So what is Inventory Management?
Inventory management is all about what you need to sell your products. Whether buying from manufacturers, distributors, or suppliers, every retailer must ensure it has what it needs to sell to customers.
Inventory management ensures that a retail business never runs out of inventory. The best inventory management software will track inventory levels, orders, sales, and deliveries, while ensuring that all stock is at the right levels, in the right place, at the right time – and for the right cost.
Optimization of your inventory planning keeps it flowing and prevents you from running out or storing too much stock, and suffering the related expenses.
Challenges of Inventory Management
There are several common challenges when it comes to inventory management. Most businesses – especially those selling over multiple channels – find they face the following:
- Accurate real-time inventory updates: ensuring these can be especially challenging when selling on multiple channels.
- Multi-location warehouses/inventory locations: fulfilling orders with items in multiple locations is a significant challenge.
- Stocking products without identifiers, serial numbers, or barcodes, so that RFID devices can’t be used.
- Products allocated to different locations must be brought together as efficiently as possible.
- Inventory demand planning: with our ever-changing environment, consumer need is constantly changing.
- Manual workflows: these can be prone to errors and are labor intensive.
- Financial insights on inventory: merchants must understand which are their most profitable products and channels. This is what will help inform intelligent demand forecasting, optimize product planning, enhance marketing efforts, and more.
- Omnichannel selling: modern consumers expect a seamless shopping experience across multiple channels, both on-premise, and using desktop or mobile devices. Inventory management must register and track sales and related stock level changes across all of them. Ideally, it should do so in real-time, to ensure a merchant’s system is always accurate.
While these challenges seem overwhelming, there’s a quick solution for that. Inventory management software has become a key tool when it comes to inventory control and removing any pain points when it comes to the once taxing process.
So what exactly is inventory management software? And how can it help?
What is Inventory Management Software?
Inventory management software is an all-in-one solution for inventory tracking. It tracks, manages, and organizes inventory and sales orders. Advanced inventory management software also provides inventory planning and demand forecasting, which is crucial for multichannel merchants.
While spreadsheets may work for inventory tracking, technology has advanced, and automated inventory management software improves efficiency. Merchants use them to keep track of their inventory levels, streamline workflows, and manage sales orders.
See how Brightpearl can improve your inventory management efficiency
Why Should You Invest in Inventory Management Software?
“There are two ways to extend a business. Take inventory of what you’re good at and extend out from your skills. Or determine what your customers need and work backward, even if it requires learning new skills. Kindle is an example of working backward”
Jeff Bezos, Amazon.
Inventory management software is an essential investment for any business owner looking to improve operational efficiency and expand their brand. It helps track inventory items, manage replenishment, and provide real-time inventory insights.
A suitable inventory management software does not only help ensure the right inventory levels on hand, but integrate with other tools like CRM (customer relationship management) solutions. Together, these tools can provide valuable insights into your business, and help you understand what your customers want to buy.
1. Benefits of Inventory Management Software
Inventory management software helps your business run faster and smarter. It increases efficiency and gives you full visibility and control over your inventory. Here are some of the specific benefits.
Real-time inventory update
Whether you operate brick-and-mortar retail stores and a website or sell across many digital channels, always having accurate inventory figures is essential. It helps you avoid the twin dangers of under and overselling. Inventory management software that integrates with online and offline sales channels helps to update inventory levels in real-time and streamline orders across all channels.
Manual inventory management is a slave to human error. A simple slip of the pen on a work order, forgetting to scan something with your RFID device, or lack of attention could lead to costly mistakes. If you don’t have an accurate record of your stock, overselling could create dissatisfied customers who you’ll never win back.
Inventory management software helps to automate the entire inventory tracking process. Stock levels are updated accurately, in real-time, avoiding any costly human errors.
Most inventory management software comes with the ability to automate tasks, thus speeding up certain time-consuming processes.
Barcode scanning technology, for example, eradicates the need to spend time manually entering numbers. Scan the SKU, and you’re good to go. This automation eradicates the likeliness of mistakes and creates more time for you and your employees to use elsewhere.
You can even automate reordering – simply set a reorder point based on how quickly things sell, and the system will place the purchase order when needed.
