7 Benefits of Inventory Management System for Your Business
Inventory management system is a software system that helps you track and control your inventory throughout your entire supply chain, from purchasing to production to sales. It helps you optimize your inventory levels, meet customer demand, improve profitability, and increase efficiency.
KEY TAKEAWAYS
An inventory management system is a software system that helps you track and control your inventory throughout your entire supply chain.
An inventory management system can provide many benefits for your business, such as greater visibility, improved customer satisfaction, increased profitability, enhanced efficiency, and better decision making.
An inventory management system can be manual or automated, periodic or perpetual, depending on your business needs and preferences.
There are many types of inventory management software available in the market, such as Unleashed, IBM Sterling Inventory Control Tower, or Zoho Inventory.
To measure your inventory performance, you can use metrics such as inventory turnover ratio, inventory days, or fill rate.
In this article, we will explain what an inventory management system is, how it works, and what are the benefits of using one for your business. We will also provide some examples of inventory management software that you can use to manage your inventory.
What is an inventory management system?
An inventory management system (or inventory system) is the process by which you track your goods throughout your entire supply chain, from purchasing to production to end sales. It governs how you approach inventory management for your business.
Inventory management system can be manual or automated. A manual system involves using spreadsheets or paper records to record inventory data. An automated system involves using software or hardware devices to scan, record, and update inventory data in real time.
An inventory management system can also be categorized into periodic or perpetual. A periodic system involves counting and valuing inventory at specific intervals, such as monthly or quarterly. A perpetual system involves updating inventory data continuously as transactions occur, such as purchases, sales, or transfers.
How does an inventory management system work?
An inventory management system works by tracking the movement of inventory across your supply chain. It records information such as:
- How much inventory you have in stock
- Where your inventory is located
- When you need to reorder inventory
- How much inventory you need to order
- How much inventory you sell
- How much inventory you lose or damage
An inventory management system can also help you with other aspects of inventory management, such as:
- Forecasting demand and supply
- Planning production and purchasing
- Allocating inventory to different locations or channels
- Pricing and costing inventory
- Reporting and analyzing inventory performance
What are the benefits of inventory management system?
An inventory management system can provide many benefits for your business, such as:
- Greater inventory visibility: An inventory management system allows you to track all your inventory movements, so you always know how much stock of each item you have, where it’s located, and when to reorder. This helps you avoid stockouts, overstocks, or misplacements of inventory.
- Improved customer satisfaction: An inventory management system helps you meet customer demand by ensuring that you have enough inventory to fulfill orders on time and accurately. This helps you avoid losing sales, disappointing customers, or damaging your reputation.
- Increased profitability: An inventory management system helps you understand your profitability by breaking down the costs and revenues of producing and selling goods. This helps you optimize your pricing, costing, and margin strategies, as well as identify and eliminate waste or inefficiency in your inventory processes.
- Enhanced efficiency: An inventory management system helps you improve your workflow efficiency by automating and streamlining your inventory tasks. This helps you save time, money, and resources, as well as reduce human errors or delays in your inventory operations.
- Better decision making: An inventory management system helps you make better decisions by providing you with accurate and timely data and insights on your inventory performance. This helps you identify trends, patterns, opportunities, or problems in your inventory management, and take appropriate actions to improve it.
What are some examples of inventory management software?
There are many types of inventory management software available in the market, depending on your business needs and preferences. Some of the common features that most inventory management software offer are:
- Barcode scanning or RFID tagging
- Inventory tracking and control
- Inventory forecasting and planning
- Inventory reporting and analysis
- Inventory integration with other systems
Some of the popular examples of inventory management software are:
- Unleashed: Unleashed is a cloud-based software that helps you manage your entire supply chain from purchasing to production to sales. It offers features such as multi-currency and multi-location support, serial number tracking, batch tracking, expiry date tracking, bill of materials, kitting and assembly, landed cost calculation, margin analysis, sales order processing, warehouse management, and more.
- IBM Sterling Inventory Control Tower: IBM Sterling Inventory Control Tower is a cloud-based software that helps you optimize your end-to-end inventory visibility and control across your supply chain network. It offers features such as AI-powered insights and recommendations, real-time alerts and notifications, predictive analytics and simulation, scenario planning and execution, risk mitigation and recovery actions, inventory optimization and replenishment strategies, inventory collaboration and orchestration, inventory performance dashboard and reporting, and more.
- Zoho Inventory: Zoho Inventory is a cloud-based software that helps you manage your online and offline sales channels from a single platform. It offers features such as multi-channel integration with e-commerce platforms, marketplaces, and POS systems, inventory synchronization across channels, order fulfillment and shipping automation, inventory valuation methods, inventory adjustment and transfer, inventory reporting and auditing, and more.
