What is Inventory Management Software? Everything You Need to Know (+ Top 5 Best Solutions)

Posted 3 years ago by Max Komonov

You may think of the word inventory and see well-stocked warehouses in your mind’s eye, but really any retail business has inventory of some type. Whether you’re a crafter with just a few items on hand at a time, a local small business with multiple locations, or an online retailer with access to larger warehouses, effective inventory management is a necessary part of establishing and running a profitable business.

What Is Inventory Management Software?

Inventory management involves more than just tracking items in your warehouse or retail storeroom. It extends to your parts department, including individual components and their combinations used for building products and services.

Additionally, it entails keeping track of the inventory held by your supply partners and top customers. For small to midsize businesses (SMBs), relying solely on spreadsheets can quickly become challenging. Integrating inventory product information with other data platforms requires dedicated inventory management software. Choosing the right software package for your business can be difficult, as you need to balance required features with cost-effectiveness.

Inventory management involves more than just tracking what you have. It delves deep into various aspects. The software should seamlessly integrate with your accounting or enterprise resource planning (ERP) package. Its primary function is to track warehouse items throughout the acquisition, sales, or use processes. Additionally, it helps locate items across multiple warehouses and assigns pricing (in multiple currencies if needed), ensuring accurate accounting of your inventory’s value.

How Does Inventory Management Work?

Inventory refers to the goods or materials that a business plans to sell to customers in order to generate profit. Managing inventory is a crucial aspect of the supply chain, involving the tracking of inventory from manufacturers to warehouses, and from these facilities to the point of sale. The ultimate objective of inventory management is to ensure that the right products are available at the right place and time. This necessitates having visibility into inventory, knowing when to order, how much to order, and where to store the stock.

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The fundamental steps of inventory management encompass:

Purchasing inventory: Acquiring ready-to-sell goods that are then delivered to either the warehouse or directly to the point of sale.
Storing inventory: Holding inventory until it is required, with goods or materials being transferred across the fulfillment network until they are ready for shipment.
Capitalizing on inventory: Exercising control over the quantity of products available for sale. Finished goods are retrieved to fulfill customer orders, and products are subsequently dispatched to customers.

What are the Types of Inventory Management?

Periodic inventory management. The periodic inventory system is a method used for financial reporting to determine the value of inventory. It involves conducting physical counts of inventory at specific intervals. This accounting approach involves taking inventory at the start of a period, adding new inventory purchases during the period, and deducting ending inventory to calculate the cost of goods sold (COGS).
Barcode inventory management. Barcode inventory management systems are widely employed by businesses to allocate a unique number to each product they offer. This number serves as a reference point for various associated data, including supplier details, product dimensions, weight, and even dynamic information like stock availability. By utilizing such systems, businesses can efficiently organize and track their inventory, ensuring smooth operations and accurate data management.
RFID inventory management. RFID, or radio frequency identification, is a wireless system that transmits a product’s identity as a unique serial number. This enables item tracking and provides comprehensive product information. Implementing a warehouse management system based on RFID can enhance efficiency, boost inventory visibility, and facilitate prompt self-recording of receiving and delivery.

Why Effective Inventory Management Processes are Vital to Your Bottom Line

Many small businesses underestimate the importance of inventory control. In an effort to cut startup and overhead costs, they dismiss inventory systems as a luxury that they cannot afford. But effective asset management, including tracking loss from internal or external theft, relies on this foundation.

The objective of inventory management is to streamline and automate the entire process of obtaining, creating, and/or selling your products. When your inventory optimization is effective, you will have a perpetual inventory management system that requires little manual maintenance. This will save you money in areas you probably haven’t considered.

Signs of Poor Inventory Management and How to Fix Them

You don’t have to wait for an audit of your inventory processes to discover areas of opportunity in your current inventory management systems. The signs of poor inventory management can be very obvious in severe cases, but for start-ups or businesses with less inventory may not notice the omens right away.

