Inventory management software is useful for companies of all sizes that need to keep track of what's in the warehouse or storeroom. Additionally, this solution integrates with other back-end office systems, like an enterprise resource planning software (ERP) or accounting software, for example. It will help users determine where items are located and will account for any sales or acquisitions, so you always know the value of your inventory for accounting purposes.
43% of small businesses don't track their inventory or use a manual process.
Source: Wasp Barcode
24% of businesses agree that purchasing and forecasting are areas that need the most improvement.
Source: PeopleVox
72% of retailers plan to leverage real-time inventory visibily enabled by automation, sensors and analytics.
Source: ConveyCo
INVENTORY MANAGEMENT SOFTWARE BUYER'S GUIDE
What is Inventory Management Software?
Inventory management software is often used by retail and other businesses that need to keep track of and manage inventory items through each step in the supply chain. This solution tracks warehouse or storage locations and fulfillment needs for your customers or supply partners.
Inventory management software usually integrates with accounting software or ERP software. With data from integrated systems, the software gives businesses a full picture of what they have in stock and the value of their inventory. It will also often connect with point-of-sale (POS) software for the retail sector to help businesses optimize supply chain and track orders.
This type of software is also helpful in the shipping, purchasing and fulfillment processes and can help businesses understand when they need to replenish stock or replace items that have specific expiration dates.
Who Uses Inventory Management Software?
Businesses of all sizes and industries may need inventory management software, but the most common industry is retail. Retailers need to know what stock they have, where it's located and the order status. Inventory management software solutions can help by tracking all this data in one place so business owners always know where they stand with their goods.
Common Inventory Management Software Features
Inventory management has a lot of options when it comes to features and modules. Here are some of the typical features of inventory management software:
Inventory tracking
For any business that deals with inventory, it's important to track it at every stage of its life. Many inventory management software solutions allow tracking using barcodes, serial numbers, batch codes and radio frequency identification (RFID) tags. Picking and packing become more streamlined when a quick scan can tell you an item's location and quantity.
Inventory optimization
One major feature of inventory management software is its reporting and analytics tools. This can help you find patterns in sales and processes to predict future demand. This way, you can order the right amounts and types of items – without having extra inventory you don't need. This feature is also helpful in predicting what times of year certain products will be in demand so you can prevent any stock outages and missed opportunities for growth.
Shipping management
The shipping management feature is important to fulfillment and customer satisfaction levels. Automating shipping processes saves your company time and money by printing labels and barcodes and integrating with a third-party shipping provider like UPS, USPS or FedEx. More advanced features, like having the ability to dispatch orders as multiple shipments, can ensure that customers receive in-stock items as fast as possible, with back-ordered items arriving separately.
Purchasing
If your business needs to purchase goods to manufacture your own products, or if you need to keep a constant stock of items, a purchasing feature is essential for saving time and keeping your purchases organized. Since most inventory management software integrates with accounting software, this feature can automatically fill in purchase orders (PO) for your business and send requests directly to your suppliers.
Top Benefits of Inventory Management Software
Inventory management software has numerous benefits for companies, including:
Improved monitoring
Keeping on top of expiration dates and batch numbers is essential when you work with perishable items, such as health, beauty, food and pharmaceuticals. Inventory management software helps you group your stock and understand when you need to replace or rotate inventory based on the expiration date. It's also incredibly useful in locating your stock if a manufacturer recalls a specific batch number.
Increased efficiency
Being able to keep an eye on stock levels is crucial for making sure you have positive cash flow. Additionally, you can monitor which of your products are the most popular or are selling the fastest throughout all your sales channels. This will help you make smart purchasing decisions and potentially spot customer purchasing trends.
Automated tasks
With features like barcode scanning, shipping and landed cost calculation, and B2B e-commerce platforms, inventory management software can reduce human error and cut down on manual tasks, giving your employees time to focus on more important tasks.
Improved customer satisfaction
inventory management systems can reduce the time between order and fulfillment. Customers want to know their orders are processed and shipped as fast as possible. Speeding up fulfillment time is likely to make your customers happier. Plus, inventory management software can also assist in the processing of returns and exchanges.
How to Choose An inventory management software solution
There are many inventory management software solutions available, all with different features, purposes and levels of customization. Before you purchase your solution, it's important to research what's out there and decide what's best for your business. We've outlined a few important steps below.
Know your company's needs
Before you start shopping for inventory management software, consider what it is your company wants to solve by implementing this solution. Audit your current inventory management process to see where it could be improved and create goals you'd like to achieve based on your findings. From there you can create a list of inventory management software features that are "must-haves" and features that are "nice-to-haves."
