Automated Inventory Management Systems: How They Work and How to Use Them

Aaron Thompson
September 29, 2023

The inventory process has come a long way since the first recorded forms, where people used “tally sticks” to count their revenue1. Although it eventually progressed to using pen and paper systems, the procedure was inaccurate and often resulted in costly mistakes.

With the help of new technological advancements, businesses can opt to integrate traditional methods, such as manual inspections and counting, with automated inventory management systems that can accurately track their items while reducing human error.

This guide will discuss how these new systems can help retailers better manage products and provide tips on choosing the right software for your business.

  • Automated inventory management systems: How they work and how to use them
    • What are automated inventory management systems and how do they work?
    • Inventory management systems vs. manufacturing tracking vs. warehousing
    • Benefits of automated inventory management
      • Access to inventory analytics in real-time
      • Better time management
      • Keeps you current with industry competitors
      • Reduces inventory miscalculations
    • The challenges of implementing automated inventory management software
    • How to choose an automated inventory system solution
    • Features of automated inventory management software
      • Automated order management
      • Automatic stock transfer
      • Barcode and QR scanning capabilities
      • Inventory alerts
      • E-commerce integration
      • Real-time data reporting and forecasting
    • Automated inventory management trends to watch for

What are automated inventory management systems and how do they work?

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For companies eager to streamline their process, implementing an inventory management system is a must. These valuable tools help monitor product stock levels, decreasing the need for human intervention. But their functionality doesn’t stop there. From recording dropshipping orders to forecasting, inventory management software solutions make the entire business run more smoothly and can help reduce costs.

Inventory management systems collect data across several different facets of the business, including the organization and tracking of inventory and associated processes. This helps keep your processes and data up-to-date and streamlined for higher productivity.

There are also critical features that make this software invaluable to many industries:

  • Real-time tracking: One popular feature of these systems is their ability to provide immediate updates on stock levels, which can help you instantly see when products need to be re-ordered, avoiding costly stock-outs.
  • Automatic re-ordering: This feature can be set to re-order products automatically when the inventory reaches a certain threshold.
  • Barcode scanning: Barcode and RFID technology are often integrated into inventory management systems for quick and accurate tracking of goods as they enter and exit the facilities.
  • Inventory forecasting: The inventory forecasting process can help analyze data to predict future demands. This feature can help your business reduce overstocking or understocking.
  • Integration with other systems: Most inventory management systems can seamlessly integrate into existing software, such as e-commerce platforms, making other processes more efficient.

In helping to organize, track, forecast, and reorder inventory, these systems can ultimately provide better control over your stock and products. When you’re ready to meet customer demands without being over- or-under-stocked, you’re better able to save time and money, as well as improve customer service.

Inventory management systems vs. manufacturing tracking vs. warehousing

While inventory automation offers many benefits, other systems also contribute to the success of business operations, such as manufacturing tracking software and warehouse management systems. Let’s take a look at the key features of each:

  • Inventory management systems primarily manage stock levels and keep track of items to optimize inventory. This includes real-time tracking, automatic re-ordering, and forecasting to avoid profit losses.
  • Manufacturing tracking systems help monitor the production process, track raw materials, and guarantee quality control.
  • Warehousing systems monitor where products are placed in the warehouse to avoid misplacement and ensure timely shipment for order fulfillment.

These tech solutions often work together to establish precise product management. Due to the accuracy and efficiency offered by inventory automation, retailers, e-commerce, and large businesses will find them valuable to their operations.

Benefits of automated inventory management

The benefits of using automated systems include accuracy, real-time insights, increased customer satisfaction, and productivity.

In fact, according to a study by Zapier, 2 out of 3 workers have reported an increase in productivity2, and 65% are less stressed due to automation. This is excellent news for employees who were initially fearful of AI and automation taking over their jobs.

Let’s take a further look at how software like web-based inventory management systems can improve and benefit a company’s internal processes:

Access to inventory analytics in real-time

When handling large amounts of goods and orders, accessing business analytics in real-time is vital to making quick decisions, identifying the latest trends, and adapting to new changes. This will allow management and personnel to avoid making decisions from outdated information, which can negatively affect the entire operation.

Better time management

One of the most significant advantages of automated inventory management is its ability to improve the company’s time management. It helps to streamline the process by lessening manual procedures. In turn, it frees up valuable time for employees to redirect their efforts to other essential tasks that will provide more growth opportunities, such as customer service and product ideation.

Keeps you current with industry competitors

By incorporating new technologies in your business strategies, you can ensure that you’re on the same playing field as your biggest competitors. New technologies like inventory management software will detect the bottlenecks that can slow down your operations, such as manual data entries and delays in shipping and receiving. These changes can also ensure you’re one step ahead and able to consistently deliver the best products or services.

Reduces inventory miscalculations

Manual inspections are more likely to result in mistakes such as inventory miscalculations, higher inventory waste, and misjudgment with forecasting. To reduce these human errors, it’s best to integrate automated systems to create accurate data reports and alleviate the stress placed on workers who may become overwhelmed with the amount of work they must do.

The automated collection of data allows for a reduction in manual hours spent doing that work. The return of this time and bandwidth then provides companies with efficient protocols that help create better working conditions and higher productivity.