The following issues could be happening on a micro level, not drawing the awareness of accounting, purchasing, or shipping. Take a hard look at your current inventory tracking processes. Are they really effective? Here are some things to look for while you review:

Excess stock that doesn’t sell

If it seems as though your inventory of a particular product just isn’t decreasing, it’s a sign that those purchasing inventory are not taking customer demand into account. Retailers of all types will experience more demand in some seasons than others. Accurate demand planning is the only way to avoid this excess. Excess stock can also indicate that your price is not competitive. Check your local competition for clues.

Too little stock or too many backorders

Poor demand planning could also be responsible for a lack of product sufficient for the demand, but more often having too little stock is the result of a breakdown in the purchasing and supply chain. If you can effectively manage supply, stock, and order management remotely, your customers will experience shorter delivery times and receive a higher level of service. All of that means more sales, and a more profitable business.

Your books are stacked up with a backlog of unentered items

Inventory tracking and order management is so important for a successful business. That means you should not leave it up to manual processes by fallible humans to manage these inventory records. If you are a small business trying to handle all of your accounting yourself, you probably don’t have time to manually enter every order. Automating the process is the best way to free up your time for more important tasks.

Even if you automate your business processes as much as possible, you should still have a part time bookkeeper position, either outsourced or in-house, as well as a licensed accountant for taxes and annual reporting. Saving those hours through automated inventory tracking definitely benefits your bottom line.

Benefits of Integrating Your Inventory System

Effective inventory management is crucial for the smooth operation of a thriving product business. By diligently tracking stock on a regular basis, you can steer clear of stock errors and a host of other issues. Let’s explore the remarkable benefits that come with implementing an inventory management system:

Achieve Enhanced Inventory Accuracy: By implementing robust inventory management practices, you gain precise visibility into your stock levels. This empowers you to procure just the right amount of inventory to fulfill customer demand efficiently. Embrace the power of accurate inventory management and optimize your operations for success!
Mitigate the Risk of Overselling: Take advantage of effective inventory management to keep a close eye on stock levels and backorders, ensuring you never run the risk of overselling your products.
Save on Costs: Did you know that stock costs money until it sells? It’s true! But the good news is, by considering carrying costs such as storage handling and transportation fees, insurance, and employee salaries, you can optimize your inventory management. Not only that, but you can also minimize the risks of theft, loss from natural disasters, or obsolescence. So why wait? Take action today and start maximizing your cost savings!
Prevent Stockouts and Excess Stock: Effective planning and management are essential for businesses to reduce the occurrence of out-of-stock items and avoid excessive inventory.
Discover Greater Insights: With advanced inventory tracking and precise stock control, you gain the power to effortlessly identify sales trends, track recalled products, and monitor expiry dates. Uncover valuable data and make informed decisions to drive your business forward!
Enhance Vendor and Supplier Relationships: Effective inventory management not only offers valuable insights into product popularity and demand, but also empowers you to leverage this knowledge to negotiate more favorable prices and terms with your suppliers. Maximize your profitability and strengthen your business partnerships by utilizing the power of inventory management!
Boost Productivity: Implementing effective inventory management solutions not only saves valuable time but also frees up resources for more important tasks. Experience the benefits of streamlined operations and maximize efficiency in your business!
Maximizing Profits: By gaining a comprehensive grasp of availability and demand, you can significantly boost inventory turnover, resulting in substantial profit growth. Embrace this opportunity to elevate your business to new heights!
Experience a More Organized Warehouse: Boost efficiency by strategically organizing items based on demand, frequent item pairings, and other key factors. This simple yet powerful approach reduces labor costs and supercharges order fulfillment. Get ready to streamline operations and achieve new levels of success!
Enhanced Customer Experience: Ensuring timely delivery of orders fosters greater customer loyalty. Experience the benefits of prompt and accurate deliveries.

What to Look For in a Quality Inventory Management Software?

In general, inventory management systems provide a method for tracking all of your inventory, orders, shipments, sales, and buyers. However, your inventory management processes should be unique to your business. The most flexible options are those set up as SaaS like this solution from Ecwid.

