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What makes a good inventory management system?

Updated: Oct 22


Many organizations have shifted from using an inventory management system merely to keep track of inventory and report on it to plan, project, and fulfill client orders to increase profitability. How do you know which solution will work best for you and your company with all of the alternatives available today? What characteristics should you be searching for? For wholesalers, distributors, online retailers, and manufacturing firms, inventory management systems assist operations such as acquiring goods, monitoring sales patterns, and on-hand inventory availability, as well as product disposal. Inventory management is an important aspect of Supply Chain Management. Understanding the history of a system and the firm's installed base of users is critical when choosing the proper system for your organization.

Features to look for in a sound inventory management system

The top six most essential inventory management characteristics to look for when choosing a system are as follows:

  1. Inventory control is responsible for items already on hand in the warehouse and is an important part of supply chain management. Inventory management software may classify items by category, location, SKU (or serial number), audit data, produce real-time reports, and search, filter, and browse products.

  2. Data from other system sections, such as inventory control, are governed by inventory management features. That's not all; inventory management also deals with the business activities that occur before goods arrive at a warehouse and how it gets to other locations. Tools for multi-location warehouse management and interfaces with other software or enterprise resource planning (ERP) platforms are among these capabilities.

  3. You must track the status of items and resources in the supply chain to apply inventory management. Continuous inventory tracking elements aid in the automation of manual operations. When a receipt or invoice is created, for example, the system produces a tracking number automatically. Businesses may better manage customer connections by communicating what's in stock or shipment time frames using tracking integrations with third-party logistics (3PL) providers paired with an email solution.

  4. Barcoding software aids in the elimination of data input mistakes as well as the automation of business processes that involve connecting with other elements of the system. Inventory processes are made faster and more precise by collecting, storing, and organizing digital inventory data. Digital documentation and reporting functions can be integrated with barcoding software. Inventory accuracy is improved, back-office operations and stock restocking are sped up, and paperless documentation is possible using mobile barcode scanning equipment.

  5. With inventory optimization, you can take your inventory planning to the next level. A simple inventory strategy may be made more sophisticated. You can utilize technologies that give automatic reporting, inventory trends, and a view of changes across the whole supply chain instead of traditional ordering formulae and a simple ordering procedure. This data allows you to match supply and demand better, allowing you to maximize the inventory on hand.

  6. Inventory alerts are triggered by various modules, which assist eliminate waste, improve inventory financials, and manage customer expectations. Automated email or SMS notifications warn you of low inventory levels, shipping and supply chain delays, and other features. Inventory notifications give sales forecasting, materials planning, shipping logistics, and supplier management an extra layer of operational control.

Inventory management features to consider

Modern inventory management systems arose due to advancements in computers, software, databases, and IT operations. In addition, third-party application integrations were previously impossible due to the move to web services, application-based development, and APIs. As a result, inventory management software can now handle a wide range of inventory-related business tasks. Consider the characteristics of the following contemporary inventory management systems, which you can adapt to your business's needs and use to accomplish more than just monitor inventory.

1.Cloud-based software is a cost-effective and scalable solution. Cloud computing eliminates the need for organizations to hire dedicated personnel to manage and maintain their systems. Automated backups, secure access, and real-time collaboration across multiple locations are all possible with cloud infrastructure.

2. Automated inventory controls and reporting, digital labelling, GPS tracking, Bluetooth, and RFID-enabled tracking are all part of the Internet of Things trend. The technology has also been utilized to increase theft and loss of security.

3. GPS-enabled RFID tags and digital barcoding were produced as a result of the shift to digital labelling. Organizations may now network portable devices with databases for real-time tracking and paperless documentation using digital inventory data.

4. Wireless devices are used to run mobile apps. To speed up multi-location inventory operations, interact with back-office systems and central databases. Real-time tracking and inventory alerts and notifications are possible with mobile devices (running iOS or Android).

5. Virtual agents (or chatbots) driven by artificial intelligence alter how firms communicate inventory availability to eCommerce shoppers. They communicate out-of-stock goods, provide suggestions based on an active shopping cart or user history, and automate backorder fulfilment using machine learning algorithms and web-based services. Machine learning can also provide sales data trends, which are important for improving online consumer engagement metrics.

Machine learning also has the capability of improving internal inventory controls and preventing shortages. With real-time data analysis and reporting, the system may help enhance forecasting and report on inventory patterns that are difficult to follow and anticipate manually.

Choosing the right inventory management system for your business

It's critical to ask the appropriate questions and clarify your requirements before choosing an inventory management system. Ask yourself the following questions before assessing certain features:

1. Do you need to replace your current system with a more integrated one? Is it possible to integrate standalone inventory management apps with your existing systems via web services or an API? Before investing in a new platform that involves training and deployment across several business divisions, for example, inquire about third-party connectors for your present accounting software.

2. It's critical to evaluate the impact of change while implementing new software. Make sure you budget for the installation of new features as well as staff training. With this in mind, inquire about outside vendor support contracts and training for your staff from possible suppliers. Will you be able to handle an in-house rollout with your current IT infrastructure and experience, or will you need to outsource it? When it comes to reducing manual inventory chores, you'll want to be prepared for change management. Assign someone to assist you with this.

3. When comparing systems, make sure to inquire about any hidden costs that you might not be aware of. The following are some good questions to ask:

  • In a billing period, how many orders can you process?

  • How many SKUs do you think you can handle?

  • Do you require any special hardware for your inventory management system?

  • Will you keep your data and apps on-premises or in the cloud?

  • What is the price of a licence for a given number of users?

  • Will there be any additional expenses for software maintenance or updates in the future?

  • What is included in the first and ongoing training, and what is not?


An inventory management system may help keep consumers satisfied by automating procedures, improving inventory practices, and ensuring that the items they desire are always in stock. However, decision-makers have many alternatives, and choosing the best one takes time, study, and thoughtful questioning.

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