Last updated on July, 22
🏆 Best Inventory Management Software for August 2021
Tired of all the stocks that don't belong in their right places? Get an organized process with an inventory management system that will easily manage your stocks, making sure you are delivering your products and services accordingly.
What is inventory management?
Inventory management is a business process where inventory and stock quantities are tracked in and out of your warehouse. Inventory management is also the tracking of prices that you buy and sell. With an inventory management system, you can provide all the useful information with your inventory and make the right business decisions.
Why do you need an inventory management system?
Are you having a difficult time managing your stocks? Need consistent inventory information? An inventory management system will provide you with all you need concerning your inventory. It can help you maximize your business potential and much more. Here’s a list of advantages of using an inventory management system.
To Increase Sales
Of course! You want to sell more to your customers to sustain your business. It is important that the items you buy from your suppliers are also selling to your customers. This way, you will have relevant and up-to-date stocks to keep your business going.
Track Your items Anytime, Anywhere
With an online inventory management system, you can track your customers’ shipments and manage orders from your suppliers. This will help you maximize your inventory capacity and have better control over your stocks. You can also determine what items are lacking in high demand areas and pull out items with lesser demand in your distribution area.
Keep Track of Prices
Prices of the items that you sell to your customers vary depending on the supply and demand of these items. With an inventory management system, you can adjust your selling price depending on your desired profit with your stocks. This prevents deficit or loss from your transactions.
Provide Useful Inventory Information
An inventory management system can give you useful reports concerning your inventory purchases, product sales, inventory movement, and inventory valuation. This can help you with your business decisions on what to sell more, identify new product opportunities, and where to expand.
Cut Operational Costs
Traditional methods of stock-keeping can be expensive because of hiring employees to manage and count your inventories. With this inventory management system, you can track stocks in real-time and provide efficiency in selling and acquiring inventory. You can maximize your workforce to engage in your daily operations to produce more and sell more.
Reduced Delivery Expenses
If you deliver the products yourself, you would need to use your car or pay additional transportation expenses. An inventory management system can connect with courier services and deliver your products to your customers. This will reduce your cost of delivery expenses and will save you a lot of time.
Easy to use
No need to worry when leaving your business place. With just a click on your app, you can track inventory levels and generate status reports on your shipping, invoices, and payments from your customers from multiple devices.
Core features of inventory management system
Inventory management systems have a common goal, and that is to use your inventory efficiently. Efficiency means maximizing inventory capacity, maintaining good stock quality, lessening, or, if possible, eliminating inventory spoilage. This efficiency will lead to desirable profit and business expansion. In order to do so, you’ll need these core features in your system:
Raw Material Tracking & Billing of Materials
If you are in the manufacturing type of business, raw materials counts, and prices can affect your production cost and profit margin. With the help of this system, you can easily calculate real-time prices and effect a profitable and more affordable price to your customer.
This feature allows you to tag items with barcodes and QR codes and scan them anywhere with your mobile app, so you can keep the right number of parts and products in stock. You can also use RFID readers to scan and take quick actions with your inventory if you want to check it out of your warehouse or check in to include them in your count even on the go.
With an inventory management system, you can track inventory counts and calculate your products' costs in real-time. Inventory valuation helps you analyze your inventories for financial reporting. This also helps calculate and analyze your profit margin and result in more reliable and profitable pricing for your goods available for sale.
An inventory management system will help you control your inventory levels. It can identify reorder points of fast-moving inventories, manage your purchase orders, track shipping acquisitions and deliveries of your products to customers. Having a manageable level of inventory can maximize your business space and operations.
Multi Warehouse Management
Some businesses are distributing at multiple warehouses, nationwide, or even along with multiple countries. An inventory management system has multi-warehouse management that can help you distribute your products easily. This will also track your inventories at certain locations and update you with your inventory levels across multiple warehouses.
Multiple reports are useful in analyzing your inventory. Some of these are sales reports, inventory stock level reports, inventory status analysis, and many more. These reports will help you when to replenish your inventory, what products are selling fast, and where to expand more to reach more potential customers.