Full visibility & transparency
It’s important for business owners to have full visibility over inventory performance data. Inventory management software provides the data you need to understand how your products are selling and help you spot trends. It enables smart decision making and helps optimize your cash flow by ensuring the right balance between having enough stock to satisfy customer demands and not too much that is tied in slowly-moving products.
Inventory management is hugely time-consuming when handled manually. Even for small business, the time it takes to monitor warehousing, shipping, and other aspects, can take away the hours you’d like to spend on your growth plans. If you sell across multiple channels or have multiple inventory locations, manual management simply isn’t viable.
Inventory management software helps to unlock growth. It gives you the ability to expand to those new channels, as well as the time to focus on other plans and business-critical activities.
2. How much does inventory management software cost?
The price of inventory management software varies depending on which company you go for, and what type of package you require. This should be decided based on your business needs.
Some companies, like Odoo for example, offer free trials but these tend to be basic. Others offer plans starting at $24 per month, but you could pay $300 per month or more depending on your business needs.
The more sophisticated your software is, the more it will cost. SaaS solutions with advanced features will offer a price after a consultation.
What are the Required Features of Inventory Management Software?
So, it’s clear that inventory management software can help in the growth of an ecommerce or multi-channel retail business. But what features are included?
While inventory management software varies depending on the needs of the company, most have certain standard features. The following features are included in most software packages:
It’s designed to keep your essential and necessary warehouse functions centralized so that you can keep track of details such as stock level and product history.
It also includes shortage reports and alerts to control any issues quickly and manage inventory mishaps. It’s an essential feature to keep track of your stock and plan ahead.
A reporting tool feature provides real time data such as:
- Inventory levels and product status
- Order information
- Shipment times and details
The reporting gives you visibility on your sales history and product performance. It’s an essential feature for businesses in purchasing and decision making
Barcoding and tagging
Scanning capability is another feature that speeds up delivery processes and reduces human error. Barcode scanners (or even iOS and Android devices) can be used to track pricing and product details—and only require minimal training to use.
Barcoding features ensure you can locate products and rest assured that all product information is accurately inputted and updated. This makes for more streamlined production lines.
Most inventory management softwares have an alerts feature that notifies users when certain items are running out.
Inventory alerts are great because they reduce stock waste, drive sales, and maintain operational control.
At Brightpearl, we offer inventory management software with all these excellent features and more. Our automated, multi-location inventory management ensures you have enough inventory on hand in the right locations to meet demand.
Here are the features that our customers love the most:
Multichannel & multi-location management
Control your inventory with instant inventory updates across all your ecommerce platforms, marketplaces, and brick and mortar stores.
Centralized view of operations
One centralized system lets you manage inventory, orders, fulfillment, shipping, accounting, and much more. Thus avoiding errors or data losses due to disjointed operations.
Smart inventory demand planning & business intelligence
Brightpearl’s integrated Demand Planner ensures the right balance between having excess inventory that holds too much cash and insufficient stock. Additionally, use Brightpearl’s advanced BI tool to get insights into customers and channel performance.
Automate repeatable tasks
Automate time-consuming but critical workflows with Brightpearl’s automation engine, from allocating products, reordering, shipping, order fulfillment to invoicing.
And more features
How Brightpearl has helped merchants improve inventory management efficiency
Inventory management software has inspired the growth of many brands. At Brightpearl, we’ve worked—and continue to work—with a number of companies to help them achieve their potential. These include the following:
“Stockouts and delays frustrate customers immensely and leave a bad taste in their mouth. Fortunately, that’s no longer a problem for us. We now have real-time visibility over our entire inventory, which is so beneficial for delivering seamless shopping experiences”
“We know at any time how much we have of any product so we never have stock-outs or over-order. For the first time ever, we have real visibility into our inventory – we know what we’re carrying and also what we’re selling, so we can forecast accurately like we haven’t been able to do before. Previously, we had to pull our sales out of our various channels and merge that data together.”.
“Brightpearl’s automated inventory management has ensured we have enough stock in the right locations to meet demand, whilst the reporting intelligence has proved invaluable when making purchasing decisions on different lines of stock.”
“Before we had Brightpearl, it was insane. We had to manage inventory, demand and forecasting for two separate locations and it became far too complicated. We would often try to guess which region and channel needed the most units and then we would shift the inventory around if a warehouse became depleted. With Brightpearl, we now have a proper planning and purchasing cycle and weekly forecast capabilities.”
