Inefficient inventory management can result in higher storage costs, reduced sales, and lower customer satisfaction ratings. Shortages, overstocks, inaccurate inventory tracking, slow demand forecasting, and inefficient warehouse management reveal the importance of inventory management solutions that implement real-time data, automated management solutions, and up-to-date demand forecasting for any modern business.
Below, we explore the features of an effective inventory management solution, as well as the benefits of employing one. With inventory distortion costing businesses $1.8 trillion in 2020 alone, the importance of optimized inventory management processes in reducing costs and improving customer service cannot be overstated.
The true cost of inefficient inventory management
Any business driven by inventory – including e-commerce retailers, brick-and-mortar stores, and any business that keeps an equipment inventory – can benefit from optimizing its management solutions. While small businesses often think of supply chain management and inventory management as the same process, inventory management presents unique challenges whose solutions could improve profits and increase customer satisfaction.
By simply reducing stock outs and overstocks, businesses can experience a 10% drop in inventory costs. Additionally, state-controlled inventory taxes tie directly to inventory management, since unoptimized storage can lead to increased business property taxes for your whole operation.
Benefits of optimized inventory management
Post-pandemic changes to demand forecasting have caused approximately 90% of inventory-focused businesses to reevaluate their supply chains. But higher profits don’t only stem from reduced overages. Accurate inventory tracking can lead to streamlined purchasing and delivery processes that improve customer satisfaction.
The more accurate the monitoring system, the fewer losses the business will suffer due to errors, stock outs, and inefficient storage. Inventory management solutions that address these issues should be personalized to the business’s existing infrastructure to improve processes, rather than merely automate inefficient ones.
To do this, inventory management software should provide several key features that focus on how orders are stored, tracked, ordered, delivered, and reported.
Key features of an effective inventory management solution
Rebooting your inventory management with a tailored software solution requires the right features. Once the processes are in place, many modern solutions can automate the more labor-intensive aspects of management, while still responding to your new strategies. The right solution gives you the tools you need without taking away your control.
The key features that will make management software effective in 2023 and beyond include:
- Real-time inventory costing and tracking
- Stock history reporting, including low stock alerts
- Digital labeling with barcode support
- Inventory syncing across multiple warehouses
- Centralized database management
- Integration with popular shopping apps, like Amazon and Shopify
- Automatic reordering
- Detailed reporting metrics, including customer behaviors and buying patterns
- Business performance tracking
- Shipment integration with popular providers
Tips for successful inventory management
Optimized inventory management solutions use these features to integrate with a business’s existing supply chain.
- Choose your control system. If your stock comes from your facility, the inventory should be controlled internally. Conversely, if you use a fulfillment center or drop shipper for inventory management, your software solution should integrate with their systems.
- Collect inventory data. This data can be a valuable tool, but only if you choose the right metrics to manage. An automated system can be set up to record product numbers, QOH, storage locations, product cost tracking (both wholesale and retail), and other supplier information. Integrated management solutions can track this information as spreadsheets to give you the tools you need to track your process and respond to changes.
- Organize physical storage areas. Grouping product areas in your storage facilities by items frequently bought together can reduce turnaround times and improve customer satisfaction. An internal SKU system, which many software solutions can manage, can unify your storage organization.
- Track inventory levels. Properly tracked inventories can save a business on yearly tax costs in addition to preventing shortages and overstocks. While most businesses do a manual count at least once per year, an automated solution can perform cycle counts of certain inventory sections, as well as spot checking for random stocking or storage errors.
Many small businesses may think they can avoid inventory management, just as large businesses may believe their systems are as good as they need to be. However, businesses of any size can benefit from software solutions that track, record, and optimize this all-important step in their supply chain.