Inventory Management System: A Quick Guide Highlighting Features, Types, Pros & Cons

Quick Summary – Inventory management is a critical element of the supply chain and involves processing, auditing, tracking, and managing the merchandise from purchase to production, and finally to sales. Leveraging the use of a software to track and manage a business’s inventory and sales helps eliminate the manual hassles, enables cut down on costs, and ensures that the right products are in the right place at the right time. This blog aims to offer a 360-degree understanding of an inventory management system software. Read on to know more!

It's over!

Inventory counting is finally over!

In the landscape where globalization is gaining popularity, allowing people to shop merchandise from anywhere digitally and get them delivered right in front of the doors within days, makes the use of supply chain management system or a dynamic inventory management software critical for businesses. Using such kind of a tool helps fine-tune supply chain workflows, manages stock levels, enables optimal inventory operations, eliminate delivery delays, and ensures unparalleled efficiency.

If you are into the supply chain management industry, you know how no-or-over-stock situations are anticlimax and can affect your business reputation and profits in ways you can't imagine. Spilling some disturbing facts - the cost of inventory distortion worldwide, including overstock, stockouts, and shrinkage, was estimated at around USD 1.1 trillion. Feeling the anticlimax, now? Thereby, an inventory management software helps you streamline the effectiveness of the supply chain at any time. It's gaining immense popularity among businesses due to its remarkable capabilities to handle huge inventories at retail stores, manufacturing hubs, warehouses, etc. It helps you handle a single digital store or multiple consignment stores and retailers.

Opting for inventory management software development will help you acquire an unparalleled technology support for all the tedious and complex inventory-related workflows. Developing a software will help you track and maintain the stocks and supplies, eventually optimizing your inventory, sales, and profits.

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The inventory management system is the need of the hour! So, be it a manufacturing or warehousing industry, there is a consistent need for warehouse inventory management system. If you are still managing your inventory on a paper or spreadsheet or, worse, not managing it at all, this blog is for you.

Why wait, then? Let’s dig in.

What is Inventory Management?

Inventory management is a key component of supply chain management. Inventory management helps to keep track of a company’s stocked goods and commodities. It is important for wholesale, retail, logistics, and other industries to ensure that the company has enough stock handy to meet all their customer demands. Moreover, inventory management helps solve some of the major manufacturing industry challenges. In simple terms, it acts as an automated inventory tracking system for tracing multiple business operations and collaborating with them to make better and quicker decisions.

Moreover, in these fast-tech times, developing sophisticated inventory management systems fall under crucial software development services.

Now, comes the important question - what is an inventory management system?

What is Inventory Management System? 

The inventory management system is a software solution that tracks every activity in an inventory-targeted place or warehouse. It helps guarantee complete tracking of inventory orders, sales, and deliveries among multiple vendors. Moreover, it helps trace the commodity unit and feed details into the system. Not using inventory management system software in today's tech-fast times might lead to customer disappointment, leading to sales reduction, and the stocking of unnecessary things. Thereby, inventory management system software will help you prevent these situations.

Be it warehouse management, retail management, depots, manufacturing hubs, and anything, inventory management software enhance the credibility of commodity tracking and provide the details immediately. The business or store owner is informed when a particular product or merchandise is about to go out of stock. Therefore, the automated inventory tracking system helps track the product's expiry dates and make rapid and intelligent decisions accordingly.

There must be a question popping into your mind – why is inventory management system software important? The following section is your answer.

Why Do You Need Effective Inventory Management Software?

So, any business that needs and handles stock will require an inventory management system to accurately track and manage it. Without this system, you’ll be operating on an entirely stopgap basis — and you’ll somehow end up in situations where your product is understocked or overstocked.

An inventory management software works behind the scenes to keep track of the inventory levels, product orders, sales, and deliveries. Without an effective mechanism for monitoring these aspects, you may end up bearing huge-huge losses with excess stockpiling up, eating away your utmost goals, or with less stock to meet your customer demand.

But while your business requires inventory management system software, which one you want to opt for is entirely up to you. There are multiple different systems you can opt for, including warehouse management software, retail software management, transportation and logistics software systems, etc. These systems can range from basic solutions to extensive solutions, depending on your needs.

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Key Features of Inventory Management Software 

The following are the major inventory management software features:

• Inventory Control

An efficient inventory control system is one of the best inventory management software feature as it improves the storage space and appropriately allocates different financial resources to your stock.

• Complete Reporting and Analytics

Reporting and analytics using advanced tools help emphasize which goods/products have the highest and lowest turnovers. These important data-based insights impact (majorly help) future stock re-orders.

• Purchase Order Generation

An inventory management system (IMS) automatically builds and transmits purchase orders to vendors outlining the items it requires.

• Reorder Point Purchasing

Reorder point purchasing is also among the important inventory management software features. It informs businesses to reorder inventory, so they won’t run out of stock or get overstocked. It primarily drives the acquisition of a predetermined quantity of refilling inventory.

