What Is Inventory Management Software?

February 11, 2023

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. 

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Inadequate inventory levels halt production, causing shipment delays, unhappy customers, and tarnished brand reputations. For this reason, inventory management software is a crucial component of 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 UPCs 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 the 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 some organization still use UPC barcodes. 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: You use suppliees 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: You need these materials to turn your inventory into finished products. For example, 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 straightforward 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:

  1. 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.
  1. 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.
  1. Number your items to differentiate them.
  1. Include measurements on packaging. For example, the number of wine bottles in a case and the capacity of each bottle.
  1. Count the stock levels. Verify the starting count on your inventory management system to ensure that it’s accurate for each item.

Once again, you can track inventory via a spreadsheet. However, inventory management software will produce infinitely more effective, accurate, and reliable results. 


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 your business can grow to the next level. 

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Caroline Eisner
Caroline Eisner
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