Types of inventory management systems
Manual Inventory System
A manual inventory system is updated, maintained, and controlled without using a technical system. Manual systems require counts and product inspection. Inventory will be updated by physically counting inventory frequently.
Pro #1: Easy tracking
Tracking is easy because of the small quantity and type of inventory.
Pro #2: Updated with Product Quantity and Quality
Depending on the type of product, you can easily check the quality and expiration dates of your products. Replace the products that are damaged and items that are about to expire. This will help you minimize spoilage and maintain good product quality.
Con #1: Time-Consuming
The manual inventory system requires performing Inventory Counts at least once a day or every two days. So, this will consume a lot of time and effort, especially when you have a lot of stocks. This could also reduce the operating hours of your business.
Con #2: Costly
A manual inventory system is costly to maintain. Manual inventory systems will require extensive labor hours in counting, resulting in an increase in business payroll.
Periodic Inventory System
A periodic inventory system is an inventory control system that requires a physical count of inventory at specified period intervals. Updates of inventory quantity and quality come from a specific period of time at every count or inspection.
Pro #1: Easy costing of goods
Adjusting your selling price is easy for a periodic system. The initial purchase price will be the cost basis for your inventory. You will just add a certain markup to sell your products.
Con #1: Inaccurate stock records
A periodic inventory system does not maintain accurate stock levels. Your inventory level report is not updated in real-time. You don’t get an accurate number of your stocks because counts are maintained at a certain interval. With this, you don’t get to plan your product restock head.
Con #2: High chances of spoilage
Because of no maintenance of stocks, spoilages and expiry dates of inventories may not be monitored. In this event, loss of inventory and loss of revenue will affect your business. Also, the quality of other inventories may be affected by the spoilage of some.
Perpetual Inventory System
Perpetual Inventory System or continuous inventory system is an inventory control system that allows businesses to keep in real-time account of inventory on hand. Barcodes, Radio frequency identification (RFID), and Point of sale systems (POS) provided support for this system by quickly putting inventory information as customers purchase items.
Pro #1: Real-time Count of Inventory
Because of the maintenance of in and out of the stocks, business owners maintain and control stock level count of inventory. It also helps to prevent stock-outs of an item. This will update you with your inventory turnover to time the purchase of new stocks.
Pro #2: Centralized Inventory Management
A Perpetual inventory system allows business owners to centralize the inventory management systems along with multiple locations of warehouses. It will also allow you to distribute to more channels and reach potential customers on multiple sites.
Pro #3: Real-time Costing
Every time you sell an item and purchase inventory, the value of these items varies from time to time. Perpetual inventory systems use average costing, so the valuation of your inventory is updated from time to time. Real-time costing benefits a business because it gives you accurate inventory costs.
Pro #4: Reduce Time and Costs
The Perpetual Inventory system reduces inventory counts, so it will cut costs and save you time for other business operations such as manufacturing your goods and keeping track of your sales and collections.
Con #1: Expensive
Implementing this kind of system will cost the owner for software. Barcode system, Point-of-sale (POS) system, RFID tags will cost more than conventional maintenance of inventory.
Who needs an inventory management system?
Manufacturers have a wide variety of inventory—from raw materials (depending on the type of products to be manufactured) to finished goods that the business is selling. An inventory management system will be useful, especially when it comes to inventory optimization and product costing.
A small business inventory management system is being used by owners to evaluate their businesses and reduce costs. An inventory management system helps manage the right products in the right quantity and make sure not a single important product is out of stock.
Retailers often need to keep track of the supplies in their stores. To do so, it would require constant checking, but that would be a lot of work. Here’s where retail inventory management comes into the picture, a faster way of keeping track of the products with the use of inventory management software.
Restaurants need to track their ingredients and supplies to be efficient and not waste any products. Their day-to-day operations would be a lot smoother with the use of restaurant inventory management. It would allow them to make economic food and beverages while they increase their net profit.
A pharmacy has a stockpile of medicine that needs to be monitored to avoid products going to waste. Monitoring all the stocks would be hard without an inventory management system. With an inventory management system, pharmacies can identify which medicines should be brought out or restocked.
A warehouse stores different kinds of products, and it’s quite a task to monitor all of them. That’s why managers use warehouse inventory management systems to keep track of all the ins and outs and organize the stock-keeping units. Managers can also use warehouse inventory management software to track employee activity.
