Today, we have software for everything. Want to book tickets for a movie? Download an app and boom, it’s done! Want to get married? Register online and find your ideal partner. And this isn’t even half of it. All forms of business, whether micro or large enterprises, are shifting to instilling technology in their day to day business operations. This move toward digitization has allowed many small businesses to reach their true potential. In this blog, we will discuss one such common tech based solution to help businesses with inventory management. A proper inventory management system will not only help your business grow, but it will allow you to save time, space, and energy on important issues. So, let’s start discussing how a business can improve its growth and inventory management with software.
Basics of Inventory Management
For all businesses with manufacturing units, inventory plays a very crucial role. Inventory includes all the goods and services that are being used by the business in the course of trade and commerce. The following type of items are included in an inventory:
| Type of Inventory | Description |
| Raw Materials | Includes all different items and materials that go into the making of a final product. For example, if your final product is a dress, then cloth, sewing machine, thread, needle, etc are your raw materials. |
| WIP Items (Work – In – Progress) | If a product is in the midst of being finalized, then it’s a WIP item. Even these items are a part of your inventory. For example, a half stitched dress. |
| Finished Goods | Products that are complete and finalized, but havent been sold yet are finished goods. It is an important type of inventory item for businesses. |
| MRO Supplies (Material, Retail, and Operating Supplies) | This includes the materials you would need in your day to day business operations. For example, sandpaper, nails, etc are the MRO supplies for a furniture maker. |
What is inventory management?
As evident from the above descriptions of inventory items, having a properly managed inventory can bring a lot of positive outcomes and growth to the business. Simply put, inventory management means ensuring that an organization has proper stock and it also includes creating reports on the total stock and inventory items.
These reports and figures established through inventory management will help you maintain true financial records and details depending on the expenses made on inventory and profits raised from selling the products. Apart from keeping records, the inventory management process includes ordering, using, storing and even selling the inventory items. Broadly speaking, there are two different methods of inventory management:
Traditional Inventory Management
As we know, in inventory management, you have to keep a keen eye on the flow of goods and materials. It is probably one of the most important day to day functions of a business. Traditional inventory management methods include using spreadsheets, manually entering all data, and focusing on re-ordering from the same place, etc. In the olden days, traditional methods of inventory management were quite popular. However, as the country grows, its businesses grow, there also arises the need to grow the methods we use to enhance productivity.
Many business owners that still use traditional inventory management methods face the following practical challenges:
- Inaccuracy in data due to manual entry;
- Real time data may not be accessible for all different branches;
- It is more time and labor consuming;
- Can also lead to overstocking or understocking; and
- It decreases the overall productivity of your team mates.
Modern Inventory Management
Modernization is at its peak. When you start including modern, data-driven technology to manage your internal systems, like inventory management, you open a door to great new opportunities. It allows you the following advantages over traditional methods:
- Reduced manpower requirement;
- Automation and integration for real time updates across various branches;
- Accurate data analysis from inventory management software can help you maintain proper records.
- When manual labor is redacted, your efficiency is bound to increase.
The Role of Software in Modern Inventory Management
In the modern inventory management system, software applications play a big role. All the automation and integrations that make your life easy are possible only because of the different features of inventory management software systems. Software solutions offer streamlining of various processes. And when you think about it, a streamlined inventory management system can increase the scope of your business growth. Wondering how? Let’s take a look at the various benefits that your business can get from transitioning into a modern inventory management system through software solutions:
| Benefits of Modern Inventory Management | Details |
| Eliminate Repetitive Tasks | Software for inventory management provides options for automating the tasks you have to repeat constantly. This can include various things, from data processing, generation of reports and more. It can hence save up a ton of your time and energy. |
| Improve your Inventory Tracking | You’ll need the data of your inventory on several occasions, such as audit, valuation process, accounting, etc. Software solutions allow you to track the inventory in real time. Moreover, with integration, you can also keep a track of the data of your branch offices. It diminishes the error of counting, which can be quite perceptible to the software, so you’ll always end up with the right numbers. |
| Forecasting your Orders | As a business, you’ll always have to make some orders for your inventory items. An error in predicting the number of these items can lead to certain issues, such under or over stocking of the inventory. With software that provides accurate analysis of customer demands, you can make accurate assumptions for your orders. |
| Dealing with Safety Stock | The software can also help you keep an allotted number of safety stocks, based on your company size, to meet up with sudden surge in orders. |
| Integrate with other Software | Your inventory management software can be integrated with your accounting software, project management tool, and other such tools to streamline your entire business process. |
| Optimum Reports | You can not only track your data real time, but also generate a report whenever you wish. Moreover, you can also keep a record of these reports to do a comparative analysis of your inventory through the software solution. |
Features of Inventory Management Software
After understanding how software solutions increase efficiency, it becomes important to know exactly what the software can offer to your organization. Becoming familiar to the unique features of inventory management software can help you realize where these benefits stem from. Here are the characteristics of inventory management software:
Inventory Tracking and Forecasting
The most amazing feature that improves the efficiency of any business is that the software provides real time visibility into the data. So, whether you want to track it, or order your raw materials, you can easily use the software and get going.
