Exploring the Different Ways to Manage Inventory

Why is Inventory Management Crucial to Any Business?

A business’s profitability is determined by whether they practice good inventory management. When businesses have too little inventory, they are unable to meet customers’ expectations, and this dampens the customer’s willingness to buy again. Although businesses try to supply enough available products, having good inventory management allows you to make decisions more precisely and accurately. As for businesses that overstock their items, they risk losing money and limiting their cash flow for business growth. Additionally, it costs more to keep track of excess inventory. When businesses prioritize accurate inventory, they know how much to order to fulfill their customers’ needs without overstocking. Proper inventory management is possible with the right software and is worthwhile for a business’s success.

All businesses that work with inventory can benefit from an inventory management system. Manually tracking sales and purchases can get overwhelming with other responsibilities like keeping up with accounting books, sales commissions, and maintaining client relationships. Inventory management software will help manage the manual labor of internal operations. Instead of investing in multiple different tools to manage your inventory, ERP software provides an all-in-one inventory manager. ERP software includes accounting, warehousing, contact management, commission processing, sales analysis, and more. ERP for inventory management is efficient for distributors that want to grow, automate manual processes, or increase productivity.

Ways to Manage Inventory

There are many ways a business can manage inventory. A small startup business can do it manually when they are only dealing with a few products. But, as distribution businesses begins to grow, there is a need to use inventory tools to help with hundreds of products.

Pen and Paper (Almost Free)

Using Pen and Paper is simple for a very small startup. First, you’ll need to sort your inventory according to its category since every type of inventory has an ideal use. For instance, you handle packaging materials and finished products differently. You can note down the quantity of each type of item, then categorize by the different types of inventories. The problem with pen and paper is that writing can be difficult to see, your formatting would be disorganized, and paper is easily lost. We would not suggest manually tracking inventory this way; instead creating tables would make a visual difference and MS Excel can help with your inventory management.

Microsoft Excel (From $6.99 to $139.99)

To manage inventory in Microsoft Excel, you’ll need to start by creating a new spreadsheet. Categorize your inventory type as columns and add each product that you carry into these columns. For each product, you can add product name, description, list price, and serial number. You can also add inventory quantity, value, and stock location. Although you may have entered all the product details, you’ll still need to update your spreadsheet continuously. It’s a time-consuming process and being behind on your inventory count can cause delays in supply. Excel spreadsheets are also not ideal for data that is more than a singular set of number. Plugging in data such as stock-keeping units (SKUs) would take up the entire day. Another drawback on Excel is that the only automation is formulas, pivot tables, and conditional formatting. For inventory count, there is no automation for updating inventory counts across multiple sales channels. You can’t record your inventory changes in real-time and many people can’t be on the same spreadsheet at a time. Data that is manually uploaded is in past-tense, meaning your business will be slow to make timely decisions. Manual data entry is also prone to human errors. On average, 88% of Excel spreadsheets have 1% or more errors in their formulas. Real-time software designed to track inventory can protect your business from human errors as much as possible.

Inventory Software and Manual Processes ($10,000)

Another option is to find inventory management software to track inventory across multiple sales channels such as eCommerce, tradeshows, walk-in customers, and more. Managing manual processes becomes easier when sales channels have access to product availability. Now that you can quickly track information from the inventory software, you can manually email and share data with your 3rd party logistics (3PL) partners. When 3PL partners ship an order on behalf of the business, they should email you the receipts for you to update in the inventory system. This manual approach is best suited for smaller wholesale distributors with a limited number of transactions and SKUs. However, it is more ideal to have your inventory management system inclusive with your accounting system. This way, you will not need manual data entry when updating product stock.

ERP Software ($15,000)

Another option is using an all-in-one inventory management and accounting ERP system that is compatible with your 3PL partners’ systems. There are more opportunities for automation when your ERP software can integrate with your 3PL partners’ software. Automation eliminates manual processes and the risk of human error. Electronic Data Interchange (EDI) allows your ERP software to connect directly to each of your 3PL partners’ software. Instead of communicating back and forth with your 3PLs and updating your inventory system, the ERP software can directly exchange information with the 3PLs’ software. Now, your inventory updates are truly automated and in real-time. When you compare the cost and time associated with both options, you may save more resources using an all-in-one ERP software. The efficiency in data exchange is especially beneficial for a high volume of orders and transactions.

The ROI with ERP software is the expected cost versus its benefits and features. The benefits of ERP for Inventory Management include:

Full and Seamless Integration

ERP software is integrated with all channels of the business in real-time. The system will automatically calculate the changes made when a shipment arrives or a customer purchases inventory.

Better Identification of Products

It’s easier to identify products when you can track its movement based on the SKU or serial/lot numbers. For Food & Beverage or Pharmaceutical industries, tracking a product’s movement can help avoid expiration and catch illegitimate products. Immediate access to lots/batches can also be helpful during product recalls since you will know what supplier the product came from, and which customers bought them.

Data Security

Cloud-Based Software provides security to your data and is budget-friendly since it does not take up local space. Saving manual inventory management on a computer’s local drive does not offer the security and flexibility of an ERP system on a Cloud.

Improved Decision Making

Access to data such as the quantity of a product sold last year can determine forecasting measures. Buying extra stock can harm inventory management and the flow of goods. ERP software gives you information for better decision-making. For instance, the Inventory “Hits” Report highlights the number of times a product appeared on an invoice during a specified period.

Enhanced Customer Service

ERP software is designed to produce any report you build while seeing sales trends. You can gain more insight on purchasing trends in programs like SQL Server Reporting Services or Power BI. Easy access to trends means you can see what customers like and make sales more efficient.

Increased Automation

Automatic price updating and automating purchase orders reduce mistakes liable to human error.

Digitalization and Eco footprint

Utilizing ERP software can control overstock on hand and prevent waste. ERP can identify products by lot number to determine expiry dates, early spoilage, or leakages. Also, migrating to the Cloud can save 30 to 40% of total software ownership costs.

Download our Inventory Management Technique eBook to learn more about how inventory management has a direct impact on your success.

ERP software is the best choice for managing inventory because believe it or not, it’s budget-friendly for businesses dealing with a large influx of orders and transactions. Blue Link ERP provides all-in-one accounting and inventory management software. Contact management software is included, as well as EDI capabilities for direct data exchange with vendors and suppliers. Blue Link ERP is best suited for wholesalers, distributors, and those that sell through retail and eCommerce channels. Blue Link's all-in-one solution eliminates the need to manually manage data because it is a full circle software that is automated and real-time.