You need to watch your supply chain, and make sure that there are no inconsistencies in the quality of your products. It’s also essential to have a strategy for tracking customer experience and ensuring that your clients remain happy and engaged.
All the while, you need to be constantly keeping an eye on your competitors, marketplace trends, and everything else that’s going on in your industry.
While the amount of critical information flowing through your organization can feel overwhelming, there are some tools available to help you manage it.
An inventory management system is one of those solutions.
With inventory management software, you can evaluate crucial information about your products and sales. Some tools come with the option to watch your store grow in real-time, while others provide insights into your historical data and trends.
Inventory management technology gives you the power to stay on top of your stock levels, so you can continue to delight your customers. Plus, it also helps with things like reorder agreements, tracking raw materials, and supplier management too.
Let’s explore the world of inventory management.
What is Inventory Management? Covering the basics
Inventory management is one of the tools that business owners use to evaluate the performance of their organization. With the right software, you can track inventory levels at any moment, and ensure that you’re on the right track to profit, and success.
Small businesses and larger enterprises alike both rely on this kind of technology. However, the larger your company is, the more likely it is that you’ll need particularly advanced analytics software.
With inventory management technology, you aim to ensure that you always have the right quantity and quality of products available for your customers.
In the right circumstances, inventory management can even reduce the costs of carrying excess inventory in your warehouses, while maximizing sales. Many modern software solutions come with predictive analytics strategies built-in. This means that you can potentially plan for increases or reductions in sales volume from one month to the next.
Inventory management software is particularly valuable for companies on a tight budget. You can avoid losing sales in a brick-and-mortar or eCommerce shop because you always have the right quantity on hand. At the same time, you avoid problems like spoilage or spending too much on stock that you can’t shift.
The Different Kinds of Inventory Management
There are a few different kinds of inventory management system in the business world, just as there are different kinds of inventory. For instance, the initial products that you get from your suppliers are often referred to as raw materials. Once they’re in production, they become a “Work in Progress”, followed by “Finished Goods.”
Some companies also track inventory in the form of MRO items, this basically means that you’re maintaining, repairing, or overhauling products. The kind of inventory you work with will help you to determine the kind of inventory management system that you need.
For instance, you might need a system with barcode management if you’re running a retails tore. Retail inventory management tracks your products for you, as well as any purchase order you might take, order quantity, and even “safety stock.”
If you’re in the B2B marketplace, then you might need a special kind of inventory management called wholesale inventory management. Wholesale inventory management tools often measure a lot of the same things as retail software. The difference is that instead of just tracking order quantity and SKU details, you also track various bulk products from different environments.
A wholesale inventory management tool might combine your strategy for managing the inventory of multiple online and offline stores at once. It could also pull in the data from hundreds of point of sale units if you have physical stores too.
How Does Inventory Management Software Work?
Effective inventory management software comes in manty different shapes and sizes. That’s because different businesses rely on various inventory management techniques. Your technology requirements will depend on your need for things like customer demand measurements, FIFO, finished product tracking, stockouts, and JIT.
In general, inventory management technology is about giving you a deeper understanding of everything from your physical inventory, to your future needs, and customer demand. The right technology will give you an overview of:
- Types of inventory: This will show you what kinds of inventory you have access to and give you full visibility over those products.
- Inventory forecasting: This involves using historical data to predict future demand and prevent excess inventory or carrying costs.
- Purchasing cycles: Inventory management tools should show you when and how to create purchase orders to get more crucial stock.
- Inventory control: This means figuring out how much of each inventory item you can store, and where you need to send it.
- Inventory analysis: Analytics to give you a better insight into inventory costs and how to reduce the risk of human error.
- Handling techniques: So you can quickly collect, put away, and ship inventory when you need to after a reorder point.
- Inventory accounting: So you can record crucial financial documents for tax and VAT purposes.
- Inventory management process: So you have the option to automate aspects of your inventory management wherever possible.
These are just the basic elements of an inventory system. The more advanced you go with your software choice, the more additional features you might have. For instance, you might run a first in first out system if you have a company that’s subject to spoilage.
Good inventory management software is all about increasing potential profits, improving the efficiency of warehousing, and reducing holding costs. Some companies find that this technology helps them to avoid shrinkage, because you don’t purchase too much of the wrong inventory.
Important Terms in Inventory Management Software
Choosing the right inventory tracking tools for your needs can be a complicated process. There are a lot of different competing companies on the market right now. Most of them promise that they can improve your bottom line and inventory turnover ratio.
However, the truth is that the software systems that work best for you will be the ones that specifically address your inventory issues. Just like with any tech, you don’t want to pay for any features you’re not going to use. Here are some inventory management terms you might come across:
- Barcode scanning and tracking: software and hardware to track products.
