For a customer, few things are more disheartening than wanting to make a purchase and finding out that their desired item is out of stock. That means the business loses out on a sale and may even lose brand affinity in the process. So for a business owner, knowing what you have on hand, what’s selling, and when to reorder a product are critical aspects of a well-oiled operation.
That’s the job of inventory management software, which replaces time-consuming and unreliable analog record-keeping. Here’s more on what it is, the different types, and a few recommendations to get you started.
What is inventory management software?
Inventory management software is an application that provides a central database for storing information on a business’s inventory and helps automate tasks related to managing that inventory. You can use it to manage and track your inventory levels, orders, sales, and other related processes.
Modern inventory software can also integrate with your business’s back-end enterprise resource planning (ERP) application and accounting software. That creates a comprehensive overview of ordering and procurement logistics and tracking pricing on bought and sold stock items.
Manage your inventory
Inventory tracking can help you avoid selling products that have run out of stock, or let you know when you need to order or make more of your product.Keep track of your products
Benefits of inventory management software
Businesses of all sizes and industries use software to manage inventory. The advantages of using one include:
- Improved accuracy and ease of use. Before the age of computers, businesses managed inventory by hand. They filled out order slips, suppliers issued paper receipts and kept print records of purchases and what they had on hand. Manual entry, however, is time-consuming and prone to errors. Inventory management software digitizes this process, which improves accuracy, and allows businesses to more easily keep records and streamline operations.
- Integration. A software solution lets you integrate your inventory data with other systems, like accounting, which cuts down on input errors—by eliminating duplicate data entry and minimizing manual data entry—and centralizes important information.
- Improved efficiency. Inventory management software can help you make orders only when stock is low. That eliminates the issue of dead stock—excess inventory that may expire or go unsold—and lowers the risk of stockouts or overstocking.
- Cost savings. Through accurate inventory tracking, your business can save money on stock purchases and storage costs. You only buy stock you’re fairly certain you can sell, and you don’t buy any extra. Automated systems can also reduce employee hours required to input inventory information, potentially reducing payroll costs.
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3 types of inventory management systems
Before signing up for inventory management software, determine which approach you want to take when managing inventory. These include:
1. Just-in-time (JIT) management
JIT inventory management is a strategy for ordering stock only when needed to fulfill customer demand, i.e., on an as-needed basis. This can lessen the inventory you need to keep on hand, lowering costs and reducing warehouse management needs. However, JIT systems sometimes struggle to keep up with unprecedented demand or unforeseen changes in the supply chain.
2. Bulk shipping
Unlike JIT, bulk shipping means you order stock in large quantities to sit in your warehouse in anticipation of an order. This approach can save money because it allows large amounts of goods to be transported at once, reducing transportation costs per unit of goods, but it can also lead to overordering and deadstock issues.
3. Perpetual and periodic strategies
In contrast to JIT, perpetual inventory systems update their data constantly, regardless of stock levels, offering real-time insight into your inventory. These are typically more expensive and require more user input. On the other hand, periodic inventory systems catalog stock within a specific time frame (i.e., monthly or quarterly), offering you an affordable but often less up-to-date view of your stock.
Note that there are different types of software for each inventory management system; software used for JIT inventory management differs from software used for bulk shipping or perpetual and periodic inventory systems. While mixing and matching different software is possible, it may not always be practical or efficient, as some may not be compatible with others, which can cause integration problems.
Common features of inventory management software
Given the abundance of top inventory management software, carefully consider which features would be essential for your operations. Some inventory management tools may be unnecessary for certain companies. When looking for inventory management software, here are a few key features to look out for:
- Ecommerce integration. For small and medium-sized businesses that offer both online and retail sales, it’s essential to have an inventory system that can seamlessly integrate with a range of back-end systems, such as accounting software, for increased efficiency and accuracy.
- Automatic reordering. Automating the reordering process—usually as soon as supply falls below a given threshold—is a crucial advantage of inventory management software. It can help you avoid delays caused by stock shortages and free up your time to focus on other critical aspects of your operation. Advanced systems can use historical sales data to predict when reordering will be needed.
- POS integration. Inventory management software offers advanced integration with modern point-of-sale (POS) systems. This means when you sell a product—online or in person—the inventory management software performs an automatic inventory count and tracks current and historical sales data.
- Accurate cataloging. The primary goal of an inventory system is to provide accurate and up-to-date information on the number of items in stock. Whether you record data via radio frequency identification (RFID), bar codes, or manually, the software should accurately and reliably store the data. It should also be able to catalog detailed item information, such as serial numbers, colors, or sizes, and be quickly searchable for easy retrieval.
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5 popular inventory management software options
There are dozens of inventory management software available. Here are five options for ecommerce business owners, each with strengths to suit different types of businesses.
If you’re using the Shopify platform, you can use the built-in (and included in monthly fee) inventory management features. Set up inventory tracking, view your inventory, and adjust your inventory levels in the Inventory area of Shopify. You’ll also be able to view the history of inventory adjustments for products and variants whose inventory is being tracked by Shopify. You can analyze changes to inventory levels in the Inventory Reports section of Shopify. And, if you need to receive direct notifications of low stock levels, then install an inventory alert app from the Shopify App Store.
2. Oracle NetSuite
NetSuite is an ERP software with inventory management capabilities, allowing you to monitor stock levels across digital and physical channels and avoid stockouts through real-time updates. NetSuite uses various historical and seasonal data, including average lead time and the number of inventory days of supply, to automate reorders and ensure your inventory is always well stocked. Netsuite charges an implementation fee starting at $25,000, plus an annual licensing fee depending on your company’s size and any additional customizations or integrations.
Sumtracker offers retailers tools for inventory optimization across multiple locations and the ability to set low-stock alerts. Using historical data, Sumtracker generates days of inventory remaining reports and allows you to receive partial stock against your purchase orders. Sumtracker integrates with ecommerce platforms like Shopify and costs $25 monthly for the pro version.
4. Lightspeed Retail
Lightspeed is a cloud-based, all-in-one POS (point of sale) and inventory management software for vendor management that imports vendor catalog files, allowing up-to-date product information. The platform also lets you create and send out purchase orders and calculate the cost of goods sold (COGS) directly from a mobile device. Lightspeed starts at $69 monthly and offers onboarding training videos.
5. Cin7 Orderhive
Cin7 Orderhive is a versatile, web-based inventory management option for companies of all sizes. With unlimited stock-keeping units (SKUs) and several automated features, including a workflow for shipping and returns, Cin7 Orderhive accommodates large-scale product bases. It also offers inventory forecasting reports and other analytics and can be integrated with Shopify. The platform starts at $125 per month for its base offering.
Inventory management software FAQ
How can inventory management software track inventory levels and movements in real time?
Many inventory management platforms have built-in automated inventory tracking systems to keep up-to-the-minute tabs on your company’s parts and products. Whether in the cloud or through an on-premise device, this information can help inform sales or scheduling decisions you make.
Can I integrate inventory management software with my existing systems and processes?
Yes. Inventory management software can be adapted to a company’s existing systems. Shopify offers a variety of inventory management software options you can install and use alongside your sales platforms, accounting systems, and other ecommerce business offerings. Other business software, like POS systems, occasionally include built-in inventory management.
How is inventory management software typically priced?
Inventory management software typically charges a monthly fee, anywhere from $20 to a few thousand dollars, depending on the size of your business and the scale of the package. Some systems also charge a one-time licensing or customer support fee, often billed separately from the regular monthly user fee.