Types of inventory systems

Kent Gigger
December 3 2022

There are many different types of inventory management methods, systems, and solutions companies use to manage their warehouses and order fulfillment processes. Essentially, though, the application of these systems can be bucketed in one of two ways.

  • By Hand
  • By Barcode Scanner

By hand

By default, many small businesses keep track of their inventory manually, or by hand, because that is how they started out, and they have carried their legacy methods with them through the years. It is natural for a startup to keep track of their inventory by hand, because notepads, pens, pencils, and Excel spreadsheets are inexpensive. Cost is a major issue to extremely small businesses that do not have resources to afford a more complex inventory management system, nor do they need one. A startup most likely does not have multiple locations to worry about, or a huge amount of inventory to track. It is only as a small business grows and moves past the initial stage that suddenly they find themselves in need of an improved inventory system.

As we have explained, small businesses often use a manual inventory system, because they already have access to Excel spreadsheets, and they do not have a lot of inventory to manage compared to much larger companies. For startups, Excel spreadsheets can organize data on purchases, inventory levels, and reorders. They can do this because they do not have an enormous volume of purchases, inventory levels, or reorders to monitor, but this will eventually change for any successful business.

In the long term, manual inventory systems can become resource-heavy and, expensive way to keep track of inventory due to the amount of time and the general lack of efficiency involved in inputting data, monitoring for accuracy, reconciling against financials, and correcting errors. It is painfully slow to attempt to manage inventory by hand. It requires hours and hours of physical cycle counts to make sure nothing has been forgotten and that the numbers on the books are actually accurate. In business, things are in a constant state of flux, and so warehouse managers have to record every big and small change they make to their inventory as sales orders come in and purchase orders go out.

Keeping track of inventory by hand is also problematic because it makes it difficult to forecast changes in supply and demand, which can result in product shortages and overstock. This can be disastrous if it leads to shortages at times when your customers are earnestly seeking certain products from you. If they go away empty handed, you can bet that this will not reflect favorably on your business in their eyes. Excel is simply not designed to help you generate in-depth reports on how to make the best use of your limited resources to manage your inventory.

By barcode scanner

For most companies, adopting a barcode inventory system is a big step up from doing everything by hand. Using barcodes and scanners can save a lot of time and create efficiency in your warehouse workflows. Whether you use brand-name bard code scanners or opt for an Internet-enabled mobile devices, barcode scanning can become primary data entry method across your operations. By simply scanning barcodes on incoming and outgoing inventory, your inventory management platform is automatically updated with changes in quantity levels, and critical processes, like cycle counting, can be completed in a fraction of the time it takes when using manual methods.

Barcode scanners can be used to quickly order more of an item in your inventory when the quantity gets too low. This can be done manually, by simply scanning the item’s barcode and inputting in the quantity you want to reorder. Fishbowl will then generate a purchase order for the appropriate vendor. This can also be done automatically with Fishbowl’s automatic reorder point functionality. When an inventoried item reaches a low-quantity threshold (set by you), the system can be programmed to automatically issue a purchase order, without your staff needing to intervene.  Essentially, barcode scanners allow you to keep inventory moving in and out of your warehouse at a rapid rate, saving you time and money.

Fishbowl is compatible with a variety of barcode scanners, offering a more efficient route to create purchase orders, cycle count inventory in the warehouse, reorder products on a regular basis, and track inventory in your warehouses. Fishbowl also integrates seamlessly with QuickBooks, ensuring everything you enter into Fishbowl is recorded in QuickBooks. For example, when you fulfill a sales order, QuickBooks will generate an invoice to include with the package when it is shipped, and QuickBooks will also record the sale in the general ledger.


There are two main inventory systems types:

  • By hand – Spreadsheets, hand notes, and other manual means.
  • Barcode scanner – An automated software solution accessible on mobile devices.
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