- SKUs and bundles: Groups of products sold as a single product
- Cost of goods sold analysis: Insights into the costs of production and storage
- Deadstock management: Items never sold because they’re outdated
- Decoupling stock: Inventory held to mitigate the risk of a production halt
- Economic order quantity (EOQ): How much you need to reorder
- Holding costs: Carrying costs – or the expense of holding stock.
- Landed costs: Fees for shipping, storing, importing, taxes, duties, and other expenses.
- Lead time tracking: Time taken for a supplier to deliver the goods
- Order fulfilment: Complete lifecycle of an order from the point of sale to delivery.
- Order management: Software systems for tracking and managing orders.
- Purchase orders: Documents between suppliers and companies outlining supply requirements
- Pipeline inventory: Any inventory in the pipeline of the business supply chain.
- Reorder point: Quotas that determine when reordering needs to occur
- Safety stock: Buffer stock to protect against shortages and improve your bottom line.
- Stock keeping unit: SKUs are the tracking codes assigned to each of your products.
Inventory Management Best Practices
As mentioned above, there are different software systems and strategies available for inventory management. The strategies that you use to track your stock and save money will depend on your requirements as a business.
However, all of these tools are excellent for delivering inventory visibility and showing you what you need to know about your company. The key to success is often learning how to use each essential feature of your software carefully and learning from the experience.
For instance, it’s always a good idea to:
Make the Most of Forecasting
Inventory management software isn’t just there to tell you when you’re running out of stock. You can also use the trends that you discover with this software to make relatively accurate predictions about the future.
However, to do this, you need accurate forecasting systems in place. Most inventory management tools come with projected sales calculations that are based on things like predicted growth, market trends, promotions, the economy, and even your historical sales figures. Find out how your software forecasts result for your company and use it to your advantage.
To boost the accuracy of your forecasting, it might be worth thinking about cloud-based software for your company. Having software on the cloud means that you won’t be limited in the amount of data you can collect. You might be able to connect your system to an AI system that gives you regular alerts to keep you moving in the right direction.
Regularly Audit and Track Sock
It’s important to keep track of everything that’s happening with your stock. Even with your inventory management tools to help you, remember to check your inventory, and make sure that everything is accurate every once in a while.
Most companies do this on an annual basis. Once you know your numbers are correct, you can set up a system to track your stock levels at all times. Some advanced tools will allow you to prioritize views on which pieces of stock are selling fastest. You can also find tools that send automatic alerts when your inventory levels drop below a certain point.
When auditing your stock, keep an eye out for products that are struggling to earn any sales. Low-turn stock that hasn’t had any sales in the last six to 12 months might need to be replaced with something new.
Use the Right Methods
Inventory management tools help you to keep track of your stock in a way that improves the consistency of your business. For instance, you can use the FIFO approach to keep things moving at the right pace. First in and First out sales mean that you sell your goods in the same order that they were created or purchased.
This is crucial for perishable items, but it can also be helpful for non-perishable goods, because items that sit around for too long might become overly damaged. If you want to keep on top of your company’s reputation, methods like FIFO can also assist with quality control.
Using your inventory management technology, you can ensure that all your products look great and perform as they should. Your tracking system should be able to measure how many of your products end up not being “up to scratch”.
Following your ABCs
If you’re running a company that sells a lot of different kinds of product, then it might be helpful to have tighter controls on high-value items. You can do this using the ABC method. Basically, you use your inventory management strategies to group inventory items into A, B, and C segments.
You can also use categories to segment inventory in other ways. For instance, if your company produces and sells some of its own stock, but also delivers items through a dropshipping supplier, you’ll need two different systems to keep track of everything.
Moving to dropshipping entirely can sometimes be a much better option for people who don’t have a lot of space or extra time for inventory management. You don’t have to worry as much about equipment repair times, or getting your items shipped out to a customer straight away. Instead, you work with a middleman that handles the harder parts of inventory management for you.
What’s the Best Inventory Management Software?
Managing your inventory in a growing business can be hard work. The more products you sell, the more there is to keep track of. Sometimes, you need a little extra help. That’s where inventory management software comes in. Equipped with tools like automated syncing and just-in-time updates, inventory management tools give you an end-to-end overview of business operations.
You can use the right software for LIFO strategies, updating your sales channels, and even managing the supply chain. Let’s take a look at some of the leading inventory management software on the market today.
TradeGecko is a market leader in inventory management tools. The platform makes it easy for businesses of all sizes to manage retail and wholesale operations in a unified space.
There’s an extensive app ecosystem, so you can unlock new functionality and tools whenever you need them. Other features include tools for supply chain management, operational efficiency, and customer service. Whether you’re selling on Shopify, WooCommerce, Amazon, or somewhere else entirely, TradeGecko has you covered.
The TradeGecko platform seamlessly automates the connection between all of your inventory systems, so you don’t have to spend as much time switching between apps. You can even sync your software back-end to a barcode scanner and offline point of sale system. This keeps all the cogs in your business running smoothly.