You'll also want to make sure that your IT department and top executives are on board with implementing an inventory management software solution.
Create a Shortlist
Once you've established your goals and objectives for an inventory management software solution, create a shortlist of vendors that best fit your needs. We recommend using your must-have features as well as your nice-to-have ones to help you select vendors with solutions that best match your company's requirements.
In addition to features, you'll need to consider the vendor's deployment options (e.g., on-premise, cloud), implementation processes and customer support.
Contact vendors
After you've established your shortlist of vendors, it's time to reach out to them. Explain what your objectives are and what features you require in a solution. You'll also want to request a demo of the software with real-life scenarios, if possible. Vendors typically offer virtual demonstrations, but ask if a vendor is willing to meet with you at your office. Another way to test the software is to participate in a free trial, if there is one.
You'll also want to compare the different price quotes you receive. We explain more on pricing in a separate section below.
Conduct due diligence
When you've selected your top two or three vendors, ask for references from their current or previous clients. While the vendor will likely give you the clients with the most glowing recommendations or experiences, ask to speak to clients that are in the same industry or are the same size as your company. It's important to see not just the positives of the solution or vendor, but any issues clients have experienced as well.
Pricing
One of the most important factors in selecting an inventory management software solution is pricing. Prices can vary depending on company size, customization, implementation and deployment.
Here are a few questions you should consider about pricing:
- Is there a clear plan to judge return on investment?
- What is our budget for implementing/hosting/purchasing inventory management software?
- How many inventory management software features do we really need?
- How many users will need to access the software?
- Will this inventory management software integrate with our current ERP or accounting software?
- What compliance and security features are included?
Inventory management software vendors use two popular pricing models: perpetual licensing (on-premise) or subscription hosting plans (cloud). Keep in mind that whichever option you choose, you'll have to purchase additional hardware for some features such as barcode or RFID scanning, label printing, etc.
Perpetual licensing
Businesses that prefer to host their own data can purchase licenses that last for the life of the software. On-premise deployment requires the business to purchase hardware, servers and other infrastructure, as well as use IT resources to host and maintain the solution.
Perpetual licenses are attractive to larger businesses that can afford the up-front cost. However, even though the license is perpetual, that doesn't mean it includes upgrades and maintenance. Be sure to check with the vendor about the costs of upgrades and IT support.
Subscription hosting (cloud)
Businesses that don't have the time or resources to host their own solution can consider deploying CMS in the cloud. They will only need to pay a monthly or annual subscription cost. Subscription costs can include the number of features the company needs, as well as any support and maintenance.
This type of plan allows users to access the solution from anywhere – smartphones, laptops, desktops and tablets. The nature of inventory management means that most users won't be on-site when they need to access the software. This is a popular solution for both small and large businesses, but especially small businesses that can scale their needs with these types of cloud options.
Challenges of inventory management software
Although inventory management software can be beneficial, it may present challenges, like:
Getting buy-in
Adoption of your new inventory management software is crucial to its success. Top execs and IT might have concerns about the cost compared to the return on investment or security if the software is hosted by a third-party vendor.
Only needing a few features
After figuring out its goals, a company may decide it doesn't need an all-encompassing inventory management solution. Perhaps it only needs a few features that are included in a free version or your current ERP software, or it has limited stock that's easier to track with another method.
Integration with current systems
A successful implementation of inventory management software combines your systems from every department. It's crucial that your new inventory management solution integrates easily with your existing ERP software, accounting software and others.
Market Trends
As with any software, inventory management software solutions will experience growth and change. We've listed a few new market trends for inventory management software below.
Cloud-based options
Cloud-based options for inventory management software have made it easier for small businesses to enter into more markets that had previously been inaccessible. The ability to scale software for companies' needs is a big game-changer, so we can expect more vendors to offer cloud versions and scalable purchase options for inventory management software.
RFID technology
RFID technology has surpassed barcode tech in its ability to track product information much faster. This faster tech can speed up fulfillment times, so we'll see a lot more inventory management software with RFID capabilities and a lot more organizations replacing their barcode systems with RFID tags.
IoT
Constant interconnectivity with your devices via the internet of things (IoT), can help companies eliminate inventory problems by providing real-time analytics. Constant connectivity through RFID tags can give a product's exact location and condition at any time – from anywhere. This feature will help users manage inventory at a whole new level as it becomes more popular.
