What is an Inventory Management System?

Inventory management as it goes is a complicated process that undergoes in product-oriented organizations, especially FMCG businesses and retail stores. Besides, Inventory Management is a complete process that begins with procuring the raw materials products to warehousing of these items, finally, this process concludes when the products either reach the customers or the retailers.

But having said that, Inventory Management might seem to be an easy process by this explanation but in reality, it is far more complex and impulsive to time.

Therefore, it is a must these days to have an inventory management system to keep track of the products as no business wants to understock or even overstock as both strategies are counterproductive.

UNDERSTOCKED VERSUS OVERSTOCKED

While, understocked inventory will not be able to meet the customers’ demand, on the other hand, overstocked inventory will comprise the organization’s finance and they might end up using price cuts to move the inventory faster.

Be that as it may, there are methodologies to counter such instances by streamlining the supply chain with active stock monitoring, anticipating the demand by understanding historical patterns and underlying systems that can adhere to managing the inventory. Meanwhile, different companies prefer different strategies to manage their inventories.

The two prime methodologies of how inventories are managed by companies are periodic and perpetual inventory management systems.

PERIODIC INVENTORY MANAGEMENT SYSTEM

As of the name itself, periodic refers to the inventory management system where the goods are checked, updated, and reported periodically which means in 1-6 months. Additionally, the data which includes cost and stock is not up to date every time.

PERPETUAL INVENTORY MANAGEMENT SYSTEM

On the other hand, perpetual refers to a type of inventory management system that keeps the inventory records up to date in real-time. It keeps the cost and stock updated and maintained to report the smallest of the changes. Besides, the perpetual inventory management system has more record-keeping than the periodic inventory management system.

Each of the two types of inventory management systems is designed to serve different purposes some organizations use either of the two techniques to manage their supply chain. Moreover, there are software programs that can manage the inventory data and report results for two of the techniques.

1) ENTERPRISE RESOURCE PLANNING SYSTEMS

In limelight, Enterprise resource planning (ERP) is a one-stop-shop for all inventory-related problems. It is a standalone system that covers almost everything related to a business and planning including accounting, inventory, HR, marketing, etc. A business can automate in many respects having this kind of a standalone system.

In most cases, these software programs are expensive, so businesses usually go for manual practices or single-service programs.

However, with QBM the payment is not worth the features and results in shorter periods. Be that a small business or a large business, QBM is designed with different editions to keep in mind the needs of varied businesses types.

2) SPREADSHEETS

It is not very complex for a small business with a few products to manage inventory on Excel spreadsheets. While It is a basic method but is cost-efficient with a handful of Excel skills making it easier to use but time taking.

For small-scale companies with low turnovers and fewer products, Excel is perfect to use and manage inventories. But ever since one has to type all the figures and numbers manually, the rate of human error is likely to increase which creates numerous problems.

Also, if the business grows and becomes more complicated, using Excel to keep records becomes more complex and difficult.

3) BASIC INVENTORY MANAGEMENT SYSTEMS

This type of software is a basic software that allows companies to manage their inventory but it is difficult to match the needs of the organization with the basic inventory management software as it lacks many features which an organization would deem necessary based on their circumstances.

Hence, their applications in today’s world are very few because of the limitations they come with.

4) DEDICATED INVENTORY MANAGEMENT SYSTEMS

Interestingly, dedicated inventory management software is custom designed for company requirements. It is flexible and per various and distinctive organizations.

But, these kinds of software are capital intensive and require more time to set up. Usually, large-scale organizations which have huge processes in their supply chain with harsh complexities go for dedicated software.

5) WAREHOUSE MANAGEMENT SYSTEMS

Most of the time when a business venture starts, the majority of the business owners do not feel the need to use an inventory management system.

But how would they know if they need this kind of a system or not? So actually, there are a few signs or ways to determine when to upgrade to an inventory management system. Some of those are:

There are a lot of differences between warehouse management and inventory management systems.

To understand, a warehouse management system is designed to help the warehouse function properly, and although they have the features to manage inventories yet the concept of warehousing makes it different and they might lack many of the basic features an inventory management software possess.

This is because the ultimate goal of a warehouse management system is to make sure that the warehouse is operating efficiently and effectively.

Costs

If the costs in a product-oriented business are growing rapidly, it is time to upgrade to an inventory management system as it will help to keep the storage and costs in control efficiently.

Accuracy

When the business needs details about specifics and product lines for that, they need a system where everything is recorded specifically so that the employees and owners can easily check the updated details of any product.

Flexibility

Excel and other ways are excellent ways to manage the data but sometimes you need automated, updated data and for that, a business needs an inventory management system or software to adapt to changes faster.

Slow

If the business growth slows down, it means that the inventory, stock, and costs are not managed properly. That is when a company should realize that they need a proper inventory management system to manage everything.

When a business is upgraded to a proper inventory management system, they see lots of benefits such as:

Accurate

When the inventory is managed properly by a manager, an employee, or the business owner, each of them will know as to what the stock is and what needs to be ordered.

Overselling

When all the information is available easily, people will know about the stock and they will not oversell it.

Productivity

The time spent by people using different ways to manage inventory will be saved and people in the business can work on more productive strategies.

Customers

The customers will be satisfied because they will receive their products on time and do not suffer a shortage of supply or raise prices.

Insights

By using a proper inventory management system, the company will have better insights into how the sales are going or why sales came down.

Small businesses take their time to upgrade because the cost of having an inventory management system is most of the time high and the capital including investments and profits are low. But businesses with many diverse products and high investments do invest in inventory management software to make their business management smarter and to experience growth.

QBM GUIDELINE

Out there in the market, there are many software programs available for companies to use whether they are for a limited purpose like inventory management or possess multiple features like the enterprise resource planning software. All are designed for the companies to perform better.

One of the best-selling ERP and inventory management software on the internet is QBM which is integrated with a self-learning module to master the software and tools which are designed to make your business more and more productive.

QBM editions are designed for organizations needing systems for varied requirements one of which is inventory management. Some of the QBM features like multi-location management, interactive dashboard which depicts real-time data, working-cycle automation are some of the highlights from QBM. If you are someone looking out for productivity, optimizing, and improving your inventory management then QBM is the best choice.

For a free QBM trial contact us today.