The term inventory is most commonly defined as the materials and items that are used during the production processes, as well as the finished and unfinished goods that a business owns.
Inventory software, also known as an inventory management system, is a solution that allows businesses to track, organize, and oversee all of their inventory, as well as their inventory-related processes.
In this guide, you will read about how using software for inventory management can help your business, and the various features that you should look for.
How can inventory management software benefit you?
Taking care of your inventory can be simple if you only have a small quantity of products; you can do it manually or use spreadsheets. But things become more complex as your business grows and starts to work with a larger quantity of inventory. This is when inventory software can step in to help.
Inventory management software has several benefits to offer. The most obvious one is in the name itself: it helps you manage your inventory. This includes monitoring sales and purchases of inventory, efficiently storing it away, tracking stock, confirming sufficient levels of inventory, and notifying the user if the levels get too low. In addition, it can also help automate tasks that were previously done manually, improve your inventory accuracy rate, organize your storage space, and reduce your expenses. It can be a game changer. Let’s take a detailed look at how.
Improved inventory turnover rate
One of the biggest advantages of using inventory software is that you can control your inventory turnover rate. The inventory turnover rate is a popular KPI that measures the frequency at which your inventory is being sold. It shouldn’t be too high or too low, because a low ratio means that you aren’t able to meet customer demands, and a high ratio means that you have been overstocking and have leftover products in your warehouse.
Inventory software can improve your inventory turnover rate using inventory forecasting and planning. An inventory management system collects past data on your sales during different periods in a fiscal year, as well as data on current customer shopping trends and demands, to put together accurate inventory reports and give you better control over your stock. With these reports, you can identify which of your products are most and least popular, which are seasonal products that are only purchased during a specific time, and how much of each product you need to stock to comfortably meet your demand. If you add in some information about your suppliers, you can even decide which supplier to use for the best price on a product.
Inventory software can also simplify your processes by organizing your warehouse or stockroo. With a small warehouse or a small number of SKUs, it’s pretty easy to quickly find what you’re looking for. But things get trickier with a larger warehouse or more SKUs—items are not as easy to locate, and it becomes harder to figure out how much of each product you have available.
An inventory management system allows you to store product information, like SKUs, stock availability, storage locations, and more. This makes it easier to find your inventory and keep an eye on how much you have, which in turn saves time, storage space, and hassle.
Inventory software can save you from unnecessary costs. There are a number of common inventory expenses that can easily be avoided, like overstocking which requires additional storage space, human error, and late or incorrect order fulfillment which leads to returns. Using inventory software can answer each of these problems and more.
Inventory forecasting can solve the problem of overstocking by telling you just how much stock you are going to need to meet your demand.
Using automation to help with error-prone tasks like stock taking and generating reports can reduce or even completely eliminate human error.
Having an accurate real-time record of your stock can help you figure out which orders you can fulfill on time and correctly, reducing the chances of returns.
What features does an inventory management system typically offer?
Here are a few major features that you can find in an inventory management system:
Stock management is a feature that monitors your items’ location and quantity. A typical system updates your stock levels every time a shipment of inventory arrives or leaves your warehouse. With this feature, you can see real-time information about how much stock you’re storing in your warehouse as well as where it currently is.
A procurement management feature allows the user to enter a reorder point for each item, as well as create purchase orders when you’re running low on those products. A reorder point refers to the amount of stock you want to have left for a certain product in your warehouse when you place an order to refill it. Using this feature, you can automatically send out orders every time you run low on a product, thereby avoiding a stock-out situation.
This feature stores your suppliers’ information, including the rates that they offer. Using this data, you can compare different suppliers and their estimates, and choose the supplier that offers the best deal for the product you want to order.
Shipment tracking is used to check the location of shipments that you have sent to your customers. This feature is very popular amongst ecommerce businesses that ship most of their sales. Being able to see exactly where each package is and sharing this information with your customers helps establish good communication, improves accountability, and reduces lost or missing orders.
This feature gives you detailed reports on your inventory, sales, and operations to help you make important decisions. Typical inventory reports include sales and purchase trends, inventory details, activity, and more.
Warehouses typically label each item they store for easy identification. A popular option amongst larger warehouses is using barcodes for item labeling and barcode scanners for inventory tracking. By scanning the product’s barcode every time it’s moved, you can keep track of that product’s location from the moment it enters your warehouse until it’s dispatched to the customer. Barcodes aren’t only used for location purposes—they’re also used to store other information about the product, such as physical dimensions, other products with the same SKU or similar qualities, and supplier information.
Inventory software is a system that is used by businesses to stay on top of their inventory and inventory-related operations. If you’re trying to maintain a good inventory turnover rate, organize your warehouse, bring down unnecessary expenses, and manage your stock, then an inventory management system is an important tool for your business.