• Order Management

Inventory management systems software ensures there is adequate stock to meet clients' orders. It's among the best inventory management software features, alerting managers or other staff when stock levels go low. Moreover, it also directly automates the product order from wholesalers before it runs out and inventory gets understocked.

• Multi-Warehouse Syncing

With the help of different features of warehouse software, managers can easily sync inventory data across different retailers’ warehouses and ensure that stock levels are appropriate everywhere.

• Multichannel Sales Alignment

An inventory management system software helps coordinate inventory data entries across different sales channels, so there's no need to estimate stock locations.

• Volume Forecasting

Using all the historical data available, the inventory management system (IMS) can make apt projections and forecasts on probable sales turnover during any specific period.

Coming to yet another important topic, let’s discuss the types of inventory management systems.

Inventory Management Software Types 

There were times when inventory management systems include paper folders or spreadsheets that managers had to update manually. Fortunately, people opted for the path of sustainability and advanced technologies, leading to the evolution of inventory management systems software. Now businesses can easily automate most of their inventory management operations with diverse types of inventory management systems.

These are the three types of inventory management systems:

1. Perpetual Inventory Systems
2. Periodic Inventory Systems
3. Manual Inventory Systems

• Perpetual Inventory Systems - A perpetual inventory system helps track your inventory in real-time. It’s like an automated inventory tracking system. When any commodity is sold, firstly, its bar code is scanned and then it's deleted from the inventory database. Same way, when an inventory receives a new product or good, it’s scanned and then added to the database of the inventory management system. Moreover, every system component can then access the stock information and central database.

An important benefit of a perpetual inventory system is that it provides a detailed view of any changes in your inventory. It also delivers the exact accounting of inventory stock levels eliminating the need for counting inventory manually, which is quite time-consuming. Moreover, it operates efficiently with different business sizes and can integrate with retail software to take care of high sales volume and multiple location inventories.

• Periodic Inventory Systems - A periodic inventory system utilizes physical inventory counts at pre-established breaks to update inventory. So, companies that use periodic inventory systems will be unaware of the number of products or goods it sustains until after the completion of the physical inventory count.

However, this approach to tracking inventory is quite impractical for huge retail organizations. Wondering why? Since it's all about processing the orders, you rely solely on a manual stock count taken a few weeks or months back. So, whenever there's a client demand for any product, someone requires to physically check the inventory to look out if the item is available to sell. This is the reason a periodic inventory system only functions well with small businesses having lower inventory quantity.

• Manual Inventory Systems - A manual inventory system is an old-school way to manage your inventory. Manual inventory systems are practically based on pen and paper or even a spreadsheet. While this may be a practical option if your business's monthly sales are in the single digits, it’s not a feasible and sustainable choice for expanding businesses. Large vendors or retailers will need a more advanced and robust option.

So, before moving forward, let’s now look at the advantages and disadvantages of inventory management system software. Because knowing both sides of the story is only fair game.

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Advantages of Inventory Management Software

These systems have helped resolve several inventory management challenges; no wonder they come with several benefits. Following are some of the best benefits of inventory management software:

1. Improved Sales Efficiency - The software uses different inventory management technologies that helps keep track of the goods' availability and notifies when the item is about to go out of stock. And believe me; it's one of the most important benefits of inventory management software. These details ensure that retailers don’t have to encounter a lack of inventory and always look out for customer demand.

2. Centralized Storage - Inventory management for different warehouses at separate locations was complex, making it a major inventory management challenge. But there's no problem without a solution. So, cloud inventory management system software acknowledges you all about the location as well as the quantity of the goods and delivers the accurate items to the clients.

3. Apt Planning and Forecasting – It's among the best benefits of an inventory management software system. An automated inventory tracking system helps in predicting the future demand of any commodity and taking smart decisions well in advance. In the future, if there's a hike in certain product demand, businesses can keep the stock of that product up-to-date. And, of course, vice versa. For any inventory management process, you need to integrate at least one analytical tool with an inventory control system that assists in understanding the market demands and client expectations for a particular item.

4. More Satisfied Clients - Following new software development trends is key to improving client satisfaction and winning their trust in multiple ways. First, you're aware of your inventory stock to meet the client's demands. Second, you can easily communicate the apt delivery date to the customers. Moreover, clients can have the complete tracking details of their order processing which improves their reliability and trust in the business. Now, wondering why it's among the best benefits of inventory management software.

Going with the phrase – nothing is perfect in the world. So, with advantages comes some disadvantages too. Let’s discuss them.

Disadvantages of Inventory Management Software

While there are a series of benefits coming with inventory management software, there are some drawbacks within the software as well. The following are some drawbacks of inventory management system software:

1. Potential System Crashes - System crashes are the major challenge to computerized and automated inventory tracking systems. A technical issue, power outage, or a corrupt hard drive can all result in data loss and, at times, can also shut the entire inventory management process down.

