A company’s inventory is one of its most valuable assets. Be it retail, manufacturing, food service, and other inventory-intensive sectors, a company’s inputs and finished products are the core of its business.
Managing that inventory is again a significant task for businesses. Inventory management comprises of all the processes like ordering, storing, and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as warehousing and processing such items.
Without inventory going out, there is no money coming in.
Even more important than just having or not having inventory, is keeping track of the inventory. That is the key to running an efficient and profitable business.
Inventory management has a real impact on cost management. In addition to that, poor storage can even damage products. It is, therefore, essential for a company to optimise its inventory management. Managing inventory well is vital to meet the needs of customers in the best possible way.
If you own a business, you must be aware of the demand, but you should also know other critical parameters such as delivery times, the specificities of suppliers, or market trends. With an inventory management tool, it will be easier for you to determine the quantities you need and when you need them.
Want to learn more about Inventory Management? Read our detailed article on Understanding Inventory Management.
What is an inventory management software and why you need it?
An Inventory management software is a software system for tracking inventory levels, orders, sales and deliveries. For example, manufacturing industry can use it to create a work order, bill of materials and other production-related documents. According to an article from Entrepreneur, “Companies can increase their profitability 20 to 50 percent or more through careful inventory management.” Those numbers are significant.
Nowadays more and more companies have started using inventory management software because the return on investment (ROI) for management software is enormous. Also, it will help you avoid product overstock and outages. It is a tool for organising inventory data that before was generally stored in hard-copy form or in spreadsheets.
Small businesses usually use MS Excel as a means of managing inventory, but its scope becomes very restricted to a growing business. If you are a trader, wholesaler or a small manufacturer, you should consider investing in a good inventory management software.
There are dozens of inventory management software out there. However you should choose one that fits your business needs.
Let’s have a look at some important factors to consider when choosing an inventory management software:
It is important that the software is adapted to your business and that it corresponds to your needs. It will have to be versatile to facilitate the work of your employees. The inventory management software you choose must evolve with your business and always meet your needs.
2. Free Trial
As for all software, before making your final choice, it is recommended to test a free version of the software. You will know if he fits you. Once you go through a trial version for 30-days or more, you can assess how it is benefiting your inventory management (or not) and then opt for it accordingly.
With proper inventory management software, you can find publishers who offer very accessible solutions. However, if you have specific needs for your business, this will have to be taken into account in the budget. Also, be sure to choose a reliable provider with excellent service.
Your software must be able to integrate everything together so that all your business activities are in one place. Using multiple software for different purposes also causes chaos, so this is a super vital feature to have in your software.
The software that you choose for your company should also be flexible enough to adapt to changes. It is an essential feature because many things in a company process might change. These changes should not mean changing the entire software all over again but being able to adapt to the nuances.
6. Possibility to Customise
Another essential point to note in inventory management software is the possibility to customise it as per your needs. A generic software covers all the necessary things. But you always need to have some personalised features to make sure that it covers everything that your business requires.
7. Your Requirements
Following the points as mentioned earlier, you need to have the possibility to have all your requirements fulfilled in some or the other way. Even if it takes some customisations, that is not a problem. But in the end, the software that you get should fit your requirements perfectly.
8. Ease of Understanding
Another essential feature is the ease of understanding and use of this software. Your employees should find it easy to work with the software. It should not be something super challenging, and employees should be able to navigate through the software after a few trials.
9. Customer Support
Excellent customer support is also an essential factor to consider because there can be unexpected problems with the software. In such a scenario, you should be able to contact customer support immediately. In addition to that, you must also check that the customer support is well-trained to handle issues. The turnaround time for problem-solving should be short, as well, so that you don’t have to wait too long for it to be resolved.
10. Overall Cost
The overall cost of using and maintaining the software should not be skyrocket. It should be good enough to be a part of your yearly or monthly budget. If it puts a hole in your pocket and does not give you the required returns, it is not the right one for you.
Five-Step Process in Inventory Management
Based on these two crucial aspects, four combinations are possible, and the fifth step is to bring everything together. They correspond to many methods of management:
1. Replenishment method
It is also called the “calendar method” and consists of a fixed-price, close-to-the-world order. So, you replenish your requests based on a particular date that is already fixed in advance. This also involves having a fixed price.
2. The point-of-command management method
It adopts a variable date ordering system but has a fixed quantity since it is the reaching of the level of the stock (called, the control point), which triggers the replenishment order.
3. The second aspect of the replenishment method
It is a question of having a fixed date for the variable size of the world. It considers the size of the variable and replenishes the stocks accordingly on a fixed period.
4. The order replenishment method
It consists of ordering a variable quantity, with a variable date, according to the demand. So, this is the third type of replenishment method where demand plays a crucial role.
5. Development of an Action Plan
In this process, you combine all the inventory management processes together so that it is cohesive, and you can make the most out of it.
Frequently Asked Questions (FAQs)
`1. How is an Inventory Management Software effective?
The inventory management software will allow you to reduce all issues of out of stock or overstocks. This will result in a significant reduction in storage costs. It can be a vital tool for businesses with extensive inventories as costs in this area can increase very quickly. The goal of effective inventory management is to have the right number of products at the right time.
2. How does an inventory management tool work?
Thanks to the inventory management tool, you will know your stocks in real-time, and you will have a detailed history of stock movements. Besides, you can manage your inputs and outputs numerically, valuing your inventory, and even issue delivery notes. Knowing your stocks is possible, thanks to the reports provided by the inventory management software. This allows you to have all the necessary information quickly and clearly to make strategic decisions and thus optimise the performance and costs of your business.
3. What happens when an inventory is poorly managed?
The problems of poor inventory management are additional costs of conservation, acquisition, but also depreciation. This leads to losses in the long run because of extra charges for no reason.
4. How can inventory management software make a difference?
Some software allows you to help you inventory, manage supplies but also manage the labelling of your products and bar-codes. The inventory management software can be beneficial in the management of your stocks; it allows you to reduce the risk of error significantly.
5. What is the risk in the event of mismanaging stocks?
Many risks arise out of the mismanagement of stocks. Following are the two major ones:
It results in significant costs (logistics, for example) and the risk of obsolescence. Obsolete inventory is always an additional burden for any business because it takes up space and cost but does not bring any returns.
It can result in stopping the production, and an article might not be available during the sale. This can also cause problems for the smooth functioning of your business.
In this respect, it has been shown that proper inventory management is based on two main factors: the date of the order and the quantity ordered. Indeed, it is possible to order either a fixed time or variable date. Just as the quantity ordered can be adjusted or variable.
6. What are the advantages of using inventory management software?
The three main benefits of the inventory management tool are, therefore:
- Control of quantities: You don’t end up with a massive amount of things where you don’t know what to do with them.
- Expenses management: You can manage your expenses much better and anticipate demands
- Better organization: You are much better organized and prepared for the future
To conclude, one may rightly say that an inventory management tool can be a lifesaver for many businesses.
Thanks to inventory management software, it will be easier for you to plan your activities. You will be able to anticipate the demand and thus have the supplies more efficiently. You will then be much more productive and faster in addition to reducing your costs. Overall, it can save you a lot of time and money. This is a small investment that can give you massive returns. Therefore, having good inventory management software is the way to go. You can go for a simple trial version if you want to walk through it first.
Are you still confused? Do you need expert advice? You can get in touch with us, and one of our experts will help you develop an action plan to provide you with the best management for your stocks. We will be happy to give you a free demo of our software.
We at Profitbooks offer you a 30-day free trial where our trained executives walk you through the software. It lets you get a glimpse of how it can change the way your business currently functions.
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