5 Reasons to Use a Quality Inventory Management System
As of 2018, just 12% of warehouses used pen and paper for inventory cycle counts, compared to 41% in 2013. Over the same time span, mobile device usage for stock takes rose from 32% to 65%. Technology is an increasingly critical factor for an effective inventory management system.
As more warehouses and e-commerce retailers adopt stock control software, growing businesses must decide whether such an investment is worth it. The benefits of inventory management software range from improving employee efficiency to saving you money. Automation saves you time and improves accuracy across critical stock-keeping operations. Because of the importance of inventory management for any business that sells goods, most companies have many reasons to consider software solutions.
What Is an Inventory Management System?
An inventory management system is the way in which a company controls its stock. For smaller operations, a basic system may consist of a spreadsheet. Growing businesses use integrated inventory tracking systems, where dedicated software can count and track goods coming in and out of the warehouse.
Inventory management software also lets warehouse personnel mark sublocations and transfer stock between locations, track products by serial number or lot ID, and simplify purchasing and replenishment processes. Through e-commerce and shipping integrations, inventory management software can update stock levels across sales channels.
An even more sophisticated inventory management system also incorporates barcode readers. A barcode-enabled stock management system speeds up operations, including receiving shipments, picking sales orders, transferring stock and conducting stock takes. Through each of these operations, workers can scan product labels, and the barcode reader ensures the right products are scanned, reducing errors.
Why Should You Use an Inventory Management System?
All sellers can use an integrated stock management system to manage their resources most effectively. Inventory is your most valuable asset, and the right software reduces your risks by improving accuracy and saving time.
It can boost your sales by increasing the chances your most popular products will be in stock when customers want to buy them. The right system can also reduce storage costs by allowing you to hold smaller quantities. You’ll be less likely to overstock items. By both maximizing sales and reducing waste, your business can achieve a healthier cash flow.
Improved accuracy and speed in picking and packing orders will enhance your customer experience. Plus, stock quantities automatically update across your sales channels in real time. With this feature, you’ll reduce overselling and improve your status with your marketplaces.
Best Reasons for Using an Inventory Management System
The most effective inventory management systems use technology to enhance critical operations, reduce waste and improve customer relationships.
The top five reasons to upgrade your stock control system include the powers to:
1. Increase Overall Efficiency
Automation can perform many tasks more accurately and in less time than even your top employees. You’ll reduce confusion on whether items are in stock and take the guesswork out of when to reorder. Through automated inventory tracking, every item in your warehouse or store is logged to a specific location. That means when you need to find something, you already know precisely where it is. With a barcode inventory integration, the scanner can even direct employees through the warehouse in the most efficient path.
Ultimately, employees spend less time hunting down stock. You can trust that your software is working tirelessly in the background to keep your stock counts and locations up to date. A barcode scanner integration will alert employees if the wrong items get scanned or if products are missing from a shipment. By preempting these mistakes, your company saves time.
Powerful software can improve operations from your back office to your shipping department to your physical stores. That’s because it integrates with the tools your whole company needs to work efficiently. With an accounting software integration, your finance department has accurate purchasing, sales and invoicing information. A shipping management software integration helps you prioritize customer orders based on your current availability. Point-of-sale (POS) integrations let you track inventory efficiently at every store location.
2. Keep Track of Inventory
The primary function of an inventory control system is to know how much stock you have and where it is. When you handle it with a spreadsheet, you’ll always have some lag between your records and what’s actually in your warehouse. When you upgrade to inventory management software, you can track stock by quantity and location in real time.
The key is the system takes data from your purchase and sales orders to track the stock you have on hand, what will arrive soon or what has already been promised to customers. When you confirm a purchase order, the quantity becomes marked as available. When a shipment arrives and gets processed at your warehouse, that stock adds to your quantity on hand.
As incoming shipments arrive, your workers can mark sublocations with either manual entries or barcode scanners. When you make a sale, inventory automatically deducts from your quantity available to promise. Finally, when you ship orders, the items subtract from your quantity on hand.
The software gives you the ultimate flexibility in tracking your stock. You can monitor everything together within one warehouse or manage stock at multiple warehouses worldwide. You can also allocate separate merchandise for individual sales channels. With a POS integration, you can earmark inventory for individual shop locations. With digital marketplace integrations, you can combine or separate merchandise across sales channels such as Amazon and eBay.
3. Improve Customer Service
Better inventory management creates higher customer satisfaction. With automatic low-stock alerts, you’re better able to keep items in stock. Customers are happier when they can buy things right away without waiting for a restock. So, your website and marketplace will only show customers the items you have available. You’ll also avoid overselling and canceling orders because products weren’t in stock when a customer checked out.
Barcode inventory control improves the speed and accuracy of order fulfillment. Pickers can prioritize shipments based on item availability. Barcode scanners help them find items quickly and tell them precisely what belongs in every order. That way, more shipments arrive on time with all the correct products. When customers receive the right items the first time, they’re more satisfied. You’ll receive fewer returns — saving you time and money — and fewer complaints — improving your reputation.
4. Lower Inventory Costs
In February 2021, the average business in the United States held about $1.30 worth of stock for every $1 in sales. Most companies estimate their stock carrying costs at 15%-25% of their total inventory value. Experts place that figure closer to 18%-75%, depending on the industry. The expense of holding inventory includes warehousing expenses, inflation, stock-keeping operations, and shrinkage.
Inventory is a huge investment, and anything you can do to lower your costs can have a considerable impact. One of the best steps to take is reducing the amount of inventory you keep on hand. By reordering more often in smaller quantities, you can maintain a smaller warehouse and tie up less money in stock.
An automated inventory management system can help you maintain a leaner operation with less risk. For example, Finale Inventory uses a dynamic reorder point calculation, factoring in sales velocity, supplier lead time and desired days of inventory. It will alert you when you need to replenish to have stock arrive just in time. With powerful software watching over your replenishments, you avoid stock-outs, even when holding smaller quantities. This feature improves your return on assets (ROA) while helping you save money.
5. Forecast Business Needs More Effectively
Besides tracking your sales velocity and predicting reorder points, inventory management software can help you plan for growth in many ways. Readable, visual data on your software’s dashboard highlights critical sales data. Robust reporting helps you identify your bestsellers and discover what units aren’t as profitable. This data lets you plan for inventory changes to optimize your product portfolio. The software’s built-in accounting tools also provide a detailed summary of profits and losses for better financial planning.
Inventory management software can also integrate with suppliers to track pricing and other data. With this information, you can compare costs and lead times on every purchase order, so you’ll know when it’s time to switch suppliers.
Schedule a Finale Inventory Demo
Finale Inventory is a robust, flexible and scalable software that can help you get the most out of your inventory management system. When you choose Finale Inventory, you’ll work with a dedicated account representative to integrate your new system with your existing business tools and processes. We’ll also be there for you with free consulting, setup and training included in any subscription.
To see how Finale Inventory can turn your stock management system into an asset, schedule a real-time demo today. Or, call us at 888-792-8891 to chat about our e-commerce stock management solutions.