The challenges of implementing automated inventory management software

Although plenty of benefits come with including automation in your systems, inventory management software isn’t errorless. That’s why it is essential to be aware of some of the more common challenges in inventory control, as well as software complications, that you may encounter, such as:

  • Outdated data: If your data is not current, it could result in miscalculations. To minimize these issues, you must ensure that all information imputed is up-to-date and pertains to your business needs.
  • Incompatibility with your current systems: Before committing to new inventory management software, you must ensure that it’s compatible with your existing systems. If they aren’t compatible, you could end up with outages, or missing or incomplete data. Be sure to check with your providers and test out your chosen software before purchasing.

Deciding on the best and most compatible system for your business can take time due to the many available choices. Researching the most reputable inventory management software company is crucial for your company’s success.

How to choose an automated inventory system solution

Now that you have a better understanding of the benefits and challenges of automated inventory software, it’s time to consider several factors before choosing a software solution:

  • Available features: Consider all the available features and ensure they will meet your business’s needs. Look for these key factors: the ability to track inventory levels, workflow management, and protecting sensitive data.
  • Scalability: Choose software that can grow with your business. This will make it easier for you to fulfill increasing demands and expand your operations.
  • User-friendly interface: Select a system that can accommodate a variety of technical abilities to decrease training time and increase worker productivity.
  • Support and training: Look for a provider offering personalized training and customer service. This will allow your team to utilize the system at its highest capacity. It will also reduce confusion and frustration when learning and implementing the new system.

Remember, this system can hinder or contribute to your company’s success, so do thorough research before integrating them into your organization. Initially, it can be a tedious process, but it will pay off when you can transition to automation with fewer errors and miscommunications.

Features of automated inventory management software

To fully utilize the capabilities of an automated inventory system, you must integrate features that are compatible with your business and allow you to achieve a competitive edge in your industry. Let’s explore some key features that make inventory management software a must-have in any business.

Automated order management

One of inventory software’s primary responsibilities is automating the ordering process. It allows warehouses to instantly detect when stock is low, automatically re-order products, and share customer information in one place. Specific data is also accessible to consumers and vendors, allowing both parties to understand the order status in real-time and resulting in better customer service and vendor relationships.

Automatic stock transfer

A necessary task that most warehouses must perform is transferring inventories to various facilities. This is done to optimize the storage space and to fulfill re-ordering needs for varying locations. The automatic stock transfer feature can streamline this process by removing manual data entries and reducing logistical headaches.

Barcode and QR scanning capabilities

Most inventory items come with a scannable barcode for QR codes, which helps track and manage products. These features are critical to business operations since they help to prevent losses and expedite the stocking and replenishing process before inventory runs out. Make sure to choose software that has the capability to scan barcodes or QR codes to get an accurate account of your products.

Inventory alerts

To avoid costly mistakes, choose an inventory management software that enables you to receive critical notifications such as low stock, bulk orders, new shipments, overstocking, and more. Receiving these alerts will allow you to take immediate action and keep up with changing demands or circumstances.

E-commerce integration

With the popularity of online shopping, e-commerce stores have seen higher demand3 and often need to manage various locations to meet customer needs and fulfill orders. An automated inventory management system has the capability to integrate with other software, like e-commerce programs. This will help your business keep up with customer demands and reduce stock-outs without pausing your online operations due to time-consuming manual changes.

Real-time data reporting and forecasting

Inaccurate data reporting can be costly due to miscalculations, resulting in poor decision-making that impacts your bottom line. Inventory software gives you on-demand access to current data reporting that provides insights into the status of your inventory.

You can then use this information to improve the quality and accuracy of forecasting and ensure you’re maintaining the right inventory levels for your business. You can also ensure you’re only paying for the space you actually need, helping to cut down on expenses. Further, having quick access to real-time inventory data can help you make better-informed decisions for your business overall.

These features are just some of the unique ways an automated inventory management system can help your business grow without sacrificing accuracy and efficiency. With the right software solution, you can minimize labor costs and keep up with inventory demands.

Automated inventory management trends to watch for

In an ever-evolving technology landscape, new trends are constantly surfacing. You must be able to keep up with these changes to stay ahead of your competition and keep up with your customers’ expectations. Here are a few upcoming inventory management trends that you need to keep an eye on:

  • Machine learning and AI integration: Many legacy inventory management systems still rely on outdated data. With machine learning and AI, businesses can use these autonomous tools to accurately predict demands, detect weaknesses, replenish products, and analyze data for better customer satisfaction.
  • Cloud technology4: Cloud solutions allow businesses to access data, files, and software from various locations through internet-connected devices. This feature benefits hybrid and remote workers who can access the software at any time and place.
  • Internet of Things (IoT) sensors5: Another growing trend is the IoT, which embeds physical items with sensors that can collect data and send it to other systems on the internet. This is helpful for inventory management, as IoT sensors can help identify an item’s location and exact usage while eliminating manual inspections and data entry.
  • Consignment inventory: This popular trend allows manufacturers to consign their products to retailers without upfront fees. Retailers will then handle the marketing and only provide payment when the products have been sold.

These trends can be monitored by networking with industry leaders, keeping up with your competitor’s latest technologies, and attending trade shows. It’s essential to embrace the latest technologies to ensure your business is empowered to succeed.

If you are interested in learning how Fishbowl’s flexible inventory management solution can help your business now, you can book a demo.