What is inventory management software?
Inventory management software is a solution that helps businesses plan ahead by leveraging the power of inventory automation technology. It also allows users to prepare for radical changes in sales through its record-keeping and monitoring capabilities. It also prevents product loss caused by environmental factors and theft by keeping them secure, resulting in reduced financial losses.
Inventory and warehouse management systems are becoming essential in retail, wholesale, service delivery, and many other industries, helping the company keep track of its produced assets, and distribute them accordingly to all interested customers. The definition of inventory management software brings together all tools that help prevent products from spoiling, eliminate costly mistakes and thefts, and most importantly—keep all customers satisfied.
Beyond answering the definition of inventory management software, this article will discuss its examples, benefits, types, and features. Likewise, it will present key factors to consider when searching for an inventory management tool as well as other relevant statistics and trends.
What is inventory management software and what does it do? What modern businesses find to be the most competitive advantage of inventory automation technology is the possibility to plan ahead, and prepare for sudden sales spikes or drops by monitoring trends and referring to historical records.
With organized and categorized stocks, you will also enhance your effectiveness, and pull off important stats whenever you need them. Regardless of the complexity of your stock or the number of products you’re distributing, a warehouse management tool will be a valuable addition to your software infrastructure, and one of the fastest ways to meet your employees’ and customers’ expectations.
Back in 2019, the global inventory management software market was valued at $3 billion. As economies worldwide are starting to resume activities and recover back to pre-COVID-19 pandemic levels, its worldwide value is predicted to reach $5 billion. In fact, a survey found that after the recession brought by the virus outbreak in 2020, 44% of surveyed global executives expect that growth will likely follow in 2021.
Sources: ETR & Wikibon (2020)
So, are you ready to purchase your first inventory management software system to take advantage of the expected economic recovery that will likely transpire this year? Better yet, have you decided which type of warehouse software you need? This category offers both simple catalogs and complex listing systems, which is why you should always compare several solutions before jumping on the bandwagon. Another thing you should definitely do is to check the guidelines we collated in this article to go beyond answering—what is inventory management software? Then use your newfound knowledge to find the ideal system for your needs.
You’ve already learned what is inventory management software, but how does it work? Let’s check that together, along with the other key aspects of this very helpful and robust business software.
Examples of inventory management software
- Cin7 – A complete, automated point-of-sales package and inventory management suite created to cater to the needs different business sizes and industries. Completely cloud-based, this platform offers top-of-the-line features that let you sell and distribute your products more quickly and efficiently. You can easily sign up for Cin7 free demo here.
- Zoho Inventory – Popular inventory management solution for small and large companies, used to automate their order and inventory management, and to keep track of delivery in order to make smarter business decisions. It also includes a powerful analytic and reporting kit, and out-of-the-box features such as inventory replenishment for avoiding stock-outs.
- QuickBooks Commerce– A top-listed inventory specialists’ choice for cloud-based and automated delivery of asset management services. Ideal for multi-channel and multiregional wholesalers and distributors who find it handy to manage sales, supply chains, and customer relationships from a single location.
- Brightpearl – Another recommended multi-channel retail management system that helps businesses handle orders, inventory, customer data, accounting and reporting. It offers an advanced sales management kit, and integrates with all popular marketplaces and payment gateways. If you need a reliable Brightpearl alternative check out our other comparison articles.
- SellerCloud – An eCommerce and inventory management solution used to manage the full scope of multi-channel selling. From inventory and warehouse management, publishing listing to marketplaces, to order processing and shipping, as well as accounting integration, this Zoho Inventory alternative does all the work needed.
- Logiwa – A cloud-based warehouse management software that caters specifically to small and medium-sized businesses in the retail and e-commerce industries, giving them a user-friendly platform that comes with all the core capabilities and features to address their complex needs and requirements.
- EasyCount – A web-based stocktaking tool that digitally counts inventory items to accelerate the product tracking process. Created for businesses of all sizes, this platform is also equipped with instant inventory valuations, offline inventory monitoring, as well as gross profit reporting.
These, nevertheless, are not the only reliable, end-to-end inventory management solutions you should consider this year. There are plenty of other examples of inventory management software. For more alternatives and ideas, check our list of top 10 inventory management software solutions.
A sample of QuickBooks Commerce dashboard.
Benefits of inventory management software
We’ve described what is inventory management software earlier in the article, let’s now take a look at its uses. There are many benefits of inventory management software deriving from the usage of quality inventory management software, including accurate distribution of products and services, prompt customer service, and faster and more secure deal closure. In the ideal scenario, your inventory management system will be cloud-hosted, well-integrated with third-party management software, and available to use on mobile devices for the needs of large and decentralized teams.
Here are the main advantages of inventory management software, and the answers when your manager asks—why use inventory management software?
- Centralized storage. The more stock locations you have to govern, the more difficult it becomes to manage orders and direct products to the right customers. With an adequate warehouse tool in place, you will be able to track the availability of all products and services, and thus maintain customers promptly informed on the status of their orders.
