A company’s inventory is one of its most valuable assets. Be it retail, manufacturing, food service, and other inventory-intensive sectors, a company’s inputs and finished products are the core of its business. Inventory management software is a small investment that can give you massive returns.
Managing that inventory is again a significant task for businesses. An inventory management system comprises all the processes like ordering, storing and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as warehousing.
Without inventory going out, there is no money coming in.
Even more important than inventory visibility, is keeping track of the inventory. That is the key to running an efficient and profitable business.
Inventory management has a real impact on cost management, especially for small business. Poor storage can damage the warehouse’s inventory. It is, therefore, essential for a company to optimize its inventory management.
If you are a business owner, you must be aware of the business needs. Demand and other critical parameters such as delivery times, the specificities of suppliers, or market trends. With an inventory management solution, it will be easier for you to determine the quantities you need and when you need them.
Want to learn more about Inventory Management? Read our detailed article on Understanding Inventory Management.
What is inventory management software and why do you need it?
An Inventory management software is a software solution to track inventory levels, order processing, sales, and deliveries. For example, manufacturing industry can use it to create a work order, bill of materials and other production-related documents. According to an article from Entrepreneur , Companies can increase their profitability 20 to 50 percent or more through careful inventory management. Those numbers are significant.
Nowadays more and more companies have started using inventory software because the return on investment (ROI) for management software is enormous. Also, it will help you avoid product overstock and outages. It is a tool for organizing inventory data that before was generally stored in hard-copy form or in spreadsheets.
Small businesses usually use MS Excel as a means of managing inventory. But its scope becomes very restricted to business growth. If you are a trader, wholesaler or a small manufacturer, you should consider investing in a good inventory management software.
There are large amount of inventory software out there. However you should choose one that fits your business needs.
Important factors of an inventory management software
Let’s have a look at some important factors to consider when choosing an inventory management software.
1. Versatility
It is important that the software is adapted to your business and that it corresponds to your needs. It will have to be versatile to facilitate the work of your employees. The inventory software you choose must evolve with your business and always meet your needs.
2. Free Trial
As for all software, before making your final choice, it is recommended to test a free version of the software. Once you go through a free version for 30-days or more, you can assess how it is benefiting your inventory management (or not). You can also analyze the user interface, data security and possible hardware expenses during free plan. The free version can be checked for effective business solution ,carrying costs and core features. Then, after contemplation of pricing plans and cost savings, opt for it accordingly.
3. Budget
With proper inventory system, you can find publishers who offer very accessible solutions. However, if you have specific needs for your business, this will have to be taken into account in the budget. Also, be sure to choose a reliable provider with excellent service.
4. Integration
Your software must be able to integrate everything together so that all your business activities are in one place. Using multiple software for different purposes also causes chaos, so this is a super vital feature to have in your software.
5. Flexibility
The software that you choose for your company should also be flexible enough to adapt to changes. It is an essential feature because many things in a company process might change. These changes should not mean changing the centralized platform all over again but being able to adapt to the nuances.
6. Possibility to Customize
Another essential point to note in inventory management software is the possibility to customize it as per your needs. A generic software covers all the necessary things. But you always need to have some personalized features to make sure that it covers everything that your business requires.
7. Your Requirements
Following the points as mentioned earlier, you need to have the possibility to have all your requirements fulfilled in some or the other way. Even if it takes some customizations, that is not a problem. But in the end, the software that you get should fit your requirements perfectly.
8. Ease of Understanding
Another essential feature is the ease of understanding and use of this software. Your employees should find it easy to work with the software. It should not be something super challenging, and employees should be able to navigate through the software after a few trials while at manual processes.
9. Customer Support
Excellent customer experience is also an essential factor to consider because there can be unexpected problems with the software. In such a scenario, you should be able to contact customer support immediately. In addition to that, you must also check that the workflow is well-trained to handle issues. The turnaround time for problem-solving should be short, as well, so that you don’t have to wait too long for it to be resolved.
10. Overall Cost
The overall cost of using and maintaining the software should not be skyrocket. It should be good enough to be a part of your yearly or monthly budget. If it puts a hole in your pocket and does not give you the required returns, it is not the right one for you.