If you manufacture your own products, you will need specific manufacturing inventory management features that will track both raw materials and goods to be sold. On the other hand, a retail arbitrage business will need to track inventory through the entire supply chain. Effective supply chain management is of utmost importance to such a business. In either case, don’t forget to account for expenses like procurement and storage of your materials or products and the overhead costs associated.

Chain stores will also need to track multiple locations or salespeople, with a combination of multi-location inventory management and warehouse management. Warehouse inventory management software specifically assists bigger retailers to serve a broader range of customers through various sales channels.

Quality inventory management software tracks the product you have on hand at different locations and your warehouse, orders for those products, and cost of goods sold. But it shouldn’t stop there. Through integrated reporting, your inventory software could also track profit margins, which campaigns or products are the most successful, and calculate expected future demand.

In addition, the best inventory management software consists of these key features:

Remote Multi-level Access. Good inventory management software will allow you and your sales reps to manage inventory remotely for accurate inventory levels at all times, no matter where you may be when the order is placed or the item is sold. Make sure that the app is available for your smartphone’s operating system.
Accounting System Integration. It should be able to integrate naturally with your accounting software. Your bookkeeper will be glad for the more accurate accounting. If you are a small business, integrating accounting and inventory activities decreases the time you must spend on administrative tasks.
Sales and Marketing United. You also want your inventory management to be linked to your sales and marketing efforts. This can be of great assistance when you want to know how effective a particular digital marketing campaign is doing. This can also help you offer products through additional sales channels with little additional effort.

How Much Does Inventory Management Software Cost?

Based on recent research conducted by Unleashed, it has been found that the average cost of an inventory management system is USD$175 per user license, per month. This investment not only streamlines your operations but also enhances efficiency and productivity.

In addition to the user license cost, there are other expenses associated with inventory management systems, such as customer support fees. These fees are often billed separately, and you can expect to pay around USD$80 per month for a comprehensive support package. This ensures that you have dedicated assistance whenever you need it, guaranteeing a smooth and hassle-free experience.

Furthermore, it’s important to consider the one-off set-up costs for your inventory management system. The initial customer onboarding process typically starts at USD$789, ensuring a seamless transition and implementation. For more complex or customized software set-ups, you may require the expertise of a third-party integration consultancy. Reputable software integration houses typically charge between USD$10,000 to USD$40,000 to provide you with a robust and tailored software stack that perfectly aligns with your business needs.

Investing in an advanced inventory management system is a strategic move that empowers your business to operate at its full potential. With streamlined processes, dedicated support, and tailored solutions, you can unlock new levels of efficiency and drive unprecedented growth.

The Best Inventory Management Software (Top 5)

To identify the ultimate inventory management software, we extensively examined numerous review websites, delving into the thoughts and opinions of users regarding various inventory management solutions.

#1 Lightspeed

Lightspeed is a highly sought-after company that offers an exceptional inventory management solution catered specifically to retailers. It is the perfect choice for small businesses that deal with a diverse range of products, effortlessly supporting a catalog of custom product variations encompassing size, color, material, and more. With Lightspeed, you can effortlessly track items across multiple locations, ensuring streamlined operations.

Moreover, its intuitive order-management tools empower you to effortlessly replenish stock from suppliers with just a few clicks. Take advantage of its customizable reorder points feature, which automatically generates new purchase orders when your stock falls below your specified threshold.

The icing on the cake is the comprehensive pricing control, allowing you to effortlessly set rates, offer discounts, and run promotions to maximize profitability.

Reviews

Forbes points out that Lightspeed has excellent inventory management and customer support. (Source: Forbes)
TrustRadius mentions that Lightspeed’s inventory management is considered the best in class. (Source: TrustRadius)

#2 QuickBooks

QuickBooks is an incredibly valuable tool for online sellers, seamlessly integrating with all major e-commerce platforms such as Amazon, eBay, Etsy, and Ecwid. As expected, it effortlessly connects with QuickBooks accounting software. With QuickBooks Commerce, you can effectively track inventory across multiple locations and sales channels. It’s a simple yet powerful inventory management solution that’s perfect for small businesses.