Analytics
Data is integral to achieving growth. You can measure growth through reports generated by the software for inventory management. Besides, certain software solutions offer trend analysis, i.e.., analyzing the shift in customer behavioral change, making the reports even more useful. These can help you make accurate forecasts and improve your sales.
Tracking Components
The tracking features in the software solutions are not limited to just the inventory stock. Many software solutions also help in tracking individual components of your inventory, such as the raw materials, or the finished goods. This swift process can increase your business efficiency by reducing production delays vulnerable to manual tracking of inventory. Lastly, not to forget the accuracy of the details and figures provided by the inventory management software.
Alert Feature
The software solutions come with alerts that can keep you on your toes with ordering the inventory items as and when required.
Order Management
Entire control of order management can also be shifted to a digital format by ordering, pre-ordering and managing the entire order lifecycle on the inventory management software. It is also one of the most essential features of order management.
Barcode Scanning and RFID Technology
Certain software solutions for inventory management allow barcode scanning features to expedite the process of checking the inventory, improve accuracy, and automate the collection of inventory data.
Reordering Inventory Stock
By using a software solution, you can set the points of re-order, decide the time span, the number of products, etc and then automate the ordering process. This saves a lot of your time, and eliminates the risk of being understocked.
Inventory Control
Establishing control is another essential feature of inventory management software. With a centralized system, you can easily control all the data, process it, and maintain historical records of reports.
Automation
You can also automate other manual tasks aside from pre ordering your stock. You can automate data entry, stock level updates, and free up the time of your staff for more productive duties.
Product Categorization
Having categories for each type of inventory item can be very useful to filter out and get reports whenever necessary. You can organize the inventory by category, brand, and other criteria.
Storage and Vendor Management
With the basic features, certain software solutions offer additional features such as storage and vendor management. It allows you to manage the space allocation in your warehouse, check the performance of your vendors, and help in building stronger customer relationships.
Security and Backup
All software solutions offer secure protection and storage of the data. Moreover, using backup features can help you keep the data for years to come.
Case Studies: Real – World Success Stories
Let’s talk about a real business that benefited from using an inventory management platform known as “Zoho Inventory.”.
The story begins with a young woman co-founding one of the first freediving schools in Asia. The school, Freediving Planet, offers various levels of courses, starting from beginner to instructor level.
As the Freediving planet started growing, they faced trouble managing their data through multiple spreadsheets. They used these sheets for keeping track of cash, stock, and even to manage bank accounts.
The founders then started looking for the right software solutions. They needed a platform that could keep them more efficient and save them time, while keeping a track of all their accounting. That’s how they landed on the Zoho Inventory Management System.
After they started using the solutions, their business growth seemed to increase at a greater rate. They ended up saving a lot of overhead cost and the burden of repeating the same manual labor over and over again.
This is just one example. There are millions of businesses that have improved their inventory management and tracking by using software solutions like Zoho.
Comparative Analysis of Inventory Management Techniques
Achieving optimum efficiency in inventory management techniques that you adopt is one of the foundational bases for consistent business growth. Which inventory management technique is most suitable for you depends on multiple factors, including the industry, size of company, operations, etc. We’ve jotted down a comparative analysis of different inventory management techniques to understand the various methods and their optimisation with software solutions.
| Technique | Concept | Strength | Weakness |
| Just-in-Time (JIT) | Goods are ordered “Just in time”. Allows you to minimize the quantity of inventory by ordering at the right moment. | It improves cash flow, reduces storage space needs, and builds relations with suppliers. | You need reliable suppliers and it is less preferable to meeting unexpected demands. |
| ABC Analysis | The inventory is divided into three categories: A, B & C on the basis of their value derived from its importance in the business. A: High Value – High Control;B: Moderate Value – Moderate Control; andC: Low Value – Low Control |
Allows focus on high value items and simplifies overall management. | You need accurate historical data and the categories may need timely adjustments. |
| Economic Order Quantity | Here the management happens on the basis of reordering time, cost of order and storage, using mathematical formulas. | Provides a balance between ordering and holding costs, & reduces the number of inventory orders placed. | You need access to accurate cost data, and it may not be suitable for items with an unpredictable demand. |
Integration of Inventory Management Techniques with Software Solutions
JIT
Software integration will help in monitoring the stock levels, automating the placement of orders, and ensuring timely delivery. Inventory Management Software reduces the risk of lack of stock, and improves overall supply chain visibility.
ABC Analysis
Software can provide historical data and automatically distribute the items into the ABC categories. Besides, it can also track the trends of consumer demand and suggest necessary adjustments.
EOQ
The inventory management software can automate the mathematical calculations required in EOQ. It helps in making sure that orders are placed in less number to reduce the admin workload and avoids overstocking.
