Learn More About Inventory Control Software
What is Inventory Control Software?
Inventory control software optimizes the economic order quantity (EOQ) of businesses. The EOQ is the optimal inventory a business should purchase to minimize the cost of ordering and holding. This type of software helps regulate inventory stored in the warehouse, understand how to maximize inventory layout, and ensure there’s enough product to sell at every point.
Inventory control software falls under the overarching category of inventory management, which also includes software that helps organize warehouses, scan barcodes, and print shipping labels. Inventory, or stock control solutions, automate the order fulfillment and shipping process, thus allowing vendors to instead focus on maximizing their inventory levels.
The ultimate goal of managing stock levels is to eliminate any inefficiencies that may incur economic costs on vendors or cause inconveniences for consumers. Effective stock control gives businesses a competitive advantage to streamline a speedy shipping process. For businesses with perishable inventory, managing inventory is particularly important to prevent spoilage with the implementation of a first-in, first-out policy. In addition, these solutions prevent the accumulation of dead stock (or unsellable inventory) and excessive amounts of a product that may not ever be sold.
What Types of Inventory Control Software Exist?
Barcode inventory systems
Barcode inventory systems update inventory levels in real time at the point of sale when workers scan an item. With barcode technology, inventory managers can eliminate time-consuming data errors that occur frequently with manual or paper systems for inventory counts.
Radio-frequency identification (RFID) inventory systems
RFID inventory systems use fixed tag readers for inventory tracking. Similar to barcode systems, RFID tags update inventory levels in real time when they are scanned. However, the difference between RFID and barcode systems is that with the former, multiple products can be counted simultaneously, while products can only be counted one at a time with barcode systems. While RFID technology systems might be pricier, they are dramatically faster than barcode scanning and can be very useful for managing large inventories.
What are the Common Features of Inventory Control Softwares?
Below are key features of inventory control software that help replenish physical inventory in real time, eliminate inefficiencies, and optimize customer satisfaction:
Barcodes: Barcodes are an essential feature that can help maximize the efficiency of inventory management techniques. By labeling barcodes on every product, inventory managers can scan a product, which automatically categorizes the product and accounts for it in the inventory. The other option is manually counting each product, which is not only time consuming but can also result in human errors.
Automated ordering: Inventory management systems can automatically detect when a particular product is running low on stock and will instantly update the product quantity for the inventory. As a result, the software will prompt reordering of new stock. This can help businesses maintain the right inventory and respond to customer needs if a particular product is in high demand.
Order management: Retailers can manage all of their sales and purchases from within the software. This allows retailers to create packages and shipments, and can even send delivery updates to customers through the software.
Reporting: Inventory control software can provide businesses with reports on which products are the most profitable, how quickly workers are stocking products, and how often purchase orders are being fulfilled on time. These reports can point to any inefficiencies in the warehouse or supply chain.
Forecasting: Proper management of inventory levels helps forecast when products will be going out of stock and when there is an abundance. Proper forecasting metrics allow for efficient spending of a company’s resources.
Serial number tracking: Serial number tracking allows inventory managers to attach a code to each product and monitor its movement from the point of purchase up until the time of sale. If orders are delayed or a customer would like to find out where their shipment is, this feature can give them insight and reassurance that the shipment is on its way.
Product kitting: Product kitting is the process of bundling separate inventory items into one package. Inventory control software can help identify each item that needs to be packaged together to form the bundle and assign those packaged kits in a central location within the warehouse. This saves warehouse workers plenty of time by not having to walk around to different areas of the warehouse to package these items together.
Cloud-based inventory management: Cloud-based inventory management is a way of tracking inventory through a web browser. A stock system that can be managed through the cloud allows businesses to access inventory on any device. Real-time access to the amount of inventory enhances coordination among staff for quick and smart business decisions.
Internet of things (IoT) integrations: The connection of consumer devices with manufacturing machines helps supply chains excel. Inventory control software enables firms to generate insights, business intelligence, and cost-effective strategies. For example, IoT devices can be put on actual inventory or RFID labels.
Machine learning and artificial intelligence (AI): E-commerce chatbots share the availability of products to shoppers. These virtual agents use algorithms to inform customers of stock shortages and recommend other products based on their carts.
What are the Benefits of Inventory Control Software?
Inventory control software improves the management of current inventory and eliminates any major inefficiencies in the supply chain. By accurately accounting for every product, businesses can lower costs, speed up fulfillment, and improve the overall production.
Optimize inventory levels at all times: Having excess stock costs companies a hefty sum. Warehouses can combat this issue by using inventory management software to only purchase products when they are in high demand. The alternative option is using manual labor to count each product and use conjecture on whether more stock should be ordered.
Track inventory numbers accurately: Real-time updates of inventory levels allow for more precise reports on available stock. Barcode scanning and RFID systems make this process seamless.
