What Does Inventory Management Software Do?
Inventory management software is a system used by organizations to track inventory levels, orders, sales, and deliveries. The database stores real-time inventory information on parts and supplies, while providing alerts when actions are needed. The primary use of inventory management software is the avoidance of overstocking and understocking.
Inadequate inventory levels halt production, causing shipment delays, unhappy customers, and tarnished brand reputations. For this reason, inventory management software is a crucial component to any organization centered around moving products.
Several industries take advantage of the organization, convenience, and efficiency provided by cloud-based inventory management, including:
- Manufacturing: To assemble the necessary parts for complex product builds and to create production-related documents like work orders and bills of materials.
- Property Management: To ensure supplies for maintenance repairs are available, including light bulbs, door hinges, and plumbing supplies among others.
- Facility Management: To stock supplies that ensure office productivity, employee safety, and IT support.
- Maintenance: To integrate with Computerized Maintenance Management Systems (CMMS) software to track replacement parts via barcode technologies, send alerts when it’s time to restock inventory items, and improve equipment uptime.
The Evolution of Inventory Management Software
Inventory management software entered the scene in the 1980s—the retail industry revolutionized inventory management by adopting standard barcode readers and the Universal Product Code (UPC).
During the 1990s, Denso Wave, a subsidiary company of Toyota, expanded the inventory management market by inventing two-dimensional Quick Response (QR) codes. Many organizations migrated from one-dimensional, UPC codes to two-dimensional, QR codes, allowing for complex information storage and full supply-chain audit trails.
Fast forward to the early 2000s, and smartphone technology paved the way for mass adoption of QR codes. The result? An industry-wide scramble to adopt inventory management software as a standard operating procedure (SOP). However, it’s worth mentioning that UPC barcodes are still used by a minority of organizations. Most inventory management software providers support both code formats.
Key Features of Inventory Management Software
High-quality inventory management software includes the following features:
- Code Generation and Scanning: The software should be able to read barcodes and generate new ones on its own. It helps in accounting by ensuring all parts are captured in the system and can be tracked to assets, locations, and work orders. This information is useful when performing an audit.
- Purchase Orders: You should be able to directly generate purchase orders in your CMMS so that every employee can be active in inventory management. You can also track different vendors for ordering different parts and automatically update stock levels in your CMMS.
- Attribute Customization: Supplies are always used in different ways and it’s important to customize your data in order to have standardized inventory data. Include all the values associated with supplies such as cost per unit, category, minimum quantity, vendor, and location. Adding these values to your CMMS will help when importing new supplies.
- Bulk Importing: Instead of large organizations adding inventory items manually one by one, the bulk importing feature enables them to upload a bulk inventory using a .csv file. It saves time when uploading several parts or adopting a new CMMS.
What Are the Four Types of Inventory?
When creating your inventory system, you need to know the different types of inventories, including:
- Raw Materials: These are materials needed to turn your inventory into finished products. For example, the cotton used for artificial flowers or leather for shoes.
- Work-in-Progress: Just like the name sounds, this type of inventory is a work-in-progress. While not the primary product, work-in-progress inventories complete the picture. For example, packaging for medical equipment.
- Finished Goods: This is the most straight-forward type of inventory. These items are ready to sell to buyers.
- Overhaul Inventory: These are also known as Maintenance, Repair, and Operating (MRO) supplies inventory. They are required for assembling and selling finished goods but don’t make up part of the product. For example, office supplies or gloves worn by employees when packaging products.
How Do You Create an Inventory System?
Good warehouse management depends on tracking inventory to prevent both understocking and overstocking. Regardless of the size of your business, creating an effective inventory system involves the following basic steps:
- Organize your locations and label the aisles, columns, and shelf numbers of each product. This makes it easier to track items using names and locations.
- Label your products using unique descriptions to know what’s in each container or box. It eliminates confusion when feeding data into your inventory management system.
- Number your items to differentiate them.
- Include measurements on packaging. For example, the number of wine bottles in a case and the capacity of each bottle.
- Count the stock levels. Verify the starting count on your inventory management system to ensure that it’s accurate for each item.
Once again, inventory can be tracked via spreadsheet. However, inventory management software will produce infinitely more effective, accurate, and reliable results.
What Is the Best Software for Inventory Management?
These are the best pure inventory management software options for 2020, according to third-party review sites:
- NetSuite: NetSuite is not only suitable for inventory management but also warehouse management, product data management, work order management, and manufacturing execution. It tracks inventory from multiple locations and manages safety stock. NetSuite can automatically generate product catalogs based on types, categories, and volumes in addition to eliminating stock counting errors through prompt and automatic counting of items.
- Zoho Inventory: Zoho Inventory’s features include inventory optimization, multi-channel management, retail inventory management, product identification, item-kitting, warehouse management, and supplier management. You can also integrate the software with digital marketing platforms such as Amazon and eBay to easily manage online sales. Zoho Inventory offers a free trial but the basic plan starts at $49.00 per month per user.
- TradeGecko: For only $39 per month, TradeGecko offers a clean user-interface and impressive features for inventory management. It is built for multichannel brands and to boost eCommerce growth. TradeGecko is targeted at small-to- medium-scale businesses looking to grow. Features include mobile access, reporting and analytics, forecasting, inventory optimization, and product identification among others.
- Stitch Labs: Stitch Labs is one of the most expensive inventory management software with a starting price of $799 per month, but it is an advanced software that centralizes and enables you to have complete control of your purchases, sales, and orders. It’s a cloud-based software that provides detailed reports and analytics on historical stock, financial location, and sales velocity for future assessments.
- Sellbrite: After a free 30-day trial, Sellbrite charges $49 per month to use the software. It offers a user-friendly platform and enterprise-level inventory management features that enable businesses to establish a balance between purchase orders, stock, and sales. Sellbrite’s features include reporting and analytics, warehouse management, multi-channel management, and inventory optimization.
Frequently Asked Questions:
What Is the Best Free Inventory Management Software?
The above software recommendations are considered the best current marketplace options according to review sites. However, they are paid subscription plans with only limited free trial periods for some. If you’re on a tight budget, consider Odoo as a free inventory management software alternative. It can help track stock movement from purchase orders to sales and generate real-time progressive reports. Other free software to consider for inventory management includes ABC Inventory, PartKeepr, Stockpile, inFlow On-Premise, and ERPNext.
Is QuickBooks Good for Inventory Management?
Many SMBs use QuickBooks for accounting purposes. Because of their familiarity, approximately 13 percent of them also attempt to use the software for inventory management. While QuickBooks can fulfill basic inventory tracking needs, it isn’t designed for full-scale, inventory management. We recommend, instead, integration QuickBooks with your preferred inventory management system for improved reporting metrics.
It isn’t easy to keep track of inventories, especially when operating in multiple locations. And relying on spreadsheets is a recipe for overwhelm. Securing the right inventory management software will minimize downtimes, ensure replacement parts are available, enhance quality control, and organize your efforts so business can grow to the next level.