Impact of Poor Inventory Management
Efficiency in inventory management is a key to your business’ growth and success. Many successful brands also have faced troubles and a decrease in revenue as an impact of poor inventory management. Take Nike, for example, it has on several occasions been a prey of the poor management of inventory. So, we’re here to show you exactly what can go down in your business as a result of poor inventory management.
| Impact of Poor Inventory Management | Details | Benefits of Inventory Management Software |
| Loss of Sales | Stockouts can lead to loss of sales. | Automation will help in ordering inventory items in time. |
| Unhappy Customers | Delays in delivery due to stock problems leads to unhappy customers. | You and your customers can get accurate information and live updates. |
| Holding Costs | Overstocking inventory can tie up your cash. Storage and insurance costs become excessive expenses. | Analyzes the historical data to avoid overstocking, reducing your storage costs. |
| Inefficiency and Errors | Without proper inventory management, there’s a chance you may place errors in ordering or storing, leading to wasted time for searching. | Integrating your barcode scanners minimizes the chances of errors, and you can get alerts whenever your stock is low. |
| Cash Flow | Too much or too little stock has a negative impact on your cash flow. There are chances you may find yourself in the need of cash for new supplies. | You can easily improve the cash flow and generate higher sales revenue if the problem of under and over stocking is eliminated. |
Integration of Inventory Management Software with Other Systems
It is evident that using a software solution is the best way to avoid the mistakes that can make your business lose potential profit and clients. However, an additional benefit of leaving the traditional methods and moving on to modern inventory management software is that you can integrate it with other software or systems in your business to streamline the entire business process. Let’s see the various benefits integration with other systems can provide you:
| Benefit | Specific Software/System | Details |
| Improvement in accuracy and efficiency | Accounting System | You’ll never have to look at manual data entry for inventory again, reducing errors and saving admin time. |
| Customer Relationship Management (CRM System) | With the help of integration, the sales team can keep a track of live data and update customers about deliveries. | |
| Streamlining Operations | Enterprise Resource Planning (ERP) | Automatically triggers a purchase order, eliminating the risk of having empty inventory. |
| Warehouse Management System (WMS) | Integration will allow real time tracking of inventory items in the management, you can see if any of the items are moved. | |
| Improved Decision – Making | Sales and Marketing Automation | Combining the data of sales and inventory will give you proper insights on understanding customer trends and improve your marketing strategy. |
| Business Intelligence | With clear access to the inventory, you can make data-driven decisions on various aspects of your business. | |
| Reduction in Costs | Point of Sale (POS) System | Reduces overselling because of the real time data, in turn reducing overall costs. |
| Supplier Relationship Management (SRM) | You can easily stay in touch with your supplier and get live updates. This builds a stronger relationship, while adhering to delivery timelines. | |
| Increased Customer Satisfaction | Order Management System (OMS) | By integrating it with your inventory management software, you can provide accuracy in order details, leading to happier customers. |
How Do You Select the Right Inventory Management Software?
One shoe never fits all. So, actual business growth and success always comes down to the specific decisions you take. One such is choosing the right inventory management software for your business. Here are a few things you should consider in the selection process:
Complexity and Business Size
You can choose the right software based on the volume and variety of your inventory. Look out for all the unique features that different software solutions provide. For example, CaptainBiz software allows you to track inventories, and manage your orders.
Budget
Depending on how much you are comfortable spending on a software solution, you can create a list of suitable inventory management software solutions.
Industry Trends
Do industry specific research, to see which software solution is best for you. Reviews
Word of mouth can be your best marketing tool. So, before your organization commits to any software solution, you should go through the positive and negative reviews posted by its various users.
Evaluate Scalability
When you’re investing in an inventory management software, make sure that it is capable of meeting your business’s changing needs and provides room for growth.
User Interface
Choose the software solution that you think your team will be able to adapt to easily. There are many user-friendly inventory management software like CaptainBiz.
Integrations
Check integration compatibility with your existing software tools.
Free Trial and Demo
Many software solutions, like CaptainBiz provide you with a free trial period to make the selection easier. Take advantage of these demos and understand all solutions from your shortlist in depth.
Let’s take the example of our Billing Software solution that not only takes care of invoicing, but also helps you manage your inventory and reduces costs. By taking a free trial of the CaptainBiz, you can get first hand experience with the unique features that it provides and how it paves a clear path for your business success.
Conclusion
Don’t worry about the days when you had to spend most of your productive hours behind administrative work. Now,you can eliminate repetitive tasks with the help of technology. One such important solution to reach your business’s true growth potential is integrating inventory management software in your operations. The CaptainBiz Team is here to help you understand as well as implement the software solutions! Feel free to start your trial today.
FAQs
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Which software is recommended for doing inventory management?
There are hundreds of options available online when you look up a tool for inventory management. However, choosing the right one depends on your specific needs. We recommend the CaptainBiz software, which gives you a chance to manage all your invoices and inventory in the same place. You can easily streamline your business process with this software. Before choosing, you can also give it a try by registering for a trial.
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What is the primary function of inventory management software?
The primary function it plays is to streamline inventory, ordering, storage, and generating reports. Moreover, it also provides access to accurate historical data.
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Who uses inventory management software?
It is usually suitable for businesses dealing with goods. Different manufacturers, wholesalers, retailers, and distributors can definitely benefit from using inventory management software like CaptainBiz.