- Efficient stock operations. Good inventory management is the founding pillar of any healthy retail business, as it saves both the time and effort needed to manage stock manually. With a collaborative system in action, your employees will no longer write daily reports and run back-and-forth through them to give customers an answer, but rather have data ready and regularly updated on their devices.
- Enhanced sales productivity. Many companies report significant improvement of their closed deal rates upon implementing their first inventory management solution. This is so because accurate inventory prevents you from losing customers, and minimizes common human mistakes such as reporting products out of stock and referring clients to different stores.
- In-time delivery. The core benefit of using inventory management software is being able to hit delivery deadlines, and preventing customers from waiting ages for their shipment to arrive. Advanced programs will even involve them in the process, giving them a realistic picture of the status of their order, and allowing them to track the product’s movement from purchase to arrival.
- Adjusted order frequency. Despite of distributors perceiving stock shortages to be the worst possible scenarios, we’d ascribe that attribute to overstocks. Leaving products to waste or paying for their storage and maintenance is where businesses lose the most of their money, and that’s why inventory management software is so useful. Being able to track their actual stock supplies, companies can re-order from vendors in the right moment, or adjust the order frequency in a more suitable manner.
- No more hidden costs. Another competitive edge of good inventory systems is that they adjust easily to sudden spikes in your sales, and you get to tweak them in line with sudden spikes and drops. For the purpose, you won’t have to pay extra storage fees, while in the best possible scenario you will also get a product that prepares, packs, and ships products for you.
- Satisfied customers. With personalized service and accurate responses at any moment of time, your customers will be more satisfied than ever. They will be able to track the status of shipped orders, without facing the risk of a late notice that the product they expect is no longer available.
- Integration with back-office systems. Another way to recognize a quality inventory management system is to examine its connectivity to back-office applications, in particular accounting and ERP systems which process stock related data. The best option is to purchase an open API system, as it allows custom connections to all service providers, and usually comes with the best technical support.
- Accurate planning and forecasting. Inventory management systems help you plan ahead and become more proactive, as they track the status of your products, manage negative trends and opportunities, and retrieve vital historical data to predict the progress of your sales. In fact, inventory tools are most of the time packed with analytic features that free your time, and still pull off all important indicators that measure your productivity.
Contact management dashboard of Zoho Inventory
Types of inventory management software
There are many different ways to group and categorize these systems, but defining a type will almost always depend on the intended use and purpose of inventory management software you’ve selected. The mode of work and features of inventory management software will also play a role while placing a tool under any of the following categories:
- Manually-managed inventory systems. Inspired by spreadsheet technology and packed with status updates, these systems are ideal for startups and small companies transiting from fully paper-based stock management. Manual inventory systems are simple, and focus foremost on ordering and tracking a limited number of similar products. Sometimes, they will even be devoted to a different aspect of sales management, and offer inventory as a separate module. Complex calculations are still dependent on formulas entered by the user, which means that human-caused errors remain a peril, and may cause serious output inaccuracies.
Examples: Brightpearl, SellerCloud, Ordoro
- Barcode scanning systems. The biggest achievement of inventory management technology is without doubt barcode scanning, as it allows companies to process a larger number of items, and pull in data directly from computerized cash registers and POS systems. Incoming inventory is updated automatically, which means agents always have their ordering and purchasing information ready to use. What is even better is that these systems are not confined to an exact number of warehouses, but rather let inventory move unobstructed, and facilitate in such way packing and shipping procedures. Note that there are many systems that provide barcode scanning as an integrated feature, which is why you can skip purchasing a scanning-exclusive system.
Examples: Zoho Inventory, QuickBooks Commerce, Skubana
- Advanced radio frequency systems. Radio frequency systems (or as they’re also known RFIDs) are the biggest guarantee of the efficiency and productivity of your inventory management. They automate warehouse control end-to-end, and thus target large enterprises with thousands of orders to move on a daily basis. These systems mark products with fixed tax readers used to follow their movement, and eliminate in such way the whole concept of controlling several warehouses at once. Such powers, nevertheless, make these systems way more complex and expensive than the traditional ones, which is why we don’t recommend them to developing businesses.
Examples: QuickBooks Commerce, Stitch Labs, Skubana
Sample sales credit report on Brightpearl
Features of inventory management software
How does inventory management software work? The best way to understand how does an inventory management software work is to look at its most prominent features. In this category, however, this may turn out a more complex task, as inventory systems are significantly different both in form and function.
Still, there are several important functions that appear in most systems; here are reliable features of inventory management software:
- Categorization of products. With this feature, you can migrate products between different groups and channels, and make them easily searchable by type, name, price, date, supplier, popularity, and many other filters. Better yet, the feature ensures full stock control, as it allows you to forecast demand, and make accurate orders from your vendors.
- Order management. Thanks to inventory management software, retailers can manage their sales and purchases from the same system, track orders and control stock levels, and even bill and invoice their clients. A good idea here would be to check whether the system integrates with third-party accounting tools.
- Automated ordering. What companies like the most about inventory management systems is that they eliminate time waste, and limit the manual efforts needed to bill and track projected sales. This is made possible by multichannel stock management technology, which optimizes sales in every retail environment where it is applied.