TIP
One of the most important tips for effective inventory management is to use an inventory management software that suits your business needs and preferences. An inventory management software can help you automate and streamline your inventory tasks, improve your inventory visibility and accuracy, optimize your inventory levels and costs, increase your customer satisfaction and profitability, and enhance your decision making.
What is Inventory Management System?
An inventory management system is a software system that helps businesses track and control their inventory throughout the supply chain, from purchasing to production to sales. It aims to optimize inventory levels, reduce costs, improve customer service and increase profitability.
Global Demand for Inventory Management System
According to a report by Grand View Research, the global inventory management software market size was valued at USD 2.66 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 9.4% from 2021 to 2028. The report cites the increasing adoption of cloud-based solutions, the rising need for real-time inventory visibility, the growing e-commerce industry and the emergence of advanced technologies such as artificial intelligence (AI) and machine learning (ML) as some of the key factors driving the market growth.
Benefits of Inventory Management System
An inventory management system can offer various benefits for businesses of different sizes and industries, such as:
- Greater inventory visibility: An inventory management system can provide accurate and timely information on inventory levels, locations and movements across the supply chain. This can help businesses avoid stockouts, overstocks, spoilage, theft and damage.
- Improved customer satisfaction: An inventory management system can help businesses meet customer demand by ensuring that the right products are available at the right time and place. This can enhance customer loyalty, retention and referrals.
- Enhanced operational efficiency: An inventory management system can automate and streamline various inventory-related processes, such as ordering, receiving, storing, picking, packing and shipping. This can reduce human errors, labor costs, wastage and delays.
- Increased profitability: An inventory management system can help businesses optimize their inventory turnover ratio, which is the number of times a business sells and replaces its inventory in a given period. A higher inventory turnover ratio indicates higher sales and lower holding costs, which can boost the bottom line.
FREQUENTLY QUESTIONS
Q: What is the difference between inventory management and inventory control?
A: Inventory management is the process of planning and organizing inventory to meet customer demand and business goals. Inventory control is the process of implementing and monitoring inventory policies and procedures to ensure inventory accuracy and efficiency.
Q: What are the best practices of inventory management?
A: Some of the best practices of inventory management are:
- Set optimal inventory levels based on demand and supply forecasts, lead times, safety stocks, and reorder points
- Use inventory management software to automate and streamline inventory tasks and data
- Implement inventory tracking methods such as barcode scanning or RFID tagging to ensure inventory visibility and accuracy
- Conduct regular inventory audits and reconciliations to identify and correct inventory discrepancies or issues
- Optimize inventory storage and layout to facilitate inventory access and movement
- Implement inventory policies and procedures to standardize and regulate inventory operations
- Train and educate staff on inventory management skills and responsibilities
Q: What are the challenges of inventory management?
A: Some of the challenges of inventory management are:
- Managing inventory across multiple locations or channels
- Balancing inventory costs and customer service levels
- Dealing with demand and supply uncertainties or fluctuations
- Handling inventory obsolescence, spoilage, theft, or damage
- Integrating inventory data with other systems or platforms
- Complying with inventory regulations or standards
Q: What are the types of inventories?
A: There are different types of inventories depending on the nature and stage of the goods. Some of the common types of inventories are:
- Raw materials: These are the basic materials that are used to produce finished goods. For example, wood, metal, or fabric.
- Work-in-progress: These are the partially finished goods that are still undergoing production. For example, furniture, clothing, or electronics.
- Finished goods: These are the final products that are ready for sale. For example, books, toys, or food.
- Merchandise: These are the goods that are purchased from suppliers and resold to customers without any modification. For example, groceries, cosmetics, or jewelry.
Q: How to measure inventory performance?
A: There are various metrics and indicators that can be used to measure inventory performance, such as:
- Inventory turnover ratio: These measures how many times your inventory is sold and replaced over a period of time. It is calculated by dividing the cost of goods sold by the average inventory value. A high ratio indicates high sales efficiency and low holding costs. A low ratio indicates low sales efficiency and high holding costs.
- Inventory days: These measures how long your inventory stays in stock before being sold. It is calculated by dividing the average inventory value by the cost of goods sold and multiplying by 365 days. A low number indicates fast inventory movement and high customer demand. A high number indicates slow inventory movement and low customer demand.
- Fill rate: These measures how well you fulfill customer orders from your available inventory. It is calculated by dividing the number of orders fulfilled by the number of orders placed. A high rate indicates high customer satisfaction and loyalty. A low rate indicates high stockouts and lost sales.
References:
http://publications.cta.int/media/publications/downloads/1749_PDF.pdf
https://books.google.com/books?id=H6AM-vRhmoAC&pg=PA24
https://www.unleashedsoftware.com/inventory-management-guide/inventory-management-systems
https://www.ibm.com/topics/inventory-management
https://en.wikipedia.org/wiki/Inventory_management_software
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