better Employee Management
- Regular Updates
- Improve Company image
- 24/7 Access to data
- Personalization of Customer Purchase
- Increased Efficiency
- Time Saving
- Cost Reduction
- Increased Revenues
- Advanced Reports
- Technical and Technological Reports
- Multi-Store Functions
What Are the Top Software Modules in Inventory Management System?
The inventory management module is an integral part that makes the inventory management system differ by the price and provider (brand). You can always start with the basic inventory management modules as per your business needs and requirement that includes order management and administration tools, advanced software features and integrations of accounts and eCommerce.
Let us know the most common inventory management modules listed below:
- Accounting Modules: Facilitates your business with a bookkeeping solution. This module automates the accounting activities like payment in and out, 3rd party payments, procurement, and more.
- eCommerce Modules: This Module empowers the organization to sell goods and products online and helps in increasing revenue.
- Data Administration Modules: This module helps in smoothing the daily business operations with its fast and simple tools designed to manage inventory system data like connecting users, exporting data, and updating inventory records to keep providing the best customer service.
- Warehouse Management Modules: Designed to ease the organization necessary inventory management functions like 3rd party carrier management, order receiving, returns handling, scheduling an appointment, and labeling.
Industries That Can’t Ignore Inventory Management –
1- Food Distribution –
Inventory Management is important to businesses and organizations involved in food distribution as Restaurants, Schools, Supermarkets and other crowd-based businesses interact directly with customers on daily basis and rely on good thus inventory management is vital. Inventory-less food distribution organization will only make a loss.
2- Consumer Goods –
The research says implementing and integrating the right inventory management software is a large opportunity for consumer goods companies to improve their supply chains through more advanced inventory optimization initiatives that will reduce costs and improve customer service.
3. Electronic Devices –
The right inventory management is done by the electronic company owner, this can help in location tracking, financial management, customer management, stock management, and updating the availability of the specific devices and products. This performs from stocking process to anticipating future needs that enable companies to establish sustainable businesses.
4- Movie Inventory Software –
Movie inventory software enables you to manage your vast collection of movies, keep track of what you have, easily find it by assigning locations to each title and sync it to all your devices, helps you sort out duplicate copies, and 100% flexible in adding something if you want. It makes you feel like you have your dept. If you don’t use movies inventory software then you are missing and losing all the benefits that you deserve.
5- Real estate inventory management –
There was a steady increase in property demands in Q3-Q4 of 202, and now also we are seeing the same trend in Q1 of 2020 which signals the accurate management of the services, operations, data, property records, and more. Thus digitization is the need of the real estate industry to incentivize and smoothen the supply.
Inventory in residential and commercial real estate refers to the number of unsold unit property. Real estate inventory management is a practice performed to utilize the insights of various operations, uses the data to improve property management.
6 – Wholesale Inventory Management –
Wholesale relates to the B2B sellers and they always have a huge order, bulk manufacture, and big transactions. Wholesale inventory management is the process of storing, obtaining, running, maintaining transparency, and profiting from B2B goods.
It helps you to know how much product your company should pre-order to maintain the stock as per the demand, locations, price, and projecting the same needs of the stock for the coming day.
When it’s about B2B, the challenge is always big, but having the right online wholesale inventory management in the business process can solve all problems and take your business to next level.
7 – Wholesale Distribution –
Wholesale distributors are either a person or a company that buys products in bulk directly from manufacturers and distributors to retailers for which Wholesalers need an inventory management software system with the necessary features that help control and trace bulk inventory, manage customers, and multiple suppliers and automate processes.
Top features for wholesale distributors include:
- Sales Order Fulfillment: Use a single dashboard to deliver the goods as promised at the time of sale following the 3 simple steps, receiving, processing and shipping by viewing
- Multiple Warehouse Fulfillment: Track the inventory stored across multiple warehouses and fulfillment centers closest to the customer to fulfill the order.
- Lot Tracking: Generate and assign traceable lot numbers to all perishable goods with expiration data to track multiple quantities.
- Bin Management: The smallest unit available of space in a warehouse where the goods are or can be stored for easy picking later the order fulfillment process and enable vendors and shop supervisors work together to be sure that inventory stays fresh and dead stock doesn’t accumulate.
8 – Ecommerce inventory management system –
Quality Control Made Easy 70% of shoppers would shop for an item at a competitor if it was unavailable, rather than waiting any length of time for back-ordered inventory, and here is why and when you need eCommerce inventory systems to measure the number of items a company has sold and replace inventory over a given period, support accurate inventory controls and automated processes that deliver the product to consumers without interruption.
Top eCommerce inventory management software system features:
- Returns Handling: Collecting, organizing, and stocking that has been returned, inform warehouses to accept returned items, and create reports on return products and trends.
- Automatic Restocking: Automatic restocking function allows you to track the availability of the stock and generate automated purchase orders whichever product stock goes below the pre-fixed level.
- Multi-Carrier Shipping: This shipping feature enables warehouses to choose the best carrier to achieve their shipping and delivery goals.
- Virtual Stock Control: Generate virtual inventory and manage virtual inventory kept in various locations such as warehouses, 3rd party fulfillment providers, distribution centers, and different store locations.
- Display inventory availability on the website: Reflecting the real-time status of the products and stock availability on an eCommerce platform.
- Unhiding the hidden: There are usually 10+ ecommerce platforms that are used to built heavy and highly performing eCommerce website. You should know that out of every 10 ecommerce website 2 are built-in Magento and 2 are built in Shopify.
As mentioned above the industries, there could be many business owners who might be having their online store built in shopify and worrying about can inventory management software be integrated in shopify ecommerce websites?
