Do you need an Inventory Management System?

inventory management system

I always advised young entrepreneurs or startups to set up their order and inventory management system as early as possible. Before you start developing your sales and marketing strategy, it's necessary to invest in an Inventory Management System. I would recommend a cloud-based Inventory Management System with 24/7 access for real-time and accurate information. 

Like the world, we know evolving every second we need to learn to adapt to the changes. 

What is an inventory management system? 

In simple words, Inventory Management System is built to facilitate the outgoing and incoming management of the stocks. Profoundly, Inventory Management or Warehouse Management is a system to control the entire movement and storage of inventory within the four walls of the warehouse. It comprises the various activities of the warehouse such as managing inventory, order picking, tracking stocks and dispatch as required. 

Essentials of an inventory Management System

The old warehouse management system is diminishing. The term warehouse management has become a necessary business process for many organizations. As we move towards the new development, there have been significant changes in the way inventory was managed in the warehouses. These changes have brought several tangible and non-tangible tradeoffs depending on the objectives of the organization. 

To be more specific Inventory Management System can help you track multiple things, such as 

  • Know your inventory. 
  • Avoid stockimbalances. 
  • Staff appropriately. 
  • Reduce costs. 
  • Increase profit. 

The main objective of developing this system is to help manage their inventory systematically and efficiently. Inventory control hence becomes a vital aspect contributing to the success of an organisation. 

Advantages of implementing an Inventory Management System

There are many quantifiable and non-quantifiable advantages of adopting an Inventory Management or Warehouse Management System. Such as 

  • Manage and track your complete workflow from sales, purchasing, and delivery. 
  • Multiple sales and procurement relationship for businesses keeping full, partial or completely no stock. 
  • Track all your sales and acquisitions. 

Disadvantages of implementing an Inventory Management System

There are a few minor challenges in implementing an Inventory Management System for new or small
businesses.Such as 

  • Implementing costs 
  • Staff training costs 
  • Maintaining costs 

Benefits of using an Inventory Management System

  • Saves time with automatic updates in real-time 
  • Consolidate data into a single universal format. 
  • Combine data from different sources into a single interface. 
  • Filter, transfer and generate reports based on the data you need. 
  • Able to make more realistic and practical business decisions. 

Different types of Inventory Management System

Most businesses have some inventory, whether it's a factory or just supplies. If your company has stock, you need an Inventory System. There are many types of Inventory Management System available . Here we will be addressing a few of them. 

Periodic Inventory System 

This method operates by manually counting stocks on a recurrent basis as required by the business.Companies depend on either hand-operated counting with checklists, barcodes/QR code joined with scanners. Barcodes or QR Codes and scanners essentially enable organisations to avoid the need to manual update inventory. That's why this makes it less labour-intensive and fewer errors. Companies still use some form of automation in this system to make it more productive and efficient. 

Perpetual Inventory System

Perpetual Inventory System works when there's a change occurs. It means rather than updating the system at a set interval time. Your system can update itself as soon as a status is updated. 

An ideal example of a Perpetual Inventory System would be. As soon as inventory enters a warehouse,is moved, sold, used, or thrown out, the central system is instantly updated. Any time inventory is received, relocated, used, discarded, or sold. It is scanned and entered into a centralised computer system. We can do this manually using barcode scanners or done automatically with radio frequency identification (RFID) tags. This method is complex and delivers data in real-time. 

Manual Inventory

Small companies that carry low levels of stock may still use a manual system. An employee essentially goes through a checklist, counts, weighs, or otherwise measures all items, writes down the results, and enters the quantities in a spreadsheet document. This information used to reorder materials as needed. 

Barcode Inventory System 

Barcode systems work on tags that scanned with the help of either stationary or handheld scanners. When combined with a central system, inventory data is automatically updated any time an item done scan. This system makes barcodes more efficient than manual counting, though they do have their associated costs. 

Radio Frequency Identification (RFID) Inventory System 

Radiofrequency identification (RFID) systems work with specific tags attached to inventory items. These tags are either active (transmitting their signal) or passive (which need handheld readers to track). 

Active RFID tags are best for providing real-time data on where items are at all times. Any time the item
is moved, fixed readers pick up its signal and update the system automatically.There is no scanning required. Passive tags need scanning, but multiple tags can, however, be read simultaneously without the need for scanning, making the process much quicker than scanning individual barcodes. 

Features an Inventory Management System should have

Every business is unique and its objectives and requirements. There should not be a "one size fits all" reasoning towards choosing an Inventory Management System. A good Inventory Management or Warehouse Management System should consist of the following features: 

  • Stock Tracking 
  • Stock count in real-time 
  • Barcode or QR Code or Labelling system 
  • Handle sales order 
  • Maintain Purchase Order 
  • Generate Invoices, Bills 
  • Manage and track multiple or a single warehouse 
  • Manage order fulfilment 
  • On the go 
  • Cloud-based with 24/7 access 

Conclusion

Smaller operations and maintenance teams with relatively few SKUs will typically be fine implementing a periodic inventory system. Large operations that warehouse numerous expensive items may get more mileage out of a perpetual inventory system. Supporting these systems with barcodes or RFID tags can increase efficiency, but only when the overall cost savings are justifiable. 

Inventory management is essential to every company. Having correct inventory data can help companies avoid out-of-stock and overstock situations. Inventory management can improve stock control and reduce the company's overhead costs. The companies should adopt a system that can be scaled and updated as required. It will help them to overcome the challenges they face today and also prepare them for future hardships.