Nowadays, even for SMBs, Excel spreadsheets and a pen and paper stock control option are relics of the past no longer corresponding to the fast-developing IT world and digitally savvy customers. The time to adopt retail inventory management software is clearly at hand.
In addition, last year, due to the COVID-19 pandemic, the retail sector faced a sharp inventory misbalance on a global scale. As a result, the total value of out-of-stock goods was estimated at $1,140 billion, while overstocked ones were worth $626 billion.
It proves that with the booming demand and a rather fragile economy after the challenging year 2020, it is advisable to keep a firm grasp on your inventory and aim at a higher ROI with the right retail software for inventory management (IM) to make your business more enduring.
According to Jennifer Belissent, principal analyst at Forrester, “New IM helps retailers better manage and use that data to drive better outcomes — less food [stock] waste and higher margins.”
The backbone of any retail software for IM is to mitigate excess stock, reduce inventory costs and ramp up profit margins. The following brief guide created by Itransition will answer the following main questions:
- How can an Inventory Management Software (IMS) help your business?
- How do you pick the IMS you will get the most out of?
Is IMS implementation effective for your company?
IMS is developed to manage your warehouse and organize the end-to-end supply chain (SC) tracking from production and purchase to order fulfillment.
In short, IM is the process of controlling stock along with the SC. The proper IMS implementation implies mitigating stock-out and overstock risks, ensuring ROI growth, and setting up an effective SC to deliver goods to customers on time.
Here are the top benefits of IMS for your business.
Depending on your business scale and chosen IMS, the functional side of the IMS can differ, but in general retail software for stock control is rather versatile and can ensure your business benefits such as:
IM automation helps you manage the warehouse, get timely data on stock-outs, overstocks, or dead stocks to minimize losses, and set up a supply of goods tailored to your customers’ needs.
Using an IMS, you are free to maintain a balance between fast and slow-moving stock in order to prevent your inventory costs from growing.
Managing inventory with pen and paper can be both burdensome and time-consuming. A technological approach to warehouse maintenance frees up your time for more critical tasks instead of the relentless ticking of boxes.
Attracting new customers is 5 times more сostly than keeping existing ones. It will be more efficient to build trust relationships with the existing customer base with a view to winning new ones with your impeccable service.
Reduced time between order and its fulfillment makes a positive impact on your customers’ loyalty.
IMS ensures control over inventory with all SKUs placed according to demand forecasts, which reduces dead units. In addition, low-stock alerts and an automatic reorder option will keep your stocks followed up, avoiding troublesome situations when an already ordered unit is out of stock.
Just-in-Time (JIT) Stock Management
This method of stock ordering implies timely restocking and the correct amount ordered to prevent overflowing or empty shelves.
Thanks to this approach, together with a robust retail automation system, you’ll reduce waste, which is good for the environment, and normalize the process of ordering by producing “just the right amount” items without unexpected losses.
- Note: Except for the JIT order management method, there are others such as EOQ, OTB, Safety Stock, and Par Level, or Reorder Point. The choice depends on your business type and needs.
How to Pick the Right Inventory Management Software
Deciding on the right IM option for your company can be difficult at first.
Still, after a thorough analysis of your business and its needs, together with software market vetting, you’ll end up with a robust solution.
Step 1. Analyze your business.
After evaluating business needs and answering the following questions, the software picking process will be faster and easier.
What kind of products are you dealing with?
Depending on the item type you deal with, software features may differ. For example, are you a food producer, distributor, manufacturer, etc.? This means a manufacturer needs an IMS with product-producing process control features.
What are the weak points of your business?
Assess what problems you face in your warehouse. Maybe you have overstocks that are not in demand. Perhaps you have stock-outs due to increased demand and are experiencing uncontrollable supply disruptions.
The problems identified will be the basis for setting the goals you need to achieve.
What other business-critical applications do you use?
Integrating other related applications with an IMS is important, thereby ensuring that all systems work smoothly and cohesively. For example, your IMS can receive orders from different sales channels and send the data to the integrated CRM or reporting systems.
- Note: Don’t skip the budget estimation step that is crucial at every stage of your software consideration.
Step 2. Decide on software features.
Each IMS is packed with various features. However, in general, they can be divided into those for purchase, production, stock, order management, and reporting.
- Purchase order management will facilitate the processes of creating and sending purchase orders.
- Production management tools ensure every production state is controlled.
- Stock control tools help you keep an eye on your stock levels in the warehouse(s).
- Order management features provide streamlined ways of order fulfillment.
- Reporting tools ensure inventory data collection and analysis for further optimization.
Step 3. Choose the vendor.
Vet the various options for your business on the market. After that, pick out those fitting your business most. Make a comparative analysis of each of them using such criteria as:
- price options (free trial/monthly/annual fees);
- frequency of updates;
- customizability (plus the possibility to add more custom modules); and
- compatibility with your stack (for integration with already used solutions).
No matter what solution you choose to run your inventory, implement it cautiously. Make sure it meets all your business expectations and integrates seamlessly with other systems. Consequently, you’re highly likely to make your inventory management automation a success.