Businesses across the country are cracking down on non-essential spending. With many industries still reeling from lockdown ripple effects, inventory delays, and complications from rising inflation, many professionals are looking to optimize revenue streams without losing out on earnings. Inventory management systems are one great way to get started on reducing preventable losses in the current
Inventory mismanagement is one source of avoidable revenue loss. According to the IHL, inventory inefficiencies cause $1.75 trillion in yearly preventable income loss worldwide. $642.6 billion is lost in preventable returns; $634.1 billion is lost in out-of-stocks, and $471.9 billion is lost in overstocks each year. On average, these losses cost typical retailers 11.7% of annual revenue per year.
Inventory management systems can help. Using a third-party platform can increase your inventory and tracking accuracy, enable essential data collection, reduce time between ordering and shipping, and can help your company grow. Especially in the current economic environment, cutting inventory mismanagement losses is both achievable and necessary to survive and thrive in the current unpredictable marketplace.
Systems 101: Types Of Inventory Management Systems
Inventory management systems come in a wide variety of shapes and sizes. There are three categories: inventory spreadsheets, cloud-based solutions, and ERP systems.
The simplest form of inventory management is the basic spreadsheet. This option is attractive due to its simplicity and low cost. Using spreadsheets for inventory may be deceptively problematic, however. Major cons to this system include susceptibility to human error, lag time in updates, and limited scalability. This solution is best for very small retailers, or as a stop-gap solution before a more flexible inventory management system can be put in place.
Most inventory management systems fall under the “cloud-based solutions” umbrella. These systems store data on third-party servers and have increased functionality and adaptability when compared to the spreadsheet model. Cloud-based solutions often offer automation processes, lowering the risk of human error, and can integrate with other business-centric technologies. Because cloud-based solutions are often used to integrate information over several locations, they update in real-time, further minimizing human error risks like lag time and overwriting. Small, medium, and quickly growing businesses are good fits for cloud-based inventory management systems.
ERP (Enterprise Resource Planning) Systems
ERP systems are the most complex inventory management systems, sometimes integrating finance, operations, inventory management, and more under one umbrella software. These systems are built for large businesses with complex inventory and supply chains, and include advantages such as data security, platform integration, advanced warehouse management, and more. ERP systems may not be right for smaller businesses with more limited inventory due to their cost, complexity, and set-up times.
Several factors will influence which type of inventory management system is necessary for your business. Choosing an inventory management system that is right for your organization will depend on your management needs, size and complexity of inventory, and budget.
One of the most important factors in choosing an inventory management system, especially to streamline costs, is pricing. Pricing can vary wildly between different systems, with most falling between $100-$3000 per month, though cheaper options do exist (both Lightspeed and QuickBooks Commerce have plans that start under $100/month). Some platforms offer a one-time licensing fee (Fishbowl, for example, charges a $4,395 for platform use). Tracking revenue loss through inventory mismanagement can be a great first step towards determining which platforms are worth the time and monetary investment.
Location can complicate even the most straightforward stocking and tracking. If your organization is using multiple warehouses, or is selling across both virtual and onsite platforms, investing in a more comprehensive inventory management system may have a strong positive impact on time spent on ordering, tracking, and managing inventory.
Another point to consider is employee access. Does your organization have one employee managing inventory, or several? Is inventory updated throughout the day, or perhaps just once a week? If there is any risk of overwriting or lag time due to multiple updates, your organization will need to upgrade from a spreadsheet-based system to a cloud-based system to avoid errors like over-ordering or miscounting inventory.
One of the most important features of inventory management systems is ability to integrate with platforms serving other business needs– particularly, your sales platforms. Using a management system that does not integrate with your sales channels simply replicates the inventory mismanagement problems by forcing manual data input and opening the process of stocking and tracking inventory up to human error. Instead, find a system that works well with your sales platform of choice– as well as any platforms you plan on expanding into in the future.
Many inventory management systems integrate with a variety of platforms– for example, Cin7 works well with QuickBooks, Shopify, WooCommerce, Amazon Seller, Salesforce, and MailChimp, while Fishbowl adds DropBox, SquareSpace, Salesforce, and Zoho to their roster of Amazon, Shopify, and QuickBooks. Be sure to do your research and be thoughtful about which platforms are right for your sales needs before committing to an inventory management system.
Finally, you will want to consider the specifics of each platform. What are your goals? Your challenges? How can your inventory management system serve your specific business needs?
For example, there are several different ways to track your inventory. Of course, items can be deducted manually by sales and shipping staff. However, many platforms offer barcoding, in which employees can simply scan the item to deduct it from inventory, mark it as packaged, or confirm that a package is off for shipping. More complex platforms offer RFID, or Radio Frequency Identification. RFID wirelessly tracks items’ progress throughout the warehouse without needing to scan and track packages by hand.
Other platforms may offer automated reordering, custom cut-off points, or inventory catalogs. Before beginning your inventory management system search, it may be helpful to sit down and list out which features you think will be most helpful for your business needs.
The options for inventory management platforms are nearly endless and can be difficult to understand. Though we recommend a deep dive into platform options to find a platform match specifically for you, a few inventory management systems stick out as high-quality options.
Fishbowl (one-time $4,395 licensing fee, with additional subscription for support and updates)
Fishbowl sticks out as one of the more user-friendly and cost-effective options for quickly growing businesses. It provides easy-to-use set-up resources, training videos, and support, as well as providing more complex features such as forecasting, eCommerce integrations, and business intelligence tools.
NetSuite ($99 per user/month + $999 licensing fee/month)
Though on the more expensive side of this list, NetSuite is a great option for businesses of all sizes, offering multilingual support, integrated point-of-sale tracking, and forecasting, and more. Their comprehensive platform also includes accounting and marketing programs, seamlessly integrating a variety of business needs into a single platform.
Looking for an inventory management system a new start-up? Zoho may be the platform for you. With multiple pricing, currency, and language options, Zoho can increase capabilities as your business grows and your ability to invest in high-quality inventory management software grows with it.
Cin7 has an extensive list of platform integrations makes it well worth the price with any business selling on a wide variety of platforms. This inventory management system precisely tracks revenue, payments, and pricing without sacrificing more advanced features like forecasting and 24/7 support. Cin7 is a great option for businesses of every size with complex inventory.
Next Steps: Finding An Inventory Management System That Works For You
Inventory management systems are a great option for any businesses looking to tighten their belts and minimize costs during periods of economic turmoil. They can assist in promoting growth, maximizing efficiency, and ensuring that no product goes to waste. Inventory management systems are not, however, one-size-fits-all approaches. Every business should take a moment to delineate their needs, goals, and must-have features (as well as setting a reasonable budget) before diving into the complicated, but rewarding, world of inventory management.