Inventory tracking refers to the process of a business continuously monitoring all of the inventory that it owns. Inventory has several definitions, but it most commonly means raw materials, unfinished goods, and ready-to-sell items. With inventory tracking, you have access to data such as your exact inventory levels, the location of each item or SKU, updated delivery statuses, and other inventory related information. Inventory tracking happens in every place of business that deals with inventory: manufacturing and production companies, warehouses, retail stores, etc.
What is being tracked?
Typically, inventory tracking systems can monitor the following information:
Updated stock levels
This value tells you how much of each item you currently possess. It’s important to keep this data consistently updated so that you know whether you have enough stock for your business processes, whether they’re manufacturing new items or fulfilling customer orders. Additionally, your stock levels provide a base for the other data that is tracked.
In a best-case scenario, your stock should not remain in one location for too long. (If it does, that means it has become either slow-moving or dead stock.) Once the stock enters your warehouse, it moves around as it’s first sorted and categorized, then stored, and then eventually retrieved and sent to the next stage of your supply chain. Since your stock doesn’t remain in a fixed place, it’s important to keep track of its location so that you know where to find it if needed.
This is a KPI (Key Performance Indicator) that refers to the ratio between the quantity of inventory that has been tracked and the quantity of inventory that is physically present in your possession. Ideally, both numbers should be the same, but because of reasons like theft, damage, miscalculations, and shortages from suppliers, there could be discrepancies. Inventory accuracy will show you how big those discrepancies are. Like your stock levels, inventory accuracy is essential for your business processes to smoothly function.
This refers to the total amount of money that is spent on storing, holding, and owning your inventory. This includes how much you spend on rent, labor, storage and relevant bills, and security. Carrying costs can tell you how long your business can continue to store this inventory before you begin to lose money because of it. Slow-moving inventory and dead stock are two main contributors to high carrying costs, so if you’re trying to reduce those costs, you’ll have to figure out a way to remove or sell the items.
This is a practice that is used to calculate the value of unsold inventory when a business prepares their financial statements. Inventory valuation gives your leftover stock a financial value, which needs to be added to your balance sheet. This can also help calculate your inventory turnover.
Inventory turnover is the rate at which your inventory is sold. A higher value represents stronger sales, and a lower value represents weaker sales. Inventory turnover can tell you how your business is doing and whether you need to improve your sales strategy. Check out our free inventory turnover tool to calculate yours.
A reorder point or level is the specific amount of stock remaining for a certain item at which it needs to be replenished or refilled. Reorder points are essential for preventing stockouts (situations where a seller runs out of stock).
Why do you need inventory tracking?
Better stock visibility
With inventory tracking, you can view every single one of your products throughout its life cycle—from the moment they enter your warehouse or storage space, to the time they leave. This means that you will have access to each product’s current location, available stock, relevant purchase and sales orders, etc.
With an exact count of what you have, you can also figure out what you don’t have and replenish your stock in time. This will help you avoid running out of items and missing out on valuable sales. According to a survey conducted by Peoplevox, 34% of businesses claimed to have delivered orders late because they didn’t have the products in stock, but weren’t aware of that when the order was placed.
Better inventory forecasting
Having an accurate count of your inventory at different times in a year can allow you to predict or forecast how much inventory you’ll need in order to fulfill your future demand. This can help you make informed purchasing decisions and avoid over- or under-stocking. A report by McKinsey & Company stated that businesses can reduce their inventory costs by 10%, just by avoiding over- and under- stocking.
Multiple location tracking
Businesses that store items in multiple storage spaces or warehouses may have a harder time tracking all of their inventory together. With more warehouses, you’ll have longer strings of location info, more places to lose stuff, more places to have to shelf counts, more places to coordinate shipping from, and so on. That’s why certain inventory tracking systems offer tracking for multiple locations in a single platform. Being able to access your data in a single place can definitely help reduce the complexity of this data.
Faster error detection
Consistently tracking your inventory levels can also help you identify anomalies early on, whether they indicate errors, drops or increases in sales, or unexpected expenses. If you can see these issues early, you can rectify them before they cause too much damage.
Although inventory tracking sounds like a relatively simple task, it can be quite a handful when more products are involved, which is the case for larger businesses. After a certain point, tracking your products manually stops being an option. This is where an inventory tracking system could come in handy. An inventory tracking system is software that helps you monitor the movement and location of your inventory. While there are standalone systems that are specifically used for inventory tracking, most inventory tracking systems are actually part of inventory management software. , like Zoho Inventory. Using Zoho Inventory’s inventory tracking system ensures that your data is accurate, updated in real-time, and efficiently tracked. Try our free trial today!