- Barcode scanning. This is the most popular and desired inventory feature that allows exchange of electronic data, and thus caters to the needs of global retailers and large companies. Scanning also allows electronic tracking of order data, and helps retain full inventory, warehouse, and shipment control.
- Regularly updated product information. Inventory management systems treat data as a dynamic variable, and make sure you will stay in control of it for as many items or services as you are selling. Basically, it gives you a simplified and less time-consuming way to process the usual sales information, this time keeping all members of your team updated about it.
Insertion order form on SellerCloud
Factors to consider
Before you’ve made an actual decision and invested your money, there are a few important considerations we would like you to pay attention to:
- The scalability of your new system. With only a few products in stock and a small, organized team to run, it may not seem essential to purchase a high-tier inventory system as your pioneer tool of this kind. Yet, keeping in mind how expensive warehouse control tools can be, we advise you to look for a scalable and flexible system that will grow in parallel with your sales activity. More importantly, make sure you’ve chosen a product that can resist sudden sales spikes/drops without requiring additional fees to cover for those.
- Quality management of customer relationships. While this doesn’t entail an obligation for inventory systems to do CRM, it certainly involves a possibility for you to engage customers in the tracking process, and give them personalized access to the progress of their order. The sooner you’re able to respond to their inquiries, the more satisfied they will be with your service.
- Reliable customer support. Once again – inventory systems are not exactly painless to afford, and you must make sure you’re given everything you’ve been promised in advance. If possible, choose only reliable systems where your data is secured and calculations are 100% accurate, and even more importantly – test customer service in advance! You never know the bugs and problems you may experience in future, so make sure there is someone on the other side of the line that can take care of those for you.
Pricing of inventory management software
The cost of inventory management software usually depends on the features and capabilities it provides, but may also be restrictive with respect to the number of users and products you get to involve. Certain warehouse control providers may also limit access to tech support to premium users, and require additional fees for users to cover in case of storage shortage.
Pricing schemes, on their behalf, vary from scalable, multi-plan offers to custom quotes, while there are also completely free inventory systems developed for sole producers and very small teams. Here are a few examples of how inventory management pricing works:
- Odoo – Designed to make enterprise-level ERP and inventory management benefits accessible to small companies, Odoo is available for free.
- QuickBooks Commerce – This system is recognizable for its flexible pricing schemes, as there are several plans with different feature suits to meet the needs of each company. The Basic Plan is available for $79/month, followed by Business ($199/month); Business Premium ($359/month), and Enterprise ($799/month).
- Brightpearl – Developed for the needs of high-tier and established enterprises, Brightpearl swaps monthly plans for annual subscriptions, and charges amounts between £3,780/year for the Entry License and £16,800/year for the Established one. A tailor-made custom plan is also available for the biggest companies interested to manage an undefined number of orders per month.
- Zoho Inventory – Zoho Inventory offers a pricing scheme similar to the one of QuickBooks Commerce, but yet adjusted to the needs of startups and very small companies. The lowest, Basic plan is available for only $29/month, followed by Standard ($79) and Professional ($249).
- SellerCloud – SellerCloud is a representative of quote-priced inventory management systems, where each user receives an individualized plan that meets his needs and payment capacity. For more details, you should visit the company’s official website, or contact sales support.
Sample pipeline profile view on Odoo
While it is absolutely true that warehouse control helps direct products to the right place in the right time, there are also a few downsides you should be aware of:
- The foreign currency risk. Retailers operating with more than one currency must check whether their inventory management system is equipped to meet their needs. The problem that may arise is that while importing inventory and paying for it in a currency different than your own (higher, in most cases), you may lose money. Because of the difference, you will eventually end up paying more for the inventory than you originally predicted, unless you’ve bought the transaction currency in advance. If you purchase and sell products using the same system, solve this issue on time.
- Thefts. Solid inventory management systems do reduce the possibility of theft and fraud, but you can’t expect them to eliminate it completely. Involving more employees that have access to the system and can govern inventory on their own may make it difficult for them to steal, but it will also make it difficult for you to identify the person responsible once such thing happens.
- Inventory damage. Because of the fact that inventory management systems take most of the order management burden on their shoulders, some managers get a bit spoiled and expect these tools to handle even operations that are not in their capacity. What we have in mind is not paying attention to how inventory is controlled and protected from damage, and whether all rules and regulations have been taken into account.
- Generating specialized documents. Inventory management systems are becoming more and more capable to generate a wide range of important accountancy documents, including expense statements, personalized invoices, checks, and purchase order confirmations. In the best scenario, they will also pull out automated reports on low stock amounts, and notify all team members about it.
- More efficient analytics. In near future, we should expect inventory management systems to become even more reporting-savvy. More and more tools are equipped for ERP reporting, spares management, tracking of stock expiry periods, pilferage control, and accurate demand forecasts.
- No systems different than RFIDs. Like them or not, RFIDs are becoming a commonplace in the inventory management sector, slowly but surely eliminating their manual and semi-automated competitors. In the years ahead, inventory management systems will be able to locate individual products or even product components, monitor their quality and tag them with special microchips that help track their movement without associating them to a particular warehouse.