According to research, ineffective inventory management costs businesses $1.7 trillion in lost revenue annually. These losses fall under out-of-stock items, overstocks, and preventable returns. This makes inventory management one of the most important aspects of any business.
You need accurate information about what you have in stock and how much it’s worth. This way, you’ll have an easier time making informed decisions about running your business. The question is, what do you consider before you choose inventory management software?
How do you ensure you end up with the best system for your business? In this comprehensive guide, we’ll discuss the most essential factors to consider when making your decision, so read on.
Type of Inventory Management Software
There are many different types of inventory management software on the market, so it’s important to choose the one that best suits your needs. The following are the most common options for software:
Enterprise Resource Planning
Enterprise Resource Planning (ERP) software is comprehensive and can manage all aspects of a business, including inventory. It’s typically used by larger businesses with multiple locations.
Warehouse Management System
Warehouse Management System (WMS) software is designed specifically for managing warehouses and inventory. It helps you track where products are, how much space is available in the warehouse, and what you need to order.
Point of Sale Software
Point of Sale (POS) software is mostly used by businesses that sell physical goods to customers. It helps track sales, inventory levels, and customers’ purchase histories.
Before you choose inventory management software, consider your current needs and your future plans. If you’re a small business with one location, choose software that has the flexibility to grow with your company. The best inventory management software is user-friendly and easy for all staff members.
It should be simple enough for non-technical users to navigate but powerful enough to handle complex tasks. If these systems seem too complex or expensive for you, you can always use Excel. It may seem complicated for most, but with inventory management excel templates, you can make it work.
Before investing in inventory management software, you need to understand the analytics that it comes with. First, you want a system that can track your products across multiple warehouses and stores in real-time. This means having a centralized database where all items are tracked regardless of their location or status.
It also needs to show you how much it costs to source, store and sell your inventory. Real-time analytics is important so that you know where products are located within your stores or warehouses at any given time. To choose the right software for your business, determine what metrics are most important to review.
Do you need information about sales by location, product category, or vendor? Is it more important to know your cost of goods sold (COGS) than gross profits? Will you need to track inventory for multiple locations and warehouses?
Some inventory management software also offers predictive analytics. This is a great tool to help you forecast future needs for products and make better purchasing decisions.
One of the most important aspects of inventory management is tracking items using barcodes. Most inventory management software can scan barcodes. This alone speeds up the input process and helps ensure accuracy.
If your business doesn’t use barcodes, you’ll need to manually enter each product’s information into the system. This can be a very tedious and time-consuming process. Choose inventory management software that can input the information for you.
The inventory management software should be able to track the number of items in stock and the location of each item. This is especially important when a business has multiple locations or warehouses.
It allows you to see what’s available at each location and order accordingly. The system should alert your team if an item has sold out or become low on quantity, so they know to order more.
The software should also track the age of your inventory, so you know when items are getting close to their expiration date. This can help plan for and make necessary orders to prevent stockouts.
An inventory management system needs to keep track of every unit entering or leaving the warehouse. That’s why your software needs to have a real-time reporting feature. You’ll never be more than a few clicks away from knowing exactly how much product is in stock at any given moment.
Perpetual updates is one of the best inventory management software features. This means that the moment an item is scanned or removed from stock, it’s updated in the system. This ensures an accurate count of your products at all times and helps you avoid over-ordering or running out of stock.
Customization is important when you choose inventory management software. The system should be customizable to your needs, easy-to-use, and able to adapt as the business grows. For example, if you have a retail store but want to integrate online sales in the future, choose a solution that allows for this growth.
Also, consider what types of products you sell. Do they have expiration dates? Are they perishable items?
If so, choose inventory management software that allows for expiry notifications. Do you need auto-reorder functionality based on sales trends or specific customer orders?
If this is the case, choose software with order management capabilities. The more customizable the software, the better it’ll meet your business needs. Reading online reviews and getting referrals will help you understand the software better.
Integration With Other Systems
Inventory management software must integrate with other systems. The system should allow you to import data from spreadsheets or capture electronic data feeds directly. You also need to choose a system that works well with your existing database and operating platform.
Suppose you have a Windows-based software system and choose inventory management software that runs on another operating platform. In this case, it could cause problems for your employees or even disrupt sales.
Make sure the inventory management software provider offers integration solutions with other systems. This way, you can streamline data entry across multiple departments within your organization.
Integration is a critical part of an inventory management system because it allows you to manage your stock in real-time. When data is entered into the system, it’s updated automatically. You always have the latest information about what you have in stock and when items are sold.
How to Choose Inventory Management Software
Choosing the right inventory management software can seem daunting. However, following these tips will help make the process easier. By considering the type of software, the size and complexity of your business, and your future plans, you can choose the right system.
Now that you know how to choose inventory management software, please check our blog for more valuable content.