What is Inventory Management Software?

Inventory management software is a computer program that tracks, manages, and reports on stock's level, sale, order, and purchase using a digital database. It includes recording incoming material information, online inventory cataloguing, periodic data entry for invoices and purchase orders. Inventory software also helps with physical counting of materials on hand, and quantities needed for production. The inventory tool allows users to calculate costs associated with the inventory and monitor performance metrics.

Offline and Online Inventory Management Software

Inventory Management Software is classified into two types. They are:

Offline Inventory Management Software

Offline inventory management software is installed in your system, and you can track inventory in your warehouse or shop through a single interface. It is not connected to the internet, and you can use it to manage your stock purchase, usage and delivery offline.

Online Inventory Management Software

The online inventory management system is a cloud-based software and could be logged in through a web browser or pre-installed application. Online inventory management software enables real-time tracking/recording of products and synchronizing multiple warehouse data in the cloud database.

What is the Difference Between Offline and Online Inventory Management Software?

Inventory Management Software Modules

• Ecommerce Module: This module helps you to manage your entire eCommerce store and online sales channel. It is essential to process all online orders and update the inventory to the portal in real-time.
• Accounting Module: This module helps manage the entire financial transactions related to inventory. Accounting records, tracks, and reports all inventory transactions like purchase, sales, returns, damage, wastage, salvage, etc.
• Business Intelligence Module: BI Module helps analyze the inventory reports using advanced analytics tools for better decision making. The report can be customized as per the business needs.
• Data Administration Module: This module helps update all the data from different systems and stores it in a centralized database.
• Warehouse Management Module: Warehouse Management Software is a vital module that helps track the incoming and outgoing inventory. It also manages the entire logistics as well as inventory movement in a warehouse.
• Order Management: Order management module manages all your sales orders and fulfilment, including the entire sales cycle. It helps manage your products, fulfil orders, generate invoices, and more.

Essential Features of Inventory Management Software

• Digital Data Collection: Collecting the digital data of inventory during entry, processing, and exit is the most vital feature of inventory software. It generates barcodes, QR codes, RFID tags for new stock items and scans these codes at different stages of inventory flow to collect the accurate digital data of stocks.
• Stock movement tracking: Tracking the company's stock flow is the primary function of any inventory management solution. It includes receiving goods or raw materials, WIP, sales, purchases, and locating an item in the warehouse.
• Inbuilt reporting tools: Reporting is undoubtedly the most crucial feature for every business software, and inventory software is no different. Periodic reports on available inventory, wastages and average stock turnover ratios enable managers to optimize stock control, cut costs and boost efficiency.
• Reorder quantity/point alerts: The software must provide alerts to managers or maintainers when stocks are low or excess. It should also send alerts about optimum reorder quantity and the time to reorder. This will reduce cost and optimize workflow.
• Order Management Module: Inventory system allows businesses to process orders based on a consolidated inventory database of multiple locations.
• Barcoding System: Barcode scanning is an integral part of inventory systems. It lets businesses scan barcodes on products, cartons, and other goods to track their movement.
• Data Security and Backup: The inventory management system must secure the company's inventory data from any breaches or losses. It should have adequate security and backup protocols to save businesses from losing valuable inventory data.

Advanced Features of Inventory Management Software

Every inventory software has some advanced feature depending on its targeted market.

• Multi-Location Control: This feature allows users to keep track of the inventory at multiple locations and its movement, quantity, or status.
• Intelligent Information system: Top inventory management systems can automatically analyze the stock turnover ratio, sales forecast, delivery cost, and inventory flow to decide the best inventory reorder point and quantity.
• Notifications and auto ordering: Inventory management systems could even automatically generate purchase orders for reorder depending on the information. It can send an alert to the manager regarding low stock or could even place an order itself.
• Multi-location synchronization: The inventory synchronization feature helps organizations get complete data on all their warehouses and stores. It gives a bird' eye view of companies' inventory operations, stock levels, reorder points, and budget in real-time.
• Multi-user role-based access: The multi-user feature of a best inventory management software allows multiple users to work on the system according to their level of access. It allows companies to scale their operations quickly.
• Cloud based operations: Some inventory management systems can run on the cloud server. It provides users the flexibility to log in to the software through any web browser remotely.
• Smart Device operations: Inventory software that supports multiple platforms like iOS, Android could be a great addon. It helps track goods and control inventory remotely. Scanning QR codes and updating stocks through phone could cut costs and increase ROI.
• Seamless 3rd party integration: Integration of inventory system with other systems like ERP, accounting software, and CRM tools help organizations to reduce workforce errors and add value to the business process.
• Real-time inventory tracking: The real-time tracking feature of the inventory management system provides managers with up-to-date information on goods or products, their location, and their status. Users can track goods in real-time, depending on their needs. It lets managers quickly respond to changing market conditions.

