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Benefits of Inventory Management System

Author
Kajal Sharma
Posted

July 3, 2024

Companies like warehouses, manufacturing plants, and retail centers benefit significantly from inventory management services because they help track their products’ status and deliver them to consumers when necessary. Despite that, many companies still use manual methods, which affect their productivity and revenues.

Electronic inventory management systems are suggested, which offer significant advantages to companies with warehouses, dealing in the shipping industry, or selling logistics products. These systems are easy to learn and use, and once you start using the warehouse management system software, you will see a massive difference in your productivity.

In this article, we will discuss inventory management systems, the benefits of warehouse management software, and some examples of how WMS solutions can be used in various industry verticals.

What is an Inventory Management System?

An inventory management system is used to manage inventory, increase stock management efficiency, minimize costs, and maximize value.

An Inventory Management System is a technology that assists the organization in managing inventory, orders, sales, and deliveries. It also helps companies strike the best inventory balance, not buying too many or too few stocks.

Everything related to managing inventories can be done manually. Still, in this era of digitalization, companies are more likely to use software systems that help them keep all the records safely in one place. They can also track and manage their inventories effectively. The key features of the inventory management system include the following –

  • Real-time inventory tracking,
  • Automated reordering and
  • Comprehensive reporting,

which enhances efficiency and accuracy in inventory management.

Do you know?

The global inventory management software market was valued at USD 2.13 billion in 2023. The market is projected to be worth USD 2.31 billion in 2024 and reach USD 4.84 billion by 2032, exhibiting a CAGR of 9.7% during the forecast period (2024-2032).

In addition, businesses that implement advanced inventory management software systems can reduce inventory carrying costs by up to 30%.

Furthermore, companies report a 25% increase in productivity and a 20% decrease in order fulfillment times. These statistics highlight the importance of inventory management software in a company.

The global market of inventory management

Today, manual inventory tracking is no longer viable. The complexity of global supply chains, the demand for real-time data, and the necessity for seamless integration with other business systems make inventory management software a must-have in the company.

Amazon, a global leader in e-commerce, attributes a significant part of its success to its sophisticated inventory management software system. Amazon has improved its supply chain by using advanced algorithms and real-time data. This has sped up deliveries and made customers happier, helping Amazon stay on top and grow.

What Are the Advantages of Inventory Management Software?

Inventory management is critical to a business. It involves tracking stock, orders, sales, and deliveries to ensure the right product is available at the right time.

Here are the benefits of an inventory management system that one can get after its deployment.

Benefits of using inventory management system

1. Improved Cash Flow

Effective inventory management means having the right stock balance so you don’t build up too much capital in stock, which can be used for other business operations. A warehouse management system significantly improves cash flows on a large scale.

Example: A small retail store uses an inventory management system to track sales trends. They see that winter coats sell more in November and December. By stocking up on winter coats before the season and reducing stock after, they have cash flow for other expenses like marketing and staffing.

2. Better Customer Satisfaction

When you have the right products in stock, customers are more likely to find what they need, be happier, and be more loyal.

Example: Imagine an online electronics store using an advanced inventory system. Monitoring stock levels and demand ensures popular items like the latest smartphones are always in stock. This reduces the chance of customers leaving the site because the product they want is out of stock.

3. Less Storage Costs

One of the most significant benefits of inventory management is that it reduces storage costs. Good inventory management means you avoid overstocking, which can lead to high storage costs and the risk of products becoming obsolete or spoiled.

Example: A grocery store chain uses inventory management software to track perishable items. Adjusting orders based on sales data minimizes waste and reduces the cost of storing unsold stock. This also means the shelves are always stocked with fresh products, which customers love.

4. Better Decision Making

You can make informed purchasing, marketing, and sales decisions with accurate inventory data.

Example: A fashion retailer uses inventory data to see which clothing lines perform well. They see that a particular style of jeans is trending. By increasing orders for that item and promoting it in marketing campaigns, they increase sales and stay ahead of the fashion curve.

