Published: 13 Feb, 2023
Like oil catalyzes machines to function, inventory management catalyzes businesses to make smart choices in this ever-evolving world. Managing inventory is monitoring the stock levels, planning the buying, storing, and selling of stock, and ensuring that the right stock is available at the right time. Managing inventory can get tedious as it involves these processes.
Solution: An inventory management system that enables businesses to carry out inventory management processes in real time without much effort.
The automation of the inventory management process can benefit a business tremendously. However, opting for the right inventory management system is crucial for a business’s growth as poor inventory management can lead to several negative implications like stock shortages, excess inventory, inaccurate demand forecasting, increased lead times, poor cash flow etc.
This blog post will walk you through inventory management and some of the top benefits of installing an inventory management system (IMS).
So let us begin.
Table of contents
An IMS entails building and maintaining an inventory database, tracking products through barcode scanning or human data entry, and producing reports to examine inventory levels, sales patterns, and other essential variables.
Let’s say you recognize that your organization faces overstocking frequently. It’s utterly undesirable as it results in low efficiency, profitability, customer satisfaction, and wasteful use of resources. Then, integrating an IMS that tracks and manages stock levels, sales, deliveries and order cycles would help you reduce the risk of overstocking and stock shortage.
Listed below are some of its top benefits. Let us discuss them in detail.
Due to inventory discrepancies between the products available for sale and the actual amount in the warehouse, a business may sell more products than it has available with it. This is called overselling, pernicious for a business’s reputation and growth, leading to poor business-customer relations. Well, this problem can be solved effectively with an IMS that keeps track of the stock and the demand in the market in advance. Businesses can use this data to analyze the potential demand increase and take measures accordingly.
For Instance, the IMS can cooperate and coordinate between the sales and product teams. The teams can complete their tasks within a deadline and balance the real-time demand-supply cycle.
When businesses can monitor and track their inventory level in real-time with an IMS, they have at their disposal complete data on the location and quantity of products in stock. The system makes the products more visible, which makes it simple for businesses to make sound decisions about production, and fulfillment times, minimize wastage, and maximize the return on investment (ROI).
For Instance, a logistics company implements an IMS that keeps track of the products in the warehouse and provides real-time visibility of the products. The company can track the availability of the products and order for fulfillment if and when the need arises. Therefore, leads to a balanced supply chain, increased productivity, less wastage, and higher ROI.
Reduced errors like counting, data entry, recording errors, etc., and increased precision are the best benefits of implementing an IMS. This can be best understood with the help of an example: a retail company implements an IMS and integrates it with their point-of-sales, which helps them to track the inventory levels, and movements like shipments, restocking, etc. The system automates and streamlines inventory tracking, movement, and transactions. This implementation increases the accuracy while reducing the risks of potential stockouts leading to increased revenue.
Stock costs businesses money until it is sold, like the operational and transportation cost, employee salaries, insurance, and the considerable risk of theft. An IMS allows businesses to reduce these costs by identifying how much stock is required and when. The system lets companies know when they are running short of any product and the quantity the customer needs.
An example of reduced cost due to IMS implementation can be witnessed in a company operating a chain of retail stores. The company implements an IMS that keeps track of the store’s inventory level and identifies when there is a need for filling in the products.
Automating the inventory management process can help monitor the stock levels and prevent potential stockouts and overstocking. Thus, leading to increased sales, revenue, and better customer satisfaction. Data accuracy also enables businesses to reduce wastage and lowers operational costs, leading to increased profitability and return on investment. For Instance, through an IMS, a company can forecast demand using advanced inventory analysis tools and reduce excess stocks. Thus, reducing the storage cost and the additional cost of obsolete inventory disposal.
Businesses can streamline purchasing by generating orders, tracking deliveries, and monitoring inventory levels with an IMS. They can get real-time insights on inventory levels and forecast demand and supplier performance. They can manage supplier relationships, optimize order levels and negotiate better prices. With this automated data, they can make sound decisions, increase efficiency, reduce errors, and manage the flow of products into the company’s inventory.
For Instance, a clothing retailer tracking its inventory stock manually implements an IMS that provides it with automated data on its inventory levels and sales trends. The IMS also forecasts the demand and provides real-time inventory levels, thus automating the reordering process.
Automated inventory management can help businesses manage their warehouse by providing them with real-time data and carrying out automated processes for monitoring and tracking the inventory stock in it. This can considerably increase the efficiency of warehouse operations and reduce additional costs incurred in inventory management.
For Instance, a wholesale distributor managing its warehouse manually decides to integrate an IMS with its shipping and receiving process. After some time, the wholesaler notices that there is a considerable reduction in errors. The distributor can manage its warehouse more seamlessly and accurately.