QuickBooks integrates with Pogi by SimplyRFID. This integration offers QuickBooks inventory management users a seamless way to import critical data about inventory whereabouts and the status of key deliveries.

Reviews

NerdWallet highlights QuickBooks Online’s solid set of features, including inventory management, making it a versatile solution for small businesses. (Source: NerdWallet)
value="3">Software Advice mentions that QuickBooks provides an inventory management component that simplifies inventory tracking and provides essential data. (Source: Software Advice)

#3 Cin7

Cin7‘s cloud-based inventory management software offers seamless integration with various modules, including point-of-sale software, warehouse management tools, and e-commerce platforms. It provides a competitively priced solution that can effortlessly scale alongside your business, eliminating the need for system migration when expanding to new locations or storage facilities.

With Cin7, you can utilize a range of effective tracking methods, including barcode, batch, first-in, first-out, and serial tracking. Moreover, Cin7 boasts robust reporting tools that not only provide valuable insights into your inventory but also offer relevant data from other integrated systems, such as your accounting software.

Reviews

G2: Users describe Cin7 Omni as super easy to use and user-friendly, with an efficient and knowledgeable support team. Compatibility and ease of integration are also highlighted. (Source: G2)
TrustRadius: Users appreciate the ease of use and customization options offered by Cin7 software. The competitive pricing for cloud-based software is also mentioned. (Source: TrustRadius)

#4 Fishbowl

Fishbowl inventory management software provides an exceptional solution for small businesses in the retail, manufacturing, and warehousing sectors. Whether you’re using third-party software like QuickBooks or Salesforce, Fishbowl offers a seamless integration that enhances your operations.

With features such as lot and serial tracking, as well as the ability to track items by expiration date for perishable goods, Fishbowl ensures efficient inventory management. What’s more, the platform can be easily integrated with scanning hardware, empowering you to barcode your products effortlessly.
If you’re a small or scaling business looking for software that can grow with you, Fishbowl is the perfect choice.

Reviews

G2 reviews highlight Fishbowl Inventory as a great software for tracking inventory, shipping, and receiving. It offers features such as lot number tracking and expiration date tracking. (Source: G2)
GetApp reviews indicate that Fishbowl is a solid warehouse management system with the necessary functionality for inventory and warehouse management. (Source: GetApp)

#5 Oracle NetSuite

Oracle NetSuite is a comprehensive enterprise resource planning (ERP) system with advanced inventory management features. It’s designed for businesses with multiple locations, warehouses, and sales channels. If you’re a large business in need of robust inventory management, NetSuite is the perfect fit.

NetSuite provides a complete view of your inventory across all locations and seamlessly integrates with other modules like point-of-sale (POS) and accounting software. With batch, serial, lot, and bin tracking, you’ll always know where your items are stored.

Automated prompts for cycle counts and inventory catalogs ensure accurate and up-to-date data. Experience the power of Oracle NetSuite and take control of your inventory management with confidence.

Reviews

ERP Research explains that the NetSuite inventory management system allows users to easily transfer and distribute items between different locations while providing warnings for shortages. (Source: ERP Research)
Protelo Inc. mentions that by leveraging NetSuite, businesses can gain a real-time view of suppliers and shop floor performance indicators, as well as automate inventory management processes. (Source: Protelo Inc.)

Ecwid is the Easiest Inventory Management Solution for Online Store

Ecwid is more than an online store, it is also software for managing inventory. It can integrate with many other applications and processes. You can manage your inventory, orders, shipments, marketing, invoicing, product sourcing, manufacturing and sourcing raw materials, and your online website from one dashboard.

Perhaps the biggest benefit of Ecwid by Lightspeed is that you can start small and scale up. A crafter or someone just dipping their toe into the retail waters may not want to start with a full scale enterprise solution.

Our platform allows you to start at a level that makes sense for your business size, market share, and budget. Furthermore, Ecwid makes it easy to scale up with a simple upgrade in your package as needed. The monthly SaaS format puts you in total control to switch between memberships as needed.

About The Author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.