5. More Efficiency and Productivity

Automated inventory management systems streamline operations, and employees don’t have to spend time on manual tasks like counting stock or checking inventory levels.

Example: A manufacturing company uses an inventory management system that integrates with its production line. This means materials are ordered in time for production, reducing downtime and inefficiency.

6. Preventing Stockouts and Excess Stock

Balancing stock levels prevents stockouts, which can lead to lost sales and excess stock, which unnecessarily ties up capital.

Example: A bookstore uses an inventory management system to track book sales. When a new bestseller is flying off the shelves, they order more stock before they run out. At the same time, they see that a particular cookbook series isn’t sufficient and run a promotion to clear the excess stock.

Interactive Tips for Your Business

Tips for effective inventory management

  • Track Trends: Regularly analyze sales data to spot trends and adjust inventory levels accordingly.
  • Use Technology: Invest in inventory management software that suits your business size and needs.
  • Communicate: Keep open lines of communication with suppliers to ensure timely restocking.
  • Review Regularly: Conduct periodic reviews of your inventory to identify slow-moving items and find ways to boost their sales.

By adopting effective inventory management practices, businesses can optimize operations, reduce costs, and keep customers happy. Whether you run a small local shop or a large online store, managing inventories is easy.

4 Methods of Inventory Management

Effective inventory management is crucial for businesses to meet customer demand while minimizing costs and maximizing efficiency.

Here are four proven methods that businesses can employ to streamline their inventory processes and maintain optimal stock levels

  • Just-in-Time (JIT): This method involves ordering inventory only when it’s needed, reducing holding costs but requiring precise demand forecasting.
  • First-in, First-Out (FIFO): This system ensures that older stock is sold first, reducing the risk of obsolescence, especially for perishable goods.
  • Last-In, First-Out (LIFO): Newer inventory is sold first, which can benefit industries with rising costs.
  • Economic Order Quantity (EOQ): This method calculates the optimal order quantity to minimize the total costs of inventory, including ordering and holding costs.

How to Select the Right Inventory Management System

Choosing the correct inventory management software system is essential for the organization, regardless of its size, to avoid wasting time and resources by increasing its inventory management efficiency. Here’s a Here’sured approach to help you choose the right system:

  • Inventory Size and Complexity: Assess the size of the inventory and its specificity (e.g., perishable, located in several places).
  • Integration Requirements: Ask: Is it necessary to connect the system to other software, such as accounting or Customer Relationship Management software?
  • Scalability: Determine if the system can expand in correspondence with your business.
  • Core Functions: Ensure the system can perform routine inventory functions, such as stock replenishment and bar code management.
  • Advanced Features: Other features can be demand forecasting, the possibility of batch or serial number labeling, and multiple location handling.
  • User Interface: The system should be one that your team can easily navigate and should be in line with the following aspects of the system.
  • Training and Support: The training and support arrangements available from the vendor must be considered.
  • Compatibility: Ensure it is compatible with your programs, like accountancy programs or e-commerce sites.
  • APIs: Determine if the system has integration points, aka APIs, for adding custom-made integration if required.
  • Upfront Costs vs. Long-term Value: In this case, it seems vital to consider the costs of acquiring the licenses and implementing the technology and the subsequent costs of its maintenance and further upgrades.
  • ROI: Estimate necessary productivity improvements to compare to the system’s expenses.
  • Reviews and References: Search for commentaries and testimonials regarding other users’ exuberance to measure satisfaction.
  • Support Quality: Ensure the vendor guarantees optimal contacts in terms of support and their average response time.
  • Data Security: Ensure the system observes all regulations regarding data protection.
  • Uptime: Make sure the system’s functionality is steady, possibly to ensure it is not very.
  • Hands-on Evaluation: With this setup in the current system, it is recommended that one use the trial version or demo, if available, to see how much the system can fulfill the business’s needs.
  • Feedback: During the trial period, User feedback should be sought from the potential users.
  • Flexibility: Determine how the system can be customized to meet the needs of certain types of businesses.
  • Configurability: This object must incorporate the potential to adapt to new changes in your business processes.
  • Technology Trends: Consider its ability to conform to the features of the technologies expected to be implemented in inventory management, such as Artificial Intelligence and the Internet of Things.