Dealers will benefit from using this because of bulk inventories and bulk orders from their customers. Tracking deliveries, orders, and payments will be easier for dealers with integration through couriers and multiple payment channels.
Barbershops, Car Spas, Salons & other service types of businesses also need an inventory management system to keep track of the necessary items to run their businesses. Equipment like scissors, razors, wrenches, screws, and other tools also need to be accounted for by businesses to keep track of the costs of operations.
Step-by-step guide in selecting the right inventory management system
Step1: Take a look at your products.
To determine the best inventory management software for your business, you need to take a look at what you’re selling or stockpiling. What products do you sell? It could be goods, food and beverages, medicine, or clothes. This will help you choose the type of inventory management system that is appropriate for your business.
Step 2: Determine how simple or how complicated your software needs to be.
If you are managing a big warehouse and a professional is going to do the inventory for you, then you probably need software that is more detailed and needs some training to get used to. But if you are a retailer or a small business owner that will try to figure out inventory management on your own, then a simpler software would be better.
Step 3: Set a budget.
You have to know how much you’re willing to spend on software. Although inventory management systems are made to help you with your cost and potential net profit, it sure doesn’t mean that you have to pay much to avail it. Work with a budget, or you can consider some offers of inventory management software for free!
Step 4: Scan through the core features.
Even though you have your eyes set on a particular inventory management app, you have to make sure that all the features that you need are included in it. Check out their website and scan through the core features to give you an insight into the specific software you’re considering. Checking the core features can also help you narrow down a list if you have one.
Step 5: Download the software.
Now that you’ve decided which inventory management software is perfect for your business, pay for it, and install it. If you choose a free inventory management software, then you’re good to go!
Frequently Asked Questions (FAQs)
Inventory management pertains to the process of ordering, storing, and utilizing a company's inventory. Whereas warehouse inventory management controls and optimizes the movement, storage, and tracking of inventory in and around the warehouse.
On the other hand, a warehouse inventory management system is more detail-oriented, while inventory management takes on a broader view. For example, warehousing gives you the detail of the actual location of an item in a warehouse, and inventory management gives you the location of the specific warehouse where the item is stored.
Bulk shipment is a cost-efficient method where you ship multiple items at once.
ABC inventory management
ABC inventory management is a technique based on categorizing the products in the order of their importance. Not all products have an equal value; you can identify them as A being the most valuable to C being the least valuable.
Backordering - Backordering is a technique where you decide to take orders and receive payments for products that you don’t have stock yet. This method is a bit risky considering that you’re already selling products without the security of having the stocks yet.
Just in Time (JIT)
Just-in-time inventory management is a strategy where you arrange an order of supplies and goods to arrive just when you need them. This is a great way to reduce inventory costs and avoid ordering too much.
Consignment is an inventory practice where the stock supplier retains ownership of the product until it gets sold to the consumer. At the same time, the retailer buys the goods from the supplier without paying for the product until it's sold.
Dropshipping - Dropshipping is an inventory management technique where the retailer doesn’t stock the supplies they are selling. After receiving an order and payment, they simply forward the orders to the supplier and let them ship the product to the consumer. The retailer then pays the supplier.
Inventory Cycle Counting
A cycle count is an inventory procedure where a small number of products or a specific area is counted on a specific day. Cycle counts usually are scheduled at a fixed date or time over an accounting period.
An open-source inventory management software is freeware or free-to-use software that some companies offer to help small businesses experience free inventory management software. This will help them manage their orders, deliveries and maximize the potentials of their businesses.
These open-source inventory management tools also have limitations as per software for users to upgrade their subscription plans in the future. The upgraded subscription plans add more features that may be important to users that can come up with more economical and beneficial business decisions
A lot of features can be found in Inventory management software. Find out what features will benefit your business. The versatility of a system can help your business in multiple ways.
Inventories that have short-term expiration need to sell fast to avoid spoilage. Also, seasonal changes in demands can happen in your business, maintaining just the right amount of inventory for each product to maximize your storage capacity.