Pricing: Designed for small and mid-sized businesses, TradeGecko starts at a price of $39 per month for the founder plan. Extra tools and hardware come with additional expenses.
Another top performer in the inventory management environment is Veeqo. This all-in-one software solution helps businesses keep track of sales, orders, and shipping. Everything you need to run a successful company exists in the same back-end, which means it’s much easier for your brand to grow rapidly.
Veeqo comes with access to multi-channel inventory counts, as well as dozens of integrations for your most important business tools. You can align reports across a variety of warehouses and spaces. Plus, there’s support for tracking returns and wholesale orders too.
To make your life even easier, Veeqo provides in-depth reports on everything you need to know about your sales. There are solutions for up to 21 different order integrations for cross-country shipping.
Pricing: There’s a free trial to get you started, after that, costs start at around £120 per month for multiple users and access to up to 20 sales channels.
CIN7 is a brilliant tool for business owners that need to keep track of all their inventory and sales. This high-performing inventory management tool tracks your product lifecycles for you. This means that you never miss out on an opportunity because of lack of stock. You can even set up automatic reorder schedules if you prefer.
CIN7 makes inventory management easy, which is a great thing for smaller brands who need to reserve as much time and energy as possible for growing their brands. There’s a free trial, so you can try the technology before you sign up. Plus, the back-end environment comes with access to plenty of resources and documentation for support too.
Another major benefit of CIN7 is that it comes with access to various point of sale integrations, automation tools, and warehouse management. The only problem is that this software can be very pricey.
Pricing: Prices start at around $299 per month for the “Starter” package. There’s a free trial to get you started, but you’ll have to contact the sales team for more info on prices.
Zoho Inventory Management is one of the better-known tools in the current market. This state-of-the-art solution helps companies to increase the sales and unlock new business opportunities. With this software, companies can manage online and offline orders, integrate their system with existing tools, and more.
Zoho Inventory Management works well with solutions like eBay, Shopify, and Amazon. That’s great news if you’re selling on multiple platforms at once. Additionally, you’ll get all the tools you need for keeping track of your sales. There are serial number features, batch tracking, and even a host of shipping integrations to choose from too.
With a wide selection of advanced solutions, such as accounting software, asset management tools, and reporting, Zoho keeps you one step ahead of the competition. There’s even a free plan to get you started if you only take a handful of orders per month.
Pricing: Free option for up to 10 online and offline orders per month. If you need to handle more orders, then the cost goes up to around £39 when you pay monthly, or £30 when you pay annually.
Inventory Management FAQ
Still not sure about inventory management software? Here are some of the most common questions that we often encounter when speaking to business owners.
Can I manage everything in a spreadsheet?
A: You can, but it isn’t really a good idea. You need to update all of your spreadsheet information manually, which means that it takes a lot of time. Plus, there’s a good chance that you’ll make mistakes from time to time. A spreadsheet can’t scale with your business.
Is inventory management software expensive?
A: It depends on the software you choose. There are a lot of different options out there – some are designed for substantial enterprise companies, while others are intended for smaller businesses. The more advanced you want your technology to be, the more you’re likely to pay for your subscription. You may be able to save some money by signing up for annual memberships, however.
What is inventory tracking?
A: Inventory tracking is a process that comes in many different styles. Some people use their own spreadsheet when they first get started then gradually upgrade to a full-blown software solution. The more channels you sell through and the more stock you have to track, the more complicated tracking becomes. It’s important to ensure that you have a tech tool that can keep track of everything.
Why is inventory management important?
A: Managing your inventory is an essential part of running a successful company. You need to know which products and materials you have on-hand, so you can ensure that you’re always delivering what your customers want. Good inventory management helps with delivering a more seamless customer experience and improving cashflow for your team. You can reduce your expenses by spending less on backup stock and things that you won’t have chance to sell.
Is inventory management difficult?
A: Without the right technology, inventory management can be exceedingly difficult, particularly if you have a lot of stock to keep track of. That’s why automated tools and intelligent software is available to help simplify the process of inventory management for all kinds of business.
What are the types of inventory?
A: The most common types of inventory are raw materials, work in progress, or WIP inventory, Finished goods, and MRO or Maintenance, repair, and operations goods. You might also consider things like “packing materials” as a type of inventory if you’re an eCommerce retailer that needs to keep track of that sort of thing.
Making the Most of Inventory Management
Inventory management tools are some of the most valuable solutions you’ll have as a business owner. The only way to stay one step ahead of marketplace demand and ensure that your customers are getting what they need, is to keep a close eye on your inventory.
With the right software, it’s easy to see which of your products inspire the most demand, and how often you need to reorder supplies. You can also use your inventory management tools to track things like spoilage and avoid missing out on profits.
If you’re not using inventory management technology yet, now could be the perfect time to get started.