Inventory Management Systems Overview
What are Inventory Management Systems?
Inventory Management Systems provide a central hub for retailers, primarily eCommerce or multichannel selling operations, to manage the flow of goods and eliminate inefficiencies in the movement of inventory between locations. Products in this category generally include modules for order fulfillment, procurement, and shipping in addition to inventory control and management.
Implementing an inventory management system allows companies to better manage their inventory levels, which becomes convoluted when there are multiple locations or bundled/kitted products. The software manages and tracks inventory and can predict demand, which helps prevent overstock or out of stock situations. It can help automate purchasing and shipping. Finally, inventory management systems help with the management of vendors, orders, suppliers, fulfillment, and warehouse locations.
Inventory Management vs. Order Management, Supply Chain Management, and Warehouse Management Systems
Generally, an inventory management system is more affordable than omnichannel order management and retail suites, which also encompass marketing, payment processing, and customer management. Supply chain management (SCM) suites include logistics, product lifecycle management, and enterprise asset management in addition to inventory control and ordering systems.
Software billed as inventory management is a wiser choice for smaller businesses, compared to SCM suites which are designed to manage supply across many warehouses or a complex logistics network. Capabilities of inventory management systems are very similar to warehouse management systems (WMS), though WMS’ are often targeted at distributors while inventory management systems are most often targeted at retailers; however, this is not an absolute distinction.
Inventory Management System Features & CapabilitiesA basic Inventory Management System should include:
Inventory control - including inventory location tracking, inventory levels and low stock alerts, reordering rules and automatic reordering
Bill of materials (BOM) creation and management
Barcode scanning capabilities or integrations
Tools to optimize inventory stocking levels based on historical sales data
Purchase/Sales order management
Fulfillment tools and optimization
Order and stock history
Reporting and analytics - including product/channel performance and sales forecasting
Some products may include the following modules or integrate with third party vendors that provide:
Shipping and tracking
Supplier relationship and supplier performance management
Accounting or bookkeeping
Customer relationship management (CRM)
Enterprise asset tracking
Inventory Management Systems Comparison
Inventory management systems are most useful when they possess all the features and capabilities we’ve outlined. However, to more easily compare Inventory Management Systems consider evaluating different options based on these factors:
Accounting software integration: Inventory management systems provide the most return on investment when you can connect them to your existing accounting software to be able to calculate your company’s cost of goods and valuation of products at any given time. Some tools, like Zoho Books, combine accounting software and inventory management into one platform.
Procurement tools: The modern warehouse is incredibly complex due to globalized supply chains. Inventory management systems can help you manage procurement by using predictive analytics that help keep warehouses sufficiently stocked. Look for inventory management systems that can forecast demand and safety stock levels. Other reporting tools related to procurement you will want to consider include order recommendations and decision-making suggestions that are based on your inventory history.
Most inventory management products follow a pricing scheme based on the number of shipping orders processed per month. These range from $40 to $80 on the low end to $300+ for the highest shipping volume. There are at least two open source solutions for personal or small business use. Enterprise level users are always advised to work with the vendor for a custom quote.