Fulfill orders on time to increase customer satisfaction: Issues such as inaccurate inventory records can cause higher lead times, which result in slower response to demand. Once this happens, stock inventory runs out and customers cannot place orders. This may cause customer disapproval and even a loss of business. Inventory control software will eliminate this issue by automatically alerting inventory managers when stock is running low, as well as automatically restocking these products. Therefore, shorter lead times will get more customers their products on time and increase overall customer approval.
Identify sales and losses by tracking sales patterns: Tracking stock is one of the best ways to keep track of sales patterns. This software provides an overview of which products are in high demand and which products are not selling as well. This will allow businesses to respond to customer demand by supplying more items that are frequently purchased and potentially discontinuing items that are hurting the business’ bottom line.
Who Uses Inventory Control Software?
Retailers: Retailers use inventory control software to categorize products, import item barcodes, and manage item price points across their inventory. Managing product levels will also provide retailers with analytics on which products are performing well and are in high demand. These analytics will alert retailers to autofill orders on items that are selling quickly so the product is always in stock. Additionally, if a product is overstocked at another retail outlet, the software can suggest stock transfers so each outlet can have a more balanced inventory level.
Manufacturers: Inventory control is a critical tool for day-to-day operations in the manufacturing industry. When a customer orders a bulk shipment of a certain product, the manufacturers must assess whether they have enough raw materials in stock to complete the order. Oftentimes, these orders consist of a variety of raw materials that the manufacturer must combine to create one final product. An order might require the manufacturer to obtain more stock from a variety of other suppliers so it can be completed.
Historically, manufacturers would take stock by spreadsheets, which was a very rudimentary system often prone to error. With specialized software, however, each item has a barcode attached to it that is linked to the software. The manufacturer can then accurately assess if they have enough material, track orders from suppliers, and fulfill orders in a more timely manner.
E-commerce sellers: Stock control is important for businesses that sell products through online marketplaces. E-commerce sellers especially use software to handle returns, automate re-stocking, shipping, and virtual stock inventory.
Wholesale distributors: Wholesalers who use online distribution channels use stock control software to track bulk inventory, manage suppliers and customers, and automate the fulfillment process. Wholesalers frequently use software features such as kitting, sales order and warehouse fulfillment, lot tracking for perishable products, and bin management.
Software Related to Inventory Control Software
Related solutions that can be used together with inventory control software include:
Enterprise resource planning (ERP) software: Integrating inventory control software with an ERP system is key to maximizing its potential. Integration between these two systems will allow managers to see all data that relates to manufacturing, supply chain, and shipping all in one place. This will ultimately lead to more visibility of how business processes are connected.
Accounting software: Integrating inventory management software with accounting software will allow businesses to accurately present inventory in financial reports. Important documents such as tax returns can then accurately reflect inventory value. If the stated assets from the warehouse don’t match with bookkeeping, then the company can get audited. The best way to maintain the financial integrity of a warehouse is by integrating inventory control system with accounting software.
Warehouse management software: Insight into the daily operations of a business’ warehouse is provided through warehouse management software. Such visibility includes monitoring the movement of products between warehouses to improve shipping and handling procedures.
Barcode software: Barcodes are the building blocks of the shipment process, so barcode software is necessary to print unique codes for each product. Each country and company may mandate different barcode styles, and software dedicated to this service will allow customizable styles for identifying labels.
Label printing software: Labels are a logistical necessity for the fulfillment process. Label printing software help businesses print unique labels for products to ensure an accurate transfer of products during the shipping process.
E-commerce Platforms: Integrating inventory control software with a business’s e-commerce platform is critical for keeping track of inventory. Without it, managers must instead manually track orders on their e-commerce platform and then adjust the stock in a spreadsheet. When these two are integrated, every sale made online will automatically be reflected in the inventory management software. The result is more visibility and accuracy, which will translate to fewer inventory errors.
Challenges with Inventory Control Software
No software is free of challenges, and inventory control products come with their own set of difficulties.
Lack of supply chain functionality: Some systems are scaled down in comparison to ERP or other supply chain systems. Inventory control software can lack support when it comes to functions such as procurement and route optimization. In this sense, most stock-level software will need additional integrations to make it a more complete tool that can assist with managing the supply chain. Users should be aware of this before purchasing this software.
Complexity: Learning how to operate this software can take countless hours of training. While some functions are more intuitive than others, it will still take specialized training and patience to master functions like RFID tracking and product kitting.
Which Companies Should Buy Inventory Control Software?
Food distributors: When perishable goods are a staple of a business’ product portfolio, inventory management is crucial to prevent the spoilage of goods. First-in, first-out policies allow food at risk for expiration to be sold before other products.
E-commerce: Online retailers rely heavily on inventory control since the purchase of goods occurs exclusively on the internet. Real-time updates in inventory are necessary to prevent sellouts, transactions for products that aren’t actually in stock, and to alert customers of low stock thresholds. Automated inventory management allows for instantaneous updates in stock levels to ensure smooth, reliable functioning of business processes.