Inventory Stock Notifications
Receive alerts and notifications when there’s overstocking for you to offer promotional discounts or replace them with your suppliers to clear out extra stock, or place an order in case of stock shortage and keep up with your product orders.
Product Returns/Exchange Handling
With this, you can manage and minimize stock returns and determine what products are always returned or exchanged to determine points in improving product quality and restock quantity.
Product/ Material Grouping
Group inventory into predefined categories, wet or dry products, manage their stock levels, manage reordering schedules, and track components and specifications that make up your inventory.
Sales Report Analysis
View sales history reports and find a list of your popular products. This will help you analyze your stocks and find out what to sell more. If a product is slow-moving,
exchange some from your suppliers or offer product discounts to clear them off your inventory.
Purchase Order Management
This allows you to manage purchase orders and analyze stock demands to prepare and meet your customer’s needs. The right software or product must only be used to make this happen.
Product Demand Forecasting
Through this feature, you can draw on past data to identify future demand, Identify the peak and off-peak of products. Forecasting can help you strategize and plan your future selling capacity and target markets.
These are your sales summaries or in detail for a day, week, month, quarter, or even a year. This will help you analyze your selling pattern and what products you need to sell for a specific period of time. Industries change, so keeping up with trends will help you adjust to economic situations.
These are your slow-moving items or products that have not completed the manufacturing process. Constraints are common in the business, but
managing your spoilage will make your business and efficient and can save you some money for other product opportunities.
Inventory On-hand Report
Sometimes, knowing how much inventory in your warehouse is simply not enough. With an on-hand inventory report, you can accurately differentiate allocated stock and available stock, resulting in fewer stock-outs and maximize sales opportunities.
Stock Location Report
This report will determine the location of your inventory and products. With this report's help, you can allocate specific items, transfer them from a warehouse to another warehouse at multiple locations that need to be restocked or are needing a supply of raw materials for the manufacturing process.
Inventory Change Report
This report will determine what inventory levels are good for your inventory and manufacturing capacity. Enough supplies of raw materials will maximize your manufacturing production and will increase product output.
Stock Reorder Reports
Stock reorder report tells you when a re-order and immediate replenishment of goods is necessary. Re-order points are typically unique with each product. Factors that affect reorder points are delivery lead times, sales, and safety stock. This will help you avoid low stock and stock-out situations.
Purchase Order Report
A purchase order report allows you to track what stock is incoming and when it will be arriving at your warehouse. This will also prevent over-ordering and help to streamline your entire supply chain.
Inventory Pick List Report
This report is a list of items that your operations team takes inventories into production. This normally fulfills customer orders for the day or packaging of good products for delivery. Using an inventory pick list report also allows you to determine accurate on-hand inventory.
Inventory Packing List
An inventory packing list or production report details the total amount of materials required to produce a product or fulfill a customer’s order. With this, you can plan out the production schedule and customize the bill of materials for production.
Inventory refers to the company’s assets, goods, and materials that a company holds for the ultimate goal of resale. Products are items or materials that have undergone a specific process to reach its purpose.
Inventories in a merchandising business are considered merchandise inventory. Inventories in a manufacturing business are classified as raw materials, work-in-process inventory, and finished goods.
The proof is in the numbers when measuring success in managing your inventory. After you have implemented new inventory management techniques, and using your inventory management software, compare the data from before and after.
Have your level of mis-shipments, mis-picks, or out of stocks decreased? What about dead stock and spoilages? Have you eliminated the losses of inventories and loss of sales? Have you already expounded your market? Exceeded your sales from previous months?
If you can answer yes to these, you’ve successfully conducted inventory management. As a result, you can expect to see better customer and product reviews, improved customer loyalty, increased sales of a previous idle product, and even a boosted Online Seller Rating Performance.
Online systems are inventory management systems that are connected through the internet or are working via a network database. Online inventory management systems are updated in real-time and can be connected to multiple online applications. These online applications can help you buy additional inventory and sell your products.
An offline software only works and can be accessed at a specific place or area. They use data files to be accessed only on a Local Area Network (LAN). An online inventory management system can be used anywhere and configured by an online software provider. Its features can also be updated from time to time to adapt to the users’ needs.