Tip for How to Choose an Inventory Management Software

Tips for how to choose an inventory management software

  • Features of inventory management: Be sure it includes vital features such as real-time schedule updates, reporting functions, and software integration.
  • Scalability: Get a software tool that can grow with your company.
  • User-Friendliness: This system should be simple to understand and use, so representatives require little training.
  • Support and Training: It is recommended that you buy software with a wide range of support and training services for it to be a massive breakthrough in how you run your business.

However, finding all the required features in a single ready-made inventory management software system is quite challenging. It will lack one of the features that you assume should be available.

Hence, custom software development is suggested for managing inventory. Here, you can decide what you want in your software, and we will deliver a product that fits perfectly into your existing operational base.

Challenges of Inventory Management

Inventory management can be quite challenging for businesses. One big issue is keeping track of how much stock you have. Mistakes can lead to having too much or too little inventory, both of which can be expensive. When you have inventory in multiple locations or sell through different channels, it gets even more complicated and needs sound systems and teamwork.

Predicting how much stock you’ll need in the future is also tricky; getting it wrong can mess up your supply chain. Costs, such as storage and handling, are also involved, and products may become outdated. Finally, it’s essential to have accurate data and real-time updates, which can be challenging without the right technology and skilled staff.

Let’s have a glimpse at the challenges –

  • Demand Variability: Fluctuating demand can lead to overstock or stockouts if improperly managed.
  • Supply Chain Disruptions: Disruptions can affect the availability of raw materials and finished goods.
  • High Storage Costs: Storing excess inventory can be costly, mainly if it includes perishable items.
  • Data Inaccuracy: Inaccurate inventory data can lead to poor decision-making and inefficiencies.

SPEC INDIA: Building Resilient Inventory Management Software for Tomorrow

Developing software that will revolutionize the world of Inventory Management Systems is what we do at SPEC INDIA. We build warehouse management software designed to fit the needs of an individual business. These products help to increase efficiency, lower costs, and improve overall inventory control.

Should you be experiencing challenges with demand forecasting, stock accuracy, or warehouse management, don’t worry —our bespoke software development service is here to solve all these problems. Joining us means using advanced technology to streamline your inventory processes, making decisions faster and more accurately. This increases resilience and competitiveness in your industry.

Let us empower your journey towards seamless inventory management with our innovative software solutions tailored to your unique requirements. Build warehouse management software today with Spec India.

Frequently Asked Questions

Look for features such as real-time inventory tracking, demand forecasting, integration with existing systems, reporting, and scalability.

Yes, modern inventory management software systems are designed to integrate seamlessly with existing ERP, CRM, and other business systems.

The implementation time varies depending on the complexity of your requirements but typically ranges from a few weeks to a few months.

By automating inventory processes, reducing errors, optimizing stock levels, and improving demand forecasting, inventory management software helps in significantly reducing costs.

The ROI can vary, but businesses often see a reduction in storage costs, fewer stockouts, and overstock situations, leading to better cash flow and increased profitability.

Yes, many inventory management software systems include features specifically designed for managing perishable goods, such as expiration date tracking and FIFO inventory methods. By leveraging advanced warehouse management software, businesses can achieve significant improvements in efficiency, cost savings, and customer satisfaction. Explore how SPEC INDIA can help you build resilient inventory management software for tomorrow.

Kajal Sharma
Author
Kajal Sharma

Kajal Sharma is a Senior Content Writer at SPEC INDIA with over 6 years of experience. Specializing in SEO-centric writing, and with a strong hold in the IT sector, she excels at crafting engaging and optimized content. Kajal is adept at driving measurable results through strategic content creation. She also has wide experience in running marketing campaigns.