Consumer goods: For physical retailers of consumer packaged goods, stock control is needed when there are seasonal products that can complicate the process of forecasting. Effective inventory management software helps simplify this process and provide more accurate predictions.
How to Buy Inventory Control Software
Requirements Gathering (RFI/RFP) for Inventory Control Software
When searching for the right inventory control software, it’s important to create a long list based on products that contain some of the most necessary features for a functioning stock management system. After the available pool has been segmented based on crucial features, one can then sort based on nice-to-haves, bells and whistles, and industry-specific software requirements.
Compare Inventory Control Software Products
Create a long list
In order to create a long list, buyers must ensure the products being considered meet these core criteria:
- The software is compatible with one’s technology and computer programs
- The system should easily import and export data to be used for ordering and accounting software, i.e., if a business uses spreadsheets, it should be able to export data in a .csv or .xlsx format
- The availability of the “reorder point” feature that triggers automatic reordering when inventories hit a certain threshold
- A perpetual updating system for small manufacturers
- Options for RFID or barcode labeling
Create a short list
Once a long list based on core features is created, a short list should be further narrowed based on industry-specific necessities, nice-to-haves, and bells and whistles. The below features address mandatory features unique to certain businesses and simplify the process of shipping with advanced technological features:
- Software compatible with a first-in, first-out system for sellers of perishable products
- Intuitive interface
- Machine learning and AI
- Configurability
- Cloud infrastructure
- Dropshipping
Conduct demos
Buyers must schedule calls with the vendors on the short list to ensure their product is the right fit. The most foolproof way to make the right decision is to actually test out the software. It is important to ask vendors about how their product addresses the business’ most pressing needs.
Selection of Inventory Control Software
Choose a selection team
Vendors will be bringing their strongest team to seal the deal with a potential client. Therefore, it’s important to come to the negotiation process with questions and directives on certain key considerations. These include procurement, legal and contracts, internal business needs, application development, finance and accounting, and information security. Buyers must ask questions about the total costs and fees associated with purchasing, implementing, and using the product. In order to prevent surprises later, it is crucial to ensure the terms and conditions are read in full and discussed.
Negotiation
During the negotiation process, the buyer will need a clear understanding of user seating pricing and fees associated with hosting, upgrades, support and maintenance, and training staff on how to use the software. In addition, a forecast on the cost of maintaining the inventory management system across multiple years will be needed. The goal of this process is to receive all the information needed on pricing and features to assist in the final decision.
Final decision
It could be useful to create a scoring template that measures the various features mentioned in the long and short list, as well as notes from calls between the sales organization and vendor.
What Does Inventory Control Software Cost?
This category of software costs on average about $100 per month. A basic or frills-free option is often available at a much lower cost, but the necessary features to help run an efficient business may be lacking.
Return on Investment (ROI)
ROI measures the time it takes for an investment to pay off and, more importantly, lead to maximization of business revenue. Several factors help determine the ROI for inventory control software. When narrowing down the short list to make the final choice, the following factors should be quantified into concrete numbers to make the best decision:
- Labor savings
- Vehicle savings
- Inventory reductions
- Lower shipping costs
- Fewer customer chargebacks
- Less need for storage facilities (and the accompanying cost of maintaining these facilities)
- Increased resources for focusing on business growth
- Increased customer satisfaction
According to G2 data from August 25, 2021, ROI tends to be achieved in the following increments for this category.
- Within 6 months, 52.8% achieved ROI
- Within 7 to 12 months, another 24.19% achieved ROI
- Within 13 to 24 months, another 11.21% achieved ROI
- Overall, almost all respondents reported achieving ROI within 48 months
Implementation of Inventory Control Software
How is Inventory Control Software Implemented?
Before implementing the inventory management system, it’s important to have a strong, existing process of inventory management. Once that process is codified, buyers must work with the new vendor to train personnel on utilizing the new software. Staff buy-in on the product is essential for a smooth transition that reduces human error.
Who is Responsible for Inventory Control Software Implementation?
Subject matter experts from the vendor will assist in the process of implementing the new software, as well as team leaders and IT personnel who participated in the purchasing process.
What Does the Implementation Process Look Like for Inventory Control Software?
G2 data from August 25, 2021 shows a general timetable upon which the implementation of this type of software occurs:
- 67.3% of businesses report implementation in less than a month
- 18.3% report implementation within three months
- 6.4% report implementation within six months
- 4.4% report implementation within 12 months
Inventory Control Software Trends
Big data analytics
E-commerce sites have huge volumes of data that are relatively unstructured and underused by inventory managers. Shoppers’ behavior can help forecast customer demand and reveal more hidden patterns that can be useful for inventory managers. With big data analytics, inventory managers can structure this data and make it more applicable to use cases when managing stock levels. More integration of big data analytics with inventory control software can be expected in the future.
