What is an inventory management system?
When many people think of inventory management, they think of Excel spreadsheets or manual stocktakes. While these can be useful for managing inventory in certain circumstances, nowadays the fastest-growing businesses use inventory management software to track inventory levels, forecast demand, and more.
Dedicated inventory management systems are designed to track stock through the entire supply chain or the portion of a business it operates in. That can include everything from production and ordering to warehousing, shipping, and fulfillment, as well as the movements of stock in between.
Depending on the system, inventory management software may have some or all of the following features:
According to research by IHL, ineffective inventory management costs eCommerce businesses a huge $1.75 trillion in lost revenue every year. These global losses fall into three categories:
On average, the combined impact of overstocks, out-of-stocks, and preventable returns adds up to 11.7% of annual lost revenue for every business. Utilizing a robust inventory management system mitigates these risks and benefits businesses by enabling:
46% of small businesses with 11 to 499 employees don’t have a dedicated inventory management system. The majority of all businesses rely on nothing, pen and paper, or Excel to manage their inventory:
Studies have revealed that businesses with an efficient inventory management system see an increase in profitability and decreased costs.
Let's take a look at the different types of inventory management systems out there and weigh in on the pros and cons.
With tools, features, and formulas to make spreadsheets more dynamic and interactive, Excel and Google Sheets are capable of handling basic inventory management for small businesses. Like anything that’s free or cheap, spreadsheets aren’t perfect, but they do have a lot of features that are suitable for new businesses looking for a quick solution to manage inventory.
Keep in mind, though, that it’s easy to make double-entries and other errors using spreadsheets, and avoiding them requires time-consuming auditing, meticulous organization, and strict management practices.
Who is it suitable for? Small businesses with annual revenue under $100k and a small inventory range could find spreadsheet-based inventory management suitable in the short-term.
Unlike inventory management spreadsheets or systems that sit on a local computer, Cloud-based inventory management software is hosted on the internet, with all data stored on third-party servers.
Cloud-based inventory management eliminates the delays, errors, and frustrations common to using spreadsheets – which explains why Cloud-based platforms are seeing a sharp increase in adoption worldwide.
According to IDC, global spending on Cloud computing platforms is predicted to reach $19.8 billion this year, attaining a 21.6% growth rate in 2018. While spreadsheets are designed to carry out general mathematical functions, Cloud-based inventory management systems are specifically created to handle the requirements of a growing business in relation to production, stock, warehousing, ordering, fulfillment, and more.
Who is it suitable for? Cloud-based software is a good solution for small-to-medium-sized businesses with annual turnover of between $100k and $100m. For growing businesses, Cloud inventory management provides the level of sophistication needed to maintain effective supply chain management while scaling up sustainably.
ERP inventory management, short for enterprise resource planning inventory management, refers to an integrated approach to business planning and operations. With an ERP inventory management system, businesses can manage all their finances, logistics, operations, and inventory in one place.
According to Statista, global spending on Cloud Enterprise Resource Planning (ERP) software is predicted to increase from $19.1 billion in 2017 to $28.8 billion in 2028. Typically, ERP systems are built for businesses with extremely complex inventory and sales order processes, which usually apply to larger companies.
Small businesses may not be able to justify the higher cost of an ERP inventory management system compared to a standard Cloud inventory management system, especially if the additional functionality and capabilities aren’t needed.
Who is it suitable for? ERP systems are best suited to large, well-established companies with a yearly turnover of $100m+ who require more advanced functionality than what’s provided with a standard Cloudbased inventory management system. This includes multinational corporations and companies that operate across multiple sales channels.
Just getting started with inventory management or thinking about upgrading? Here are some of the key questions to ask yourself before making a decision.
If you sell online, look for an inventory management system that’s specifically designed for eCommerce businesses. Some key features to consider include:
You should be able to easily handle online transactions through your inventory management system, whether that be by syncing orders from your eCommerce store or selling directly through a provided store interface. If you sell retail and wholesale, also make sure that the system is equipped to handle both B2C and B2B eCommerce.
If you sell on the go, choose a system with a mobile app so you can easily check stock and create orders from anywhere, at any time.
Remove barriers to payment by choosing a system that has a built-in payment gateway or integrates with your existing payment gateway.
Most but not all Cloud-based inventory management systems offer some level of integration capabilities. Look for a system that can easily integrate with your critical software, including:
If you require an integration that isn’t on your provider’s integration list, keep in mind that a developer will need to build a custom integration using the provider’s API.
Cut down on manual labor and improve efficiency by choosing a system that automates repetitive tasks such as:
To be a successful business, you need to be able to track your performance and plan ahead. Sophisticated inventory management systems have tools like sales reports and demand forecasting features to help you make strategic decisions about your business.
You’ve probably heard the terms “tech partner” and “tech vendor” before, but what’s the difference? A tech vendor supplies a product or service to businesses, such as a software package or a piece of technology. A tech partner, on the other hand, not only provides a product or service, but also becomes an extension of your business.
In other words, a partner goes above and beyond the services of a standard vendor to help you develop your business by offering expertise, support, and resources along the way.
Like any positive business partnership, a tech partner should be willing to help you achieve your goals and celebrate in your successes. Here are some of the key qualities to look for when engaging a tech provider for your business.
When selecting a technology partner to help you through this transformational stage in your company’s growth, ensure that they’re invested in helping your business succeed by asking the following questions:
Like any good marriage, picking the right technology partner is key to the long-term success of your business and the happiness of your customers.
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These features and more are designed to support new and growing eCommerce businesses in their entrepreneurial journey by helping them grow and scale up online.
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