2. Reduced Physical Audits - Less physical audits can also be an issue since it minimizes the overall in-person interaction with your inventory. It is no big deal to decrease the number of physical audits as computers are responsible for all the inventory management functions. However, it’s still significant to conduct physical audits occasionally to examine and identify any spoilage or breakage. Moreover, audits also help managers or vendors to identify manipulation of data in inventory control systems or any possibility of internal thefts.

So, that was all about the basic aspects of inventory management system software. You know, a few years back, there was no inventory optimization software, inventory control system, or automated inventory tracking system. But as time passed by, tech advancements took place, and different industries joined the race with software solutions like a hotel management system , a hospital management system, etc. So, there was no reason for supply chain businesses to lag in the race. Hence, they join the race. Exciting, though!

Since they’re part of the race now, there are several technological advancements in favor of them. Day-by-day, modern technology trends are integrated with these inventory management software systems to make them more efficient.

Curious, already? The following section is for you.

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Latest Technology Developments in Inventory Management

While inventory management system software is already helping reshape how companies manage their logistics and maintain an accurate record of every incoming or outgoing commodity, the tech advancements are in no mood to stop. Technological developments are busy making the periodic and perpetual inventory systems advanced for a seamless user experience. Following are the advancements in inventory management technologies helping to redefine the capabilities of your software:

• Machine Learning - Humans perform repetitive activities which consume a lot of time and effort. It also increases the chances of errors during the whole inventory management process. So, an automated inventory tracking system integrated with machine learning can be the best option. Hence, by using ML (Machine Learning), clients can easily search and find the items with voice or image search and forecast inventory stock needs in the future. Moreover, ML-induced inventory management functions help inform vendors if there is any disturbance in the supply chain.

• Drones - You can now easily integrate drones with modern inventory management system software, making the overall process even more feasible. Drones are the best way to inspect the inventory lying in the multiple locations of the warehouse and feed the details into simple inventory management software. Same way, drones with retail inventory management systems can help with quality and quantity surveys of logistics easily.

• Blockchain - If you're into tech geekiness, you know that Blockchain is a decentralized platform that ensures, once the information is uploaded to the system, it remains unbiased and cannot be modified by any one vendor or stakeholder. It improves the reliability of the automated inventory tracking system as all the information uploaded must be exact and nodded a yes by all stakeholders. Moreover, blockchain solutions with inventory management systems enable retail partners, suppliers, production places, manufacturers, and warehouses to collaborate and share real-time details.

• Artificial Intelligence - So, predicting the products' future demands and taking decisions can be an actual game changer and helps multiply sales (something every vendor desires). Amazing! Artificial intelligence can make this possible by providing a rough estimation of the product's demand in the market scenario. And how? All are based on the data history of the product. Moreover, it also ensures that inventory doesn’t go out of stock.

Now, we are moving towards something more relevant and important - inventory management software cost. It’s the most crucial factor to consider when opting for inventory management software development.

Cost of an Inventory Management System 

So, businesses tend to generate good revenues, profits, and while deploying this kind of software making their inventory management process seamless. Although, the total implementation expense remains the greatest concern. They don't come with any specific price tag attached to the automated inventory tracking system or inventory control system or perpetual inventory system or any other software type. Some factors help to determine the inventory management software cost. You need to understand these factors, and the software development team can then provide you with the cost estimation. Let’s have a look at these factors to estimate inventory management software costs:

• The features you'll need will be directly proportional to your cost of inventory management software development.
• The types and complexity of features will define the estimated cost of your software development.
• The prime location (country, state, city) of your development team will help you understand the per-hour charges for their services.
• The total hours your development partner will require for the complete software development process adds or subtract the dollars from the overall expense.
• The software design you want to imbibe in your inventory management system software will also add to the development cost.
• The third-party integrations you want in your app will also modify the cost of software development.

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ConclusionSo, now you must've understood that your inventory software is more than just managing, and tracking orders and helps avoid stockouts. It simplifies the inventory management functions to save you time, effort, money, and future heartbreak. Hence, logistics is one of the critical areas that dramatically impacts your overall efficiency. So, opting for the right inventory management system software helps you make a significant difference in increasing sales orders and happier clients.Although, finding the ideal inventory management software development company for your business can be a bit challenging if you're a new player, especially with numerous choices (that vendors claim is the best) in the market. So, considering your business requirements and comparing them with research and reviews of your potential vendor partners will help you with the best inventory management decision for your supply chain.But, what if there's a way out of all the hassle? Well, yes, there is. You can directly get the help of Radixweb.As a trusted software development company, Radixweb helps you empower your business to flourish with automated inventory management software that provides unparalleled support. Our software for inventory management helps you with the complete management of your inventory, sales channels, and metrics, enabling you to make timely and informed decisions. Our experts build inventory management solutions that can actively manage your inventory levels everywhere you sell your products with 60+ marketplaces and multichannel integrations.Contact our experts to learn more about our inventory management solutions.