What is the Best Ecommerce Inventory Management Software?
At Brightpearl, we think our software solutions are above the rest. Our mission is to automate retail and offer support 24 hours a day.
But don’t just take our word for it. Here are some other software solutions to use as a comparison.
Tradegecko is a popular software solution which has recently been bought by Quickbooks. They focus on B2B businesses and target smaller companies.
However, while Tradegecko offers many of the standard inventory management software features, it doesn’t match Brightpearl’s standards in the following areas:
- Warehouse management: Brightpearl enables fuller warehouse management capacity, which improves your agility in performing cycle counts.
- Flexible order fulfilment workflows: Tradegecko isn’t the best at handling more complex flexible fulfillment options like dropshipping or back order management.
- Advanced reporting and business intelligence: Tradegecko lacks in-depth insights, whereas Brightpearl has built-in reporting and retail analytics tools to provide you with a complete picture of your business.
Implementation: Tradegecko only offers guided implementation which may result in non-optimal configuration and a glitchy system.
Stitchlabs is sunsetting in 2021, and has been bought by Square. Understandably, many business owners might be feeling overwhelmed about migrating to a brand new operations platform.
As one of Square’s preferred replacement partners for Stitch Labs merchants, we know how to support omnichannel merchants moving away from StitchLabs, and we’re packed with the features and support you need to make the process as seamless as possible. Here’s why moving to Brightpearl is the right decision:
- Additional features: At Brightpearl, our software solutions include additional features to those Stitchlabs will have provided. With a robust automation engine, flexible accounting choices, superior order fulfilment workflows, and the ability to go live in ⅓ the time of an ERP, our software is better suited for businesses.
- System scalability: We are designed to help businesses grow. At Brightpearl, we fully support your business expansions and can easily adapt to your new business model.
Veeqo is a UK focused system for small businesses. It offers some good features for small retail businesses that are looking for a quick solution.
Because of this, Veeqo isn’t recommended for those looking to scale their business or needing flexible operational workflows, as requirements in the following areas may not be met:
- Inventory forecasting: Veeqo doesn’t provide data-driven inventory forecasting which is crucial to avoid overselling and missed sales. Unlike Veeqo, Brightpearl’s integrated Demand Planner provides actionable insights into your inventory based on historical sales data and related variables, enabling efficient replenishment. Release capital tied up in unprofitable products and reinvest in top sellers
- Automation: Veeqo provides some basic automated workflows, but it doesn’t support advanced order fulfillment workflow automation, like picking the most efficient fulfillment center for orders, automating dropshipping, fulfilling from multiple locations, creating purchase orders and more.
- Reporting and retail business intelligence: it’s severely lacking in Veeqo’s functionality. Compared to Veeqo, Brightpearl provides a full range of reporting, from deep product and consumer insights, to financial reporting, and performance reporting by sales channel. Plus, Brightpearl’s integrated business intelligence offers deeper insights on business performance for smarter decision-making.
- Services: services like implementation, training, technical support and business consulting are overlooked at Veeqo, although they’re crucial to a business’s long-term growth. At Brightpearl, on the other hand, you’re accompanied by our retail experts throughout the entire partnership.
Netsuite is a versatile ERP system which has inventory management functionality. However, it isn’t retail focused, meaning that ecommerce businesses don’t get the features that they need. This means the following:
- It isn’t cost effective: you’ll find that you’re paying for many features you don’t need or use. Customizing the system will be expensive, too. With NetSuite, you could only use 20% of its features, but be expected to pay 100% of the price.
- It isn’t time effective: you’ll need to customize the system to fit your business workflows, which can take time. A system like Brightpearl already has the right features for ecommerce businesses, meaning you can get set up straight away. At Brightpearl, we aim to get you up and running in just 8-12 weeks, integrations and add-ons included.
Linnworks is a good solution for small retailers who just need basic inventory management features and don’t want to spend much on their software. However, this means that, like Veeqo, it isn’t an ideal solution for business growth.
Brightpearl is a more scalable and advanced solution for aspirational businesses that want superior functionality. Some of the areas that Linnworks falls back on include:
- Accounting: while Linnworks has integration to third party accounting software, it lacks integrated real-time accounting. At Brightpearl, we know the importance of financing and invoicing in the ecommerce world, and therefore incorporate both of these features.
