Optimizing Inventory Checks: The Business Case for Inventory Management Software

Last Updated on March 2, 2024 by Owen McGab Enaohwo

Image Credit: tallysolutions.com

No matter the size of any given organization, the ability for management teams to accurately monitor, analyze and adjust live inventory levels consistently ranks as a top priority. If teams are to keep pace with evolving supply chain and market-specific demands, leaders must be provided a holistic view of all currently available materials, resources and saleable products.

While the importance of accurate and efficient inventory management systems is understood by a majority of modern business leaders, recently published information suggests inefficient inventory management may be negatively impacting a large number of organizations. In fact, it’s believed 43% of businesses don’t track inventory levels at all, leaving American inventory accuracy metrics plateauing at or around a modest 65% over the course of the last decade.

Allowing room for inefficiencies with regards to inventory management can expose teams to a wide range of significant issues, including overstocking, the accidental sale of unavailable items and related cash flow problems, negatively impacting many wider business operations.

To mitigate these issues, an increasing number of businesses are exploring the use of smart technologies, real-time data analytics tools and mobile solutions designed to improve stock management processes. For business owners interested in implementing such systems, this article will outline the business case for inventory management software solutions in 2024.

What is inventory management?

Before detailing the benefits associated with modern inventory management software, it’s important to cover the basics of inventory management as a process. In short, inventory management is a term used to describe any and all activities related to the procurement, allocation and tracking of raw materials, manufactured items and finished saleable goods.

The main objective of an effective inventory management system is to provide stakeholders with accurate and actionable information regarding the location and status of key resources. In other words, well-implemented inventory management systems help teams to ensure that they always have the right items in the right location at the right time.

To achieve this goal, inventory management solutions must be able to analyze real-time data pertaining to all aspects of the supply chain, centralizing information collected from relevant:

• Third-party manufacturers
• Vendors
• Wholesalers
• Warehouses
• Logistics operators
• Retailers / e-retailers

While the collection and analysis of this data can be performed manually, doing so will often expose businesses to risks associated with human error. Issues like inaccurate stock counts, overstocking and poorly anticipated market demands can also rise as wider operations grow.

Click here for a more in-depth analysis of modern inventory management requirements.

The 5 stages of inventory management

To best illustrate the difficulties associated with modern inventory management, it can help to break down the process into five distinct stages. Live and accurate data pertaining to each of these stages must be carefully analyzed to ensure that business operations remain efficient.

1. Purchasing

The exact quantities of raw materials and saleable goods required to fulfill orders and meet anticipated market demands. To maintain efficiency within this process, businesses must be able to compare datasets across multiple operations, including supply chain, manufacturing, warehousing and distribution processes to avoid risks associated with over/understocking.

2. Manufacturing

The collection and analysis of actionable data relating to the production of saleable items. To ensure this process runs smoothly, teams must be able to monitor and analyze raw material procurement, resource allocation and manufacturing operations data in real-time, as any variations within one process will impact the business’ manufacturing operations as a whole.

3. Holding

Data pertaining to the storage of raw materials, core resources and saleable goods must be frequently updated and made available to stakeholders at all times. Holding costs can have a significant impact on an organization’s financial management processes, with such costs typically accounting for anywhere between 20% – 30% of a business’ total inventory value.

4. Fulfillment

Inventory management processes also extend into fulfillment operations, with teams needing accurate information regarding stock levels to ensure customer demands are satisfied. Data suggests almost 35% of businesses have encountered issues regarding the unintentional sale of unavailable goods, due in part to poorly organized inventory management systems.

5. Reporting

Finally, businesses must also keep accurate records of all relevant material procurement, manufacturing and inventory storage costs to be analyzed alongside sales data. This data will inform wider financial management processes to ensure operations remain cost-efficient.

The benefits of inventory management software

As detailed above, developing an efficient and effective inventory management system for a business of any size will require the detailed analysis of multiple complex datasets. This undertaking can be incredibly time-consuming and resource intensive for teams relying on manual management processes. Thankfully, smart software tools can address these issues.

Enhanced visibility

Combining the collection and analysis of inventory management data within a single unified software solution enables stakeholders to access key metrics at any time. Modern inventory management software is typically hosted on cloud-based platforms, meaning any changes made to relevant operations can be immediately reflected in a viewable management portal.

Stakeholders can access live data logs at any time and from any location by simply logging into their systems from a secure smart device, with options to send instant alerts in response to changing demands. Improving visibility in this way helps leaders to make data-informed decisions, with 57% of businesses believing such tools may give them a competitive edge.

Adaptive automation

Transferring manual inventory management processes to a software-based solution also enables organizations to benefit from smart automation. By combining live data collected from multiple sources, including purchasing records, material costs, supply chain data and order management systems, teams can create bespoke automations to improve efficiency.

For example, live manufacturing data can be used to inform material procurement decisions, with orders placed automatically in response to current demands. Additionally, live inventory levels can be calculated as products and materials enter and exit storage facilities, enabling businesses to automate re-ordering processes in direct response to real-time resource use.

Reduced operating costs

By ensuring inventory levels are automatically recorded using intelligent software solutions, businesses can reduce the costs associated with overstocking. Purchasing decisions can be informed by live customer orders to maintain cost-efficiency, while labor and storage costs can be minimized by ensuring excess inventory is not ordered during periods of low demand.

Additionally, AI-informed automation can help businesses to reduce labor costs associated with the performance of repetitive tasks, freeing up internal teams to focus their efforts on more complex processes. This concept can also be equally applied to tangentially related tasks, with solutions like ChatGPT for accounting helping to streamline data entry processes.

Improved vendor relationships

By automating ordering processes informed by live data, businesses can improve vendor relationships. Suppliers gain a more accurate understanding of the business’ needs as orders can be made in response to live data, helping to build trust between both parties.

Greater scalability

Developing an automated inventory management system also enables businesses to scale operations much more efficiently. Accurate predictions can be made with regards to storage, ordering and manufacturing requirements, while new processes can be easily implemented into existing systems by simply adding more datasets and storage space to software tools.

Summary

Improving the efficiency of inventory management processes is central to the success of modern organizations, however, many businesses continue to rely on resource intensive manual systems to perform these duties. By developing modern inventory management software tools, teams can automate essential processes to improve efficiency, helping small and large businesses to gain a competitive advantage in even the most complex industries.

About the Author Bob Sharp

I have been a full-time writer for over 5 years, as well as my content writing. I am also a published author and SEO specialist. I love my work, and the passion I bring to the table shines through in my writing! Outside of work, I am a dog lover and take great pride in always having superbly trained dogs as pets.