Types of Inventory Management System

Based on the Frequency of Updating Inventory

Perpetual Inventory Management:

In this system, up-to-date inventory data is obtained and tracked by updating the inventory instantly during entry and exit from the warehouse. Inventory values change instantly at each transaction, giving an accurate report. It is a continuous process to maintain inventory levels. But this method of inventory management is costly and complex to implement and needs high-end computers and connectivity with warehouse operations.

Periodic Inventory Management:

Perpetual inventory management works on a periodic cycle basis, like monthly or yearly. It involves the calculation of closing stock and tallying it with opening stock. This method helps to know the value of inventory at a given point in time. Inventory values are obtained manually by physical count. It is not a continuous process; hence it is prone to error, and data is mostly outdated.

Based on Method

Manual Inventory Management:

In this type of management, inventory is tracked and calculated manually. It requires rigorous training for those who handle inventories and generate reports. In addition to that, an operator needs to count items, which increases the error rate.

Automated Inventory Management:

In automated Inventory management, the whole process of data entry, updating, and tracking the stock is taken care of by computers. There are three types of automated inventory tracking systems:

• Barcode-based inventory management system: Barcodes are generated and assigned to items in this type of system. A handheld barcode scanner is responsible for identifying an item while tracking it.
• Radio Frequency Identification (RFID): This method uses radio waves to read RFID tags affixed on items, which makes it much easy to track non-symmetric products like clothes, bikes, etc
• QR Code-based inventory management system: QR Code uses a symbology called 2D-symbology, which can have many characters in it. QR code can store information like item name, quantity, cost, etc.

Why You Need Inventory Management Software?

• Preventing Stock Outages: An inventory management system helps businesses in meeting customer demand in time. It gives managers information on current stock levels and the material being used in production. It ensures that the company doesn't lose out on sales because of inadequate production.
• Maintaining Optimum Stock Level: An inventory management solution provides businesses with information reorder points, safety stocks, and restock levels. It makes sure that businesses don't have excess stock, which would increase storage cost, block the working capital, and obstruct stock flow.
• Reducing Operating Costs: With efficient inventory management software, companies can cut delivery charges and storage costs Managers can set optimum reorder levels and track wastages with inventory software.
• Efficient Stock Tracking: The inventory management system tracks goods movement in real-time and updates stock levels regularly. It provides up-to-date information to managers regarding the status of inventory, delivery schedules, flow of raw materials, etc., which helps them make better business decisions.
• Reducing Human Error: Inventory management software reduces human error by processing information automatically. Barcodes and QR codes are less prone to error due to the digital data fed into the system.
• Generating Valuable Reports: Inventory management software provides valuable reports to managers on sales, inventory status, turnover, and reorder points. Managers can make better decisions based on these accurate inventory data.
• Improving Customer Service: With up-to-date information on inventory and real-time tracking of goods and delivery, managers can promptly respond to customer queries.

Things to Consider When Buying Inventory Management Software

• Business Requirements: The first step in choosing the right inventory software for small business is to analyze your business requirements. It is necessary to decide your preferences and scale of operation.
• Simple User Interface: It's crucial to choose the best inventory management software that is easy to use for your managers and staff. If the software has user-friendly features and doesn't require many training hours and experts, it can reduce cost and boost efficiency.
• Role-Based Access Setup: Check if an inventory solution provides multi-user access based on the role and authority of the user. This way, you can ensure complete information security.
• Multi-location Control: The inventory system you invest in must provide the multi-site facility. It would also help you get a bird's eye view of the entire inventory operation across the organization and generate valuable reports.
• Remote Accessibility: You must get the flexibility to access the software anytime, anywhere, and from any device. Choosing cloud-based software is better as it could be logged in through web as well as smartphone.
• Pricing and initial Cost: Check for a flexible pricing system if you are a small business that could help you cut initial costs. Also ask beforehand for hidden renewal charges and upgrade costs.
• Data Transition Simplicity: The inventory management process is data-centric. So, it would be helpful to choose an inventory management system with built-in tools for seamless data migration.
• After Sales Service: A good inventory software vendor must provide adequate support to users, whether through phone calls, email, or chat. Read reviews of existing users before choosing an inventory software.
• Scalability and Agility: If you are a small business, the inventory management solution you choose must be easily scalable. It must have the ability to handle more extensive operations than your current requirements.
• Analytic Reporting Tools: Analytics is an essential factor of inventory management tools as it provides a bird's eye view on inventory data tor informed decision making.

Use of Inventory Management Software for Small Business and Enterprises Across Industries & Business Types

Inventory management software uses across industries and business have be classified as:

Inventory management software for eCommerce

eCommerce companies are among the regular users of the Inventory management system. Inventory management tools assists with the following tasks of eCommerce businesses:

• Taking and processing online orders
• Updating the stock status on websites, in real
• Monitoring inventory to meet customer demand immediately

Inventory Management Software for Manufacturing

Manufacturing companies manage a tremendous amount of inventory data daily, whether material required, production status, or quality report. An inventory management system helps manufacturing units to:

• Improve efficiency, reduce cost, and minimize wastage and error
• Determine optimum reorder levels, quantity, and point
• Track the status of raw material, components, work in progress, and finished goods
• Manage the stock as per statutory compliance.