- Workflow automation: although Linnworks provides some automated workflows, it falls short of advanced order fulfillment automation, like picking the most efficient fulfillment center for orders based on product, destination or more, automating dropshipping and splitting orders to back order.
Customer service: Linnworks also doesn’t provide additional support once the inventory management solution is up and running. We provide support, 24/7.
Orderwise is a UK focused solution that isn’t as well known as its competitors. It targets mid-market retailers and wholesalers.
While it might be better than some of the lower-end options, it still has its limits. Mainly, the fact that it’s quite old-fashioned. The leading brands need the leading software, and Orderwise isn’t designed for today’s modern ecommerce businesses. Brightpearl, on the other hand, has the following sophisticated, high-tech features:
- Cloud-based: Unlike Orderwise, Brightpearl was born in the cloud, which means you can access your financial data and reports from anywhere. All you need is the internet.
- Robust connectors: Brightpearl can sync over 10,000 orders per hour. Its robust connectors are built to handle high order volumes.
Automation: Brightpearl’s software solutions make it possible to automate your online sales order workflow, email marketing, and customer service.
- Zoho Inventory
Zoho Inventory is a popular solution with plenty of great features. It’s tightly integrated with some other apps, and has built-in integration with WooCommerce.
However, Zoho Inventory lacks the following features – all of which are provided by Brightpearl:
- Forecasting: at Brightpearl, we understand that forecasting is an important feature. We take the guesswork out of what needs to be ordered and gain control of your inventory so you can focus on growing your business.
- Returns management: managing your returns is important, as they help to determine your profitability. At Brightpearl, this is a feature we value.
- In-person training: this helps you to truly understand your software and ensures you feel confident after integration. Zoho Inventory lacks this additional touch.
Ecomdash is a fairly simple cloud-based, multi-channel inventory management software solution that offers an interface to manage inventory, orders, and shipments from the same admin panel.
While it allows the coordination of sales and order management on platforms such as eBay, Amazon, and Etsy, it’s better for small to medium sized businesses.
It also lacks the following features:
- Customer accounts
- Loyalty program
- Mobile commerce
- Product configurator
- Promotions management
- Returns management
- Shopping cart
At Brightpearl, we want to help the growth of medium to large businesses, and therefore these advanced features are important to us. If you’re a small business looking for a little extra support, Ecomdash has the features you need. However, businesses with more ambition should invest in a system with a little more substance.
Cin7 gives retailers, wholesalers, and simple manufacturers one solution to keep orders in line, with inventory for every stock location and sales channel they use. It integrates with 450+ platforms and services including ecommerce, online marketplaces, 3PL warehouses, shipping, accounting, sales and marketing, and inventory forecasting solutions.
However, Cin7 is lacking in the following areas:
- Customer support: customers have complained that Cin7 doesn’t offer the continuing support and guidance of other inventory management solutions, such as Brightpearl. Companies need to be supported by their provider, especially during the first few months after implementation.
- Size of orders: Cin7 doesn’t handle larger numbers of orders well, making it better for smaller businesses and not powerful enough for the asset management of large retailers.
Reliable and robust EDI Integrations: EDI integrations are lacking at Cin7. Brightpearl, on the other hand, makes it easy to keep your suppliers and trading partners connected. Orders, invoices, inventory and ASN transactions are updated automatically.
Fishbowl is a manufacturing-focused inventory management solution. If you’re selling finished goods, it’s unlikely to be the right solution for you.
Odoro is a single ecommerce app for managing shipping, inventory, and everything in between. It markets itself for the ability to access cost-effective rates, print labels, and sync inventory.
Odoro is used by a number of small businesses, mainly because it has flexible payment plans, starting with a very basic plan at $25 per month. This makes it better for small businesses, but not appropriate for those looking for dramatic year-on-year growth. Because of this, it lacks finesse in the following areas:
- Integrations: While Brightpearl integrates with all the leading business systems and applications, Odoro has fewer integrations. While you can expect Amazon, eBay, and Shopify, you won’t get Shopify Plus, Mailchimp, 3PL providers, or more.
- Devices: Odoro does not work with iPhone or iPad.
Frequently Asked Questions
- What are the 4 types of inventory?
