There are hundreds of inventory management systems available. These programs are designed for all types of businesses: programs for small retailers, programs for big enterprises, programs for specific retail verticals, and programs for multi-channel retailers, to name a few. This buyer’s guide is written to help retail store inventory software buyers understand this complex, fragmented market.
Here’s what we’ll cover:
What is Inventory Management Software?
If you have ever been frustrated by a retailer who has every size of an item in stock but yours, you know the importance and value of having rigorous inventory management in place. On the most basic level, stock management software helps users keep accurate count of stock levels. The primary goal for this application is for users to re-order items before they become fully sold out. Having adequate levels of inventory helps users capitalize on sales opportunities. Of course, it is important that retailers don’t order too much of an item and face not being able to sell it all. Robust systems can help users strike that delicate balance of ordering just enough but not too much.
Core features include sorting items by department or type, establishing of thresholds for minimum quantities and alerts when stock levels reach those thresholds. More advanced systems might include a matrix for tracking items by size, color and style, open to buy modules or integration with purchasing modules to enable automatic generation of purchase orders.
Best-of-breed programs such as Fishbowl can be implemented as standalone systems to manage only inventory. However, many buyers will choose to implement a program that is part of a suite that may include point of sale (POS), warehouse management (WMS), accounting, e-commerce or customer relationship management (CRM). Which type of system you implement will likely depend on your desire for integration with other modules or potentially the size of your company.
What Type of Buyer Are You?
You will want to understand what type of buyer you are before evaluating a retail inventory system. We have found that nearly 90% of retail buyers fall into one of the following categories:
- Small buyers. Single-store retailers comprise the bulk of this category, but most retailers with fewer than five stores will belong here. These buyers’ needs are typically straightforward and are met by most off-the-shelf POS systems.
- Large, integrated suite buyers. While their needs are conceptually similar to their smaller counterparts, larger retailers will require more robust, scalable programs that can share data across a wide network of locations. They are also looking for programs that can tie in POS and possibly accounting or warehouse management.
- Large, best-of-breed buyers. These buyers work for larger retailers that have already made substantial investments in existing POS or accounting systems. They are looking for a standalone system that can integrate with existing applications without replacing them. They are often interested in more advanced modules for open to buy and merchandise planning.
- Multi-channel retailers. These buyers conduct enough “brick and mortar” and online sales to warrant a system that can be managed across multiple channels. These systems will typically need to integrate with POS systems and online shopping carts. Higher volume and multi-location retailers may prefer data to be updated in real time, although they should expect a substantial increase in their investment when evaluating a retail inventory management system.
The Vendor Landscape
The software becomes much less cluttered when buyers approach it with their respective category in mind.
|This type of buyer...||Should evaluate these systems|
|Small buyers||Comcash, Retail Pro, Microsoft RMS|
|Large, integrated suite buyers||Retail Anywhere, Celerant, VuePoint OneVue|
|Enterprise suite buyers||Epicor, Cybex, and Jesta Vision I.S.|
|Multi-channel buyers||Counterpoint, RunIt RealTime, Retail STAR|
Market Trends You Should Understand
Various software trends are impacting the market. The primary trends include the following:
- Automated replenishment. Advanced inventory control tools such as vendor managed inventory and electronic purchase orders enable retailers to be proactive about keeping items fully stocked. Smaller retailers are learning from larger enterprises and beginning to use these tools that have previously been affordable only to the biggest companies.
- RFID. Another technology that has traditionally been used only by the biggest companies, RFID is working its way down market and is within reach of many mid-sized retailers. These tools enable managers to update inventory levels much faster and more accurately, improving efficiency in a number of bottlenecks along the supply chain.
- Software as a Service (SaaS). Just about every application within the retail software industry is impacted by the universal trend towards SaaS. Having a web-based system enables managers to share data easily across multiple locations, access system remotely, avoid large upfront costs and implement a robust system without complex hardware infrastructure. We expect the presence of SaaS solutions in retail to grow steadily over the next several years.
- Mobile devices. A January 2012 study from RIS News found that while only 6 percent of retailers are currently deploying tablets in their stores, 28 percent are currently testing tablets and 31 percent said they will be testing by the end of 2012. Tablet devices present a great opportunity for retailers to provide a mobile checkout method, merchandising solution and way for associates to keep inventory accurate and up-to-date. Retail vendors such as Epicor and Radiant Systems (now NCR) have released iPad applications that can look-up inventory and help associates manage replenishment and stock-level monitoring. RSR Research reports one aspect slowing the deployment of retail applications via mobile devices is a lack of wireless infrastructure. As more retailers improve their in-store technology and solutions become available, mobile devices will increase in popularity.
- Online/offline integration. Online retail and e-commerce are becoming a vital component of retailers’ business strategies--and in some cases, the most important part. A problem for these retailers is the difficulty in counting and replenishing stock for both physical stores and online. An RSR Research survey found that retailers should put a large amount of planning into how they count and control inventory, as an alarming 72 percent reported overstocking slow-moving SKUs and 52 percent said they understocked fast-moving items. RSR Research found that today’s successful retailers view stores as distribution centers and online inventory as sufficient for in-store fulfillment.
Benefits & Potential Issues
A strong inventory control system should improve the retail organization from the bottom up. Most retailers should expect the following benefits when implementing and using a system properly.
- Efficiency. If you have ever counted stock levels at the end of the day, week or month, you know what a labor-intensive task it is. Programs eliminate the hassle of counting and keeping track of stock levels, saving time and allowing employees to focus on other tasks that grow the business.
- Accuracy. Diligent tracking of stock levels in a system enables users to know exactly how much of each item is in stock, which can get surprisingly difficult to manage without a formal program. A system will also help retailers plan purchase decisions based on actual historical sales data and improve the performance of their forecasts.
- Less shrinkage. By tracking inventory formally and updating the system as items or sold or distributed to other locations, retailers should find that shrinkage naturally diminishes. Systems help users eliminate profit loss and headaches due to employee theft, customer theft, ringing up sales for the wrong item and not recording sales properly.
- Improved visibility. Inventory control software enables retailers to view stock levels at other locations and from remote locations, freeing cashiers from time-consuming tasks of calling other locations to ask if they have particular items in stock. It also provides visibility on the executive level to item counts and trends across the enterprise.
As with all purchases, there are potential issues to consider as well. The first risk associated with using these systems is that they won’t be used properly by employees. This puts owners in the frustrating position of having paid for a system without reaping any of its benefits. The most common reason why employees would not use a system is because of its complexity; we have found that adequate training typically solves this issue. The second most common issue we hear about is data simply “not adding up.” This issue is likely due to the system being outdated, used improperly or not integrating properly with other systems that access its data (often accounting or e-commerce systems). Buyers will want to ensure that implementations are smooth and that integrations are maintained.
Costs & Return on Investment
Retailers should find that the costs of formal retail inventory programs have never been lower, due primarily to competition among vendors and declining hardware prices. The costs that buyers face will vary widely. Small retailers implementing POS systems will likely find a number of affordable options, while larger retailers looking for more advanced systems will face a larger spend. We speak to many buyers who prefer real-time inventory control across multiple locations. They should note that real-time systems are typically much more expensive than systems that update stock levels once per day, which is sufficient for most small and mid-sized retailers. Most users who implement a system that is adequately sized for their needs should be able to generate a positive return on their investment. The costs of improper inventory control are deceptively high and can be easily avoided with a formal program.