Inventory Management Software for Small Business

The success of a small business largely depends on its efficiency in inventory management. Inventory management software helps small businesses in the following ways:

• Track the stock status with minimum workforce and time
• Automates the entire process of check-in & check-out of inventory
• Save on storage costs by ordering only the required stock items.

Inventory Management Software for Hotels

Inventory software for hotels helps with:

• Managing several types of inventories like linen, cutlery, crockery, etc.
• Tracking the inventory usage across every room
• Keep track of packaged food stock, ingredients, etc.
• Generate customized bills as per consumables used by guests.

Inventory Management Software for Jewellery Stores

The jewelry industry requires frequent updating of data, so it is necessary to have specialized inventory software. Inventory management software for Jewellery stores helps with:

• Centrally managing the data and information regarding sales and purchases
• Providing an easy method to monitor the flow of materials in production and finished goods.
• Generating reports for each store location, branch, or centralized headquarter
• Determining the value of closing stock for financial statements.

Inventory Management Software for Warehouse

An effective inventory management software can take care of all the activities related to warehouse operations. Warehouse Inventory Management Software helps in:

• Tracking production schedules and the flow of materials on a real-time basis.
• Creating a digital database with information about inventories & space availability
• Streamlining and automating warehouse operations with minimal dependency on manual resources.

Inventory Management Software for Pharmacies

Inventory management systems help manage items ranging from medicines to syringes and medical equipment. Pharmacy inventory management software enables users to:

• Track batches of medicine to identify near expiry stocks
• Provides optimum reorder quantity and point
• Automatic deduct stock being used for compounding purposes

Advantages of Using Inventory Management Software

• Minimizes human errors: Inventory management software eliminates all repetitive data entry tasks. Hence it reduces the risk of errors that can happen while entering data manually into inventory tracking registers.
• Up-to-date stock information: Inventory software updates the database as soon as data is entered into the system. You can extract up-to-date data of current stocks from the inventory tools.
• Customized reporting tools: Inventory tools allows you to generate reports as per your requirement. You can select specific items, locations, periods and generate reports accordingly.
• Unparalleled data security: Inventory management system ensures better security for your data. All the data is entered through digital scanning and is protected from tampering.
• Organized warehouse operations: Inventory software for small business helps organize the warehouse by integrating and automating all warehouse operations in a single workflow.
• Saves time and money: A good inventory system saves a lot of time and money. It decides the optimum inventory level and reorder quantity, and reduces the dependency on physical resources.
• Integrates with POS: Inventory software could feed data directly into a POS system. It helps make the supply chain even more efficient.
• Increases efficiency: Online inventory management tool eliminates manual work, enabling employees and business owners to focus on other essential aspects of the business.
• Reduces holding costs: Having an excess of stock increases the storage cost of your business. Inventory control software helps businesses maintain the optimum stock level and avoid out of stock situations.
• Ensures statutory compliances: Inventory control software comes with a built-in valuation module. It helps businesses maintain statutory compliances while valuing the closing stock as per the Indian Accounting Standards and Finance Act.

Top Inventory Management Trends

• Robotics and Automated Vehicles in Supply Chain: Automated vehicles and robots are being used to transfer finished goods from the assembly line to warehouses. It lowers the cost of staffing and increases efficiency in manufacturing units. These automated robots can work diligently and accurately 24*7. Companies like Ikea, Coca Cola, etc., have already implemented this technology and are hugely benefited.
• Use of Blockchain Technology: Blockchain technology has gone way beyond cryptocurrency and is being tested in every industry. The technology is making its way to inventory management, and is helping in creating a digital ledger of inventory that would be invulnerable to tampering.
• Decentralized Distribution: With the growing customer expectation in terms of delivery speed, multiple warehouses and decentralized distribution is the latest trend in the Indian eCommerce market. Companies like Dunzo, Flipkart, Liciuos are offering a 90-minute delivery. Managing multiple warehouses through an advanced inventory management system is the latest trend.
• Third Party Logistics: These days, most of the start-ups are outsourcing entire logistics to third-party logistics providers. This is mainly due to the scalability of operations that eCommerce players require these days. Flipkart has outsourced entire logistics to its subsidiary Ekart, and many Food Franchises rely on Swiggy for delivery.
• Predictive Analytics Engine: Predictive analytics is gaining importance in providing insights into business processes. It helps in identifying the trends and decides earlier for better inventory management. The future of Inventory management would be leveraging predictive analytics to improve forecasts, and reduce unnecessary costs and losses.