In the world of inventory management, there are four types of inventory that are stored in different ways. These types of inventory can be found at different points in the supply chain. As such, they’re important in supply chain management. So, barcoding and asset tracking is important to ensure each type of inventory is stored in the proper location.
So, what are the four types of inventory?
- Raw materials: these are the materials stored in warehouses for production lines. I.e., plastic or metals. They’re used to create a bill of materials.
- Unfinished products: these are often stored in warehouses before they are ready to sell.
- In-transit inventory: these are your products that aren’t in a warehouse, but are being kept in a vehicle. It’s important not to forget them.
- Cycle inventory: These are products that arrive from a supplier or through the manufacturing process, and are almost immediately pushed out to customers.
- What are the three major inventory management techniques?
A business without an inventory management system often experiences losses. Effective inventory management ensures that you have the right amount of stock when you need it.
So, alongside inventory management software, companies tend to adopt a certain inventory management technique. Here are three popular ones that companies use:
1. JIT delivery: JIT delivery stands for just-in-time. This means that the company only orders and ships new inventory as and when it’s needed. The core aims are to reduce waste, save warehouse space, and improve efficiency. It’s a popular system among many big businesses—especially those with large and expensive inventory, such as Toyota.
2. Dropshipping: Dropshipping is a form of inventory management that allows businesses to sell products without stocking or sending the items themselves. This means that a vendor acts as a go-between for the customer and the supplier.
The core aim of dropshipping is for the retailer to focus on other elements of the business, such as sales and marketing, while another company handles the inventory. Amazon uses dropshipping.
3. ABC analysis: ABC analysis approaches classifying inventory based on its consumption value. The approach comes from the Pareto principle – the idea that we get 80% of our results from 20% of our action. The ABC analysis uses A, B, and C to rank the consumption values of the inventory:
- A are the goods where annual consumption is highest
- B are the goods in the middle
- C are the goods that have the lowest consumption value
As such, inventory is ordered and stocked accordingly. H&M uses the ABC analysis approach, making 80% of its retail inventory in advance and introducing the remaining 20% based on the most current market trends.
Image from medium.com
These aren’t the only inventory management techniques, but they are among the most popular. Adopting one will ensure you reduce stock-outs and eliminate waste.
- How do I calculate inventory?
It’s important for business owners to calculate inventory correctly. You’ll need to know the following:
- Total valuation of beginning inventory
- Total valuation of ending inventory
- Cost of goods sold
And the formula to calculate your inventory is:
(Ending inventory – Beginning inventory) + Cost of goods sold = Inventory purchases
- What is the EOQ model?
The economic order quantity (EOQ) model is the number of units that a company should add to inventory with each order, to minimize the total costs of inventory, such as holding costs, order costs, and shortage costs.
The EOQ model finds the quantity that minimizes the sum of these costs. Essentially, it’s used to calculate the optimal quantity that can be purchased or produced to minimize the cost of both the carrying inventory and the processing of purchase orders or production set-ups.
The EOQ model is important because it can help minimize the level of inventory. The cash savings can then be used elsewhere. It’s especially important when ordering food or other perishable items to minimize waste. As such, it’s used by Mcdonalds and a number of other leading companies.
- How is EOQ calculated?
The EOQ formula was designed by Ford W. Harris through an explanation. It was later turned into a mathematical equation by a consultant named R.H. Wilson, who applied it extensively. An EOQ can be calculated by taking the following steps:
- Multiply the demand by 2
- Multiply the result by the order cost
- Divide the result by the holding cost
- Calculate the square root of the result to obtain EOQ
The right inventory management software will help calculate your EOQ, and ensure your inventory is properly calculated.
- How can I quickly improve my business’s inventory management?
Adopting the right inventory management software is an ideal way to improve your inventory management. Other steps you can also take include choosing the right option from FIFO or LIFO stock management and following industry trends.
FIFO and LIFO are two different methods of tracking stock. Business owners should pick one of the methods to ensure stock replenishment is efficient.
- LIFO: stands for last in, first out.
- FIFO: means first in, first out.
Image from marketing91.com
In the retail world, there are always trends to be spotted. These help you with inventory kitting and finding a point of sale. The best business owners are constantly learning. So, don’t overlook the power of analyzing data and trend-spotting.