Satisfied customers are very crucial for any business to excel. They are usually loyal and bring in persistent streams of revenue. Hence, companies need to keep their customers happy. They are constantly looking for ways to maximize their customer satisfaction. Installing an IMS can be the best way to improve customer experience.
Understocking is a significant obstacle in the way of businesses to their customers. For example, a customer wants a specific product; unfortunately, due to understocking, the customer can’t get it. This will make the customer drift to another brand for the same product leading to financial and customer loss to a business. This is where the IMS comes into play; it keeps track of the inventory levels and intimates the company the moment the inventory depletes.
Stockout is the worst nightmare of any business. It is a situation where a required product is not available in stock. Stockout leads to lost sales, customer dissatisfaction, and lower customer loyalty. It gets incredibly disappointing for the customers when they can’t find what they are
looking for. Disappointing customers is the last thing any business wants to do. So, a solution needs to be sought. Installing an IMS is the best way to deal with this issue.
We can understand this better with an example where a retail company that sells consumer electronics before installing an inventory management system tracks the inventory levels manually. They also rely on historical sales analytics to restock, often leading to stockouts during the peak demand seasons and disappointed customers. As a result, the company resorts to an inventory management system that provides real-time data on the inventory levels and helps the company replenish the inventory before it exhausts.
Be more organized by managing your products as distinct business units rather than keeping the product line as a whole. Category management can help businesses improve their efficiency and reduce wastage. Plus, it enables them to keep their customers’ preferences and needs on top. When combined with category management, an IMS can provide real-time data on inventory levels, sales trends, and customer demands.
For instance, a food and beverage company can categorize its stock into dairy, meat, and produce. The category manager for each category would be responsible for ensuring that the products in each of the categories are in stock.
Slow-moving inventory refers to the products that do not sell quickly. This can happen for various reasons like changes in customer preferences, competition, overstocking, etc. Slow-moving inventory can increase holding costs, reduce cash flow, reduce profitability, and obsolete inventory. An IMS can help companies to manage their slow-moving inventory by providing real-time data, improving forecasting accuracy, reducing holding costs, optimizing pricing and promotions, and enhancing supplier relationships. Companies can reduce waste, improve efficiency, and increase profitability by using an IMS.
For instance, A clothing retailer is experiencing slow sales of a particular line of jackets. The retailer’s IMS tracks sales data and provides real-time information on inventory levels. The retailer uses this information to identify slow-moving jackets.
When integrated with other systems and processes within an organization, IMS amounts to connected inventory. A connected inventory system provides real-time visibility and control over the available inventory. Therefore, empowering organizations to optimize their inventory levels and reorder products when needed. A connected inventory system allows organizations to increase their efficiency, productivity, and profitability.
For instance, A manufacturer of electronic devices has a connected inventory system that integrates with its supply chain management, sales, and accounting systems. The connected inventory system provides real-time visibility into inventory levels, enabling the manufacturer to make informed decisions about when to reorder components and raw materials.
Seeing the benefits of an IMS might tempt you to choose the first software you come across; however, you need to hold your horses and decide wisely. You can select the best inventory software for your business by taking the following steps:
1. Make a note of your inventory management problems.
2. Identify and understand your software needs.
3. Determine the features you need in your system.
4. Go for a system that can handle your management needs.
5. Choose a system with a seamless user- interface.
6. Test the system before purchasing it.
Remember buying an inventory management system is a long-term investment. Therefore you must invest wisely for better returns. Make sure you evaluate all the options and features before making a purchase.
Integrating an IMS into an organization can be a complex process, however it can bring significant benefits to an organization. It can help streamline and automate inventory-related processes resulting in improved efficiency and accuracy. The choice of software to integrate an inventory management system with will depend on the specific needs and requirements of the organization. An IMS can be integrated with enterprise resource planning software, customer relationship management software, warehouse management system, accounting software, field service management software etc.
Sometimes businesses pay more for features that don’t align with their ongoing operations. Thus, they turn to custom-made IMS to ensure that their software solution meets their business needs. At Netmaxims, we provide the facility of tailor-made software which distinguishes your business from your competitors. The primary advantages of a tailored IMS have enhanced accuracy, increased productivity, and better control over inventory levels and movements.
An IMS is a critical tool for organizations wanting to improve their inventory related operations. By automating the process of tracking and updating inventory levels, an inventory management system can improve accuracy, increase visibility, reduce costs, increase efficiency, improve inventory control, and ultimately lead to improved customer service. When choosing an inventory management system, it is important to consider the specific needs and requirements of the organization, as well as factors such as scalability, cost, and integration with other software systems. With the right inventory management system in place, organizations can gain a competitive edge and drive business growth.
To solve your inventory problems, connect with our custom mobile app development company. We hope that this blog was helpful to you. So how have you been managing your inventory? We would be happy to help.
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