Five-Step Process in Inventory Management
Based on these two crucial aspects, four combinations are possible, and the fifth step is to bring everything together. They correspond to many methods of management:
1. Replenishment method:
It is also called the calendar method and consists of a fixed-price, close-to-the-world order. So, you replenish your requests based on a particular date that is already fixed in advance. This also involves having a fixed price.
2. The point-of-command management method:
It adopts a variable date ordering system but has a fixed quantity since it is the reaching of the level of the stock (called, the control point), which triggers the replenishment order.
3. The second aspect of the replenishment method:
It is a question of having a fixed date for the variable size of the world. It considers the size of the variable and replenishes the stocks accordingly on a fixed period.
4. The order replenishment method:
It consists of ordering a variable quantity, with a variable date, according to the demand. So, this is the third type of replenishment method where demand plays a crucial role.
5. Development of an Action Plan:
In this process, you combine all the inventory management processes together so that it is cohesive, and you can make the most out of it.
Frequently Asked Questions (FAQs)
1. How is an inventory management software effective?
The inventory management system will allow you to reduce all issues of out of stock or overstocks. This will result in a significant reduction in storage costs. It can be a vital tool for businesses with extensive inventories as costs in this area can increase very quickly. The goal of effective management system is to have the right number of products at the right time.
2. How does an inventory management tool work?
Thanks to the inventory management solution , you will know your stocks in real-time, and you will have a detailed history of supply chain. Besides, you can manage your inventory data numerically, valuing your inventory, and even issue delivery notes. Knowing your stocks is possible, thanks to the reports provided by the management system. This allows you to have all the necessary information quickly and clearly to make strategic decisions. Thus, optimize the performance and costs of your business along with inventory optimization.
3. What happens when an inventory is poorly managed?
The problems of poor inventory management are additional costs of conservation, acquisition, but also depreciation of channel inventory along with supply chain management. This leads to losses in the long run because of extra charges for no reason.
4. How can inventory management software make a difference?
Some software allow you to help you manage stock level, manage supplies but also manage the labelling of your products and bar-codes. The software solution can be beneficial in order management ; it allows you to reduce the risk of error significantly. It can function as accounting software, inventory control software, supplier management ; quite literally an all-in-one business management solution.
5. What is the risk in the event of mismanaging stocks?
Many risks arise out of the mismanagement of stocks. Following are the two major ones:
- Overstocking
It results in significant costs (logistics, for example) and the risk of obsolescence in inventory system. Obsolete inventory is always an additional burden for any business. It takes up space and cost but does not bring any returns.
- Under-storage
It can result in stopping the production, and an inventory item might not be available during the sale. This can also cause problems for the smooth functioning of your business.
In this respect, it has been shown that proper inventory management is based on two main factors: the date of the order- purchase order and sales order and the quantity ordered. Indeed, it is possible to order either a fixed time or variable date. Just as the quantity ordered can be adjusted or variable.
6. What are the advantages of using inventory management software?
The three main benefits of the inventory management tool are, therefore:
- Control of quantities: You don’t end up with a massive amount of things where you don’t know what to do with them.
- Expenses management: You can manage your expenses much better and anticipate demands
- Better organization: You are much better organized and prepared for the future
Conclusion for choosing a suitable inventory management software
To conclude, one may rightly say that an inventory management system can be a lifesaver for retail businesses, esp. growing business.
Thanks to inventory management software, it will be easier for you to plan your activities. You will be able to anticipate the demand for inventory item and thus have the supplies more efficiently. You will then be much more productive and faster in addition to reducing your costs. Overall, it can save you a lot of time and money and help manage orders.
Therefore, having good software solution is the way to go. Choosing correct software solution is a task. You can go for a simple trial version if you want to walk through it first.
Are you still confused? Do you need expert advice? You can get in touch with us, and one of our experts will help you develop an action plan to provide you with the best management for your stocks. We will be happy to give you a free demo of our software.
We at Profitbooks offer you a 30-day free trial where our trained executives walk you through the software. It lets you get a glimpse of how it can change the way your business currently functions.
Sign up for a FREE trial and get started!
Also read:
12 Inventory Management Techniques To Cut Losses
How to deal with surplus inventory