Software Related to Inventory Management
There are numerous types of software categories includes variant inventory management functionality such as:
The software gives insights into the overall financial performance of the business handles all financial aspects, provides proof of their financial standing. It manages ledger, accounts receivable, billing and invoicing, accounts payable.
Manufacturing ERP systems:
Designed for the manufacturing industry to plan and execute manufacturing processes from scratch, allowing full visibility and control over a manufacturing business.
Retail management systems:
A combination of several useful tools like POS, inventory management, CRM to aid in running a retail store or chain and improve your business.
Distribution ERP systems:
The software manages logistic operations as well front-end and back-end activities of wholesale and distribution companies. This plays a vital role between the manufacturers and consumers. It is mainly used to track and determine product demand and ensure that products sold are delivered on time.
Warehouse management systems:
A Software designed to support and optimize warehouse functionality offers business visibility, manages supply chain fulfillment operations from the distribution canter and distribution center management.
Top 6 Key Features to Look for in an Inventory Management System
Not every inventory management system is made for you neither all suits your business needs and not all have the same functionalities and features. There are many inventory management systems and it is not one solution that fits all but various types of systems for a wide range of businesses.
The need of big giants like Walmart, Amazon, and Alibaba will be different and more compare to the local company working within the city or state thus there are many inventory systems designed for small and medium-sized businesses and many are specially built considering supermarket needs. Check out some of the following features.
1) Real-Time Inventory Tracking –
The keyword here is Real-Time which means your management system updates inventory level after the inventory is sold and enables the company to reorder the stock before it goes out of stock to provide customers joyful and on-time services.
It happens when you are unknown about the stocks availability which can put in trouble, but with the real-time tracking with the alert system you can keep track and get regular notification about which product is running low and which one you should pre-order to meet the customer demand and deliver the product on time.
2) Performs Stock Counts –
A strong inventory management system with the stock counting feature can help you keep a record of every single stock you order and sell and maintain a sheet for the future record to make a decision with ease. This is very helpful in enhancing business performance.
3) Inventory Reports and Analytics –
Software inventory management systems enable you to keep track of everything you can sell, order, and inventory that you keep in stock. This will help in making a quick decision about businesses where you need to focus more and at what business part more expenses are done that needs cut down.
4) Stock Projections –
The feature of stock projections in Inventory management systems strengthens the arms of managers and business owners by providing a better idea about the stock availability to fulfil the anticipated demand of the buyer.
5) Cloud-Based/Multiple Device Support –
A cloud-based inventory management system helps everyone who has access to the inventory to update the information easily and everyone eligible member gets the real-time information across the company.
6) Integration with Other Tools –
A Good inventory management systems designed with the future vision of helping the business owner in expanding business and enhancing performance allows 3rd party integrations that the business needs at a certain period to automate the process and improve the overview of inventory.
When you should upgrade your inventory management
Every digital product is made using technology and technology gets updated at its regular cadence so as the inventory management system. Inventory management system gets better every year as the older solution eventually become obsolete and burden on the businesses.
Upgrading your inventory management system on a regular interval or when it shows a sign can make you lead the industry and market and help you drive more profits than before. We are listing few signs that you can notice and understand that it might be the time to upgrade.
Spreadsheets allows your employees to manage inventory and having a fixed storage system restricts you from managing the operations, updating the data in real-time that can result in losing business. Then this is the sign to upgrade and shift your inventory to Cloud-based inventory software that will allow you to add extra spreadsheets and keeps you flexible in taking action of adding and removing the sheets whenever you need.
Growing Inventory costs –
When you don’t have enough stock with you the cost will rise towards the moon and it will be tough for you to control the inventory costs. An efficient inventory management system keeps you updated with the availability of the stock in every warehouse you own, collects data, and enables you to take the quick and efficient decision of which stock to keep more and which to produce more to meet customer’s requirement.
It is difficult for large or small businesses to track the stock without an inventory system which can lead a business to face business consequences which can be determined as consumption of more time, more employees means more wages to be paid means more weight on your pocket. Having dedicated inventory management software for your organization will empower you and your employees to fill information in real-time from any place, any time, and get exclusive up-to-date data information on your inventory.
Slowing growth –
When the salespeople are not independent and aware about the latest and available product stock and availability and every day when they step in have to take information from the backend team of stockroom makes the process slow and ultimately you experience slowing growth. This is the sign when you should understand that you should now upgrade or have a dedicated inventory system to quickly bring your business back to track and start growing.
Your inventory management software will be integrated into your eCommerce website. As the inventory management software needs the up-gradation the same way your website needs it too when the technology language community demands changes and improvement to fulfill which company brings the new update.
If you have your eCommerce website built in Magento 2, then there are usually 2 important points you need to take care of:
- Updating your Magento website to the latest Magento version is still running on an old version to prevent any future problems.
- Update the PHP version of your site too as Magento itself is built in PHP.
You need to consider these 2 points before taking the step of upgrading the inventory management system. To give the final shape with an updated version of the technology you can hire Magento developers that are passionate, dedicated, and offers tweaks, improvements, and maintenance of Magento-based store.
The size, need, time, and approach of the business to implement and integrate inventory management system decides the future of the business. No matter if the business is small, medium sized or large industry like Walmart and Alibaba or the problem is complex what makes the difference is strategy and the time and way of implementation. Selection of the inventory management software also plays a vital role as there is solution available according to the industry.
Before selecting any inventory management software for your business, do keep your requirements in mind, get proper knowledge about the software and also your business needs and that select the best that suits and fits for your organization the best.
How implementing the inventory management system in your business helped you achieve new heights of business and automate the process? Do let us know in the comments below!