Inventory Management Software
Inventory Management Software Quick Summary
Inventory management software enables businesses with large volumes of physical products to keep track of those products through various stages along the supply chain. Features include product categorization, sales and purchase order tracking, electronic scanning and automatic ordering.
Retailers can typically use scaled-down systems focused on maintaining perpetual inventory, whereas businesses with complex supply chains often use the inventory management functionality in ERP systems.
Benefits of Inventory Management Software
While inventory can be tracked in Excel, spreadsheets only work for periodic inventory systems (i.e., inventory systems that are updated at intervals, say after stock takes). Inventory management software is necessary to enable a true perpetual inventory system, where inventory is updated continuously as sales are made and goods are received. Benefits include:
Greater inventory accuracy
Reduced reliance on stock takes
Competitive Advantages of Using Inventory Management Software
Inventory management software can offer a competitive edge for e-commerce retailers, logistics providers and businesses in other industries where margins can be razor-thin:
Better synchronization: E-commerce retailers can synchronize inventory across digital channels (e.g., eBay, Amazon, Shopify etc.), physical retailers can synchronize inventory across multiple stores and multi-channel retailers can synchronize e-commerce platforms with brick-and-mortar stores.
Greater efficiency: Inventory management systems can integrate with point-of-sale systems to update inventory in real time as sales are made.
Reliable tracking: Advanced inventory management in ERP systems enables end-to-end tracking of goods, from raw materials to retail shelf.
Business Sizes Using Inventory Management Software
Inventory management software is used by businesses of all sizes, across a variety of industries.
Our internal data shows that of a sample of 1,676 inventory management buyers who contacted us recently, most were small businesses, with 91 percent employing fewer than 100 people, and 75 percent generating less than $5 million annually.
Smaller businesses typically use a scaled-down inventory management system in conjunction with a point of sale system and an accounting system.
Larger businesses (and enterprise businesses) typically use the inventory management functionality of an ERP system, as these systems allow for inventory tracking across multiple links in the supply chain.
Software Related to Inventory Management
Inventory management functionality is included in a diverse group of software categories, such as:
Accounting software: Helps businesses automate their core accounting functions to more easily balance their books and provide proof of their financial standing. Systems typically include a centralized general ledger, accounts payable, accounts receivable, billing and invoicing and the ability to produce standardized reports.
Distribution ERP systems: These are required by a wide variety of businesses that operate in the middle of the supply chain between manufacturers and customers. Distribution software systems can feature a wide variety of functionality and features, including inventory management, warehouse management, customer management, order management and accounting.
Manufacturing ERP systems: Provides functionality to plan and execute projects from beginning to end, while automating materials planning, production tracking and scheduling and product lifecycle management.
Retail management systems: Many vendors combine point-of-sale systems with inventory management systems in a single platform. Retail ERP systems also include inventory management functionality.
Warehouse management systems: These systems are inventory control systems specifically designed for warehouse inventory that also offer software automation for crucial warehouse processes. Automating processes such as warehouse picking has been conclusively shown to be vastly more efficient than manual methods.
A List of Common Inventory Management Features
Specifying item attributes in Acctivate Inventory Management
Inventory Management Buyers' Top-Requested Features
At Software Advice, we've helped thousands of buyers find the right inventory management System. We've analyzed those interactions to determine the top-requested features by Inventory Management buyers, presented here:
Inventory Management Buyers' Top-Requested Features
The Inventory Management Features You Really Need
Processing a purchase order in Fishbowl Inventory
How Inventory Management Software Is Priced
Typically, inventory management software is priced according to a number of factors. There are different pricing tiers for businesses of varying size, based on:
Number of users
Number of locations
Number of SKUs/products
Number of orders processed per month
Number of devices (client PCs, barcode scanners etc.)
In addition, whether the software is hosted online or on-premise can make a difference in up-front versus recurring costs.
What Businesses Typically Budget for Inventory Management Software
We looked at a sample of buyer interactions to compare how much businesses are willing to budget either for monthly fees for cloud platforms or upfront, one-time fees for on-premise platforms. We've broken this data down by business size in terms of number of licensed users, since licensed users is one of the primary factors affecting pricing for inventory management systems:
Typical Inventory Management Software Budget
Hidden Costs of Inventory Management Software
Hardware. Many businesses will need barcode scanners and printers, and retailers may also need hardware point of sale (POS) terminals.
Accounting integrations. Some vendors price their solutions based on how many accounting systems the inventory management platform integrates with.
End-to-end lot/serial number tracking. Businesses that need full traceability throughout the supply chain will need a full-blown ERP system, which is much pricier than scaled-down inventory management platforms.
What Are the Key Functions of Inventory Management Software?
Perpetual inventory. With inventory management software, inventory is updated in real time as you receive purchase orders and process sales orders.
Elimination of manual processes. By using barcode scanners in conjunction with an inventory management system, you can speed up tedious processes such as stock takes/inventory counts.
Synchronized inventory. E-commerce retailers selling across multiple platforms/channels, retailers with multiple stores and distributors with multiple warehouses all need to synchronize inventory. This can't be done with spreadsheets, since inventory needs to be updated in real time, and requires an inventory management system.
What Questions Should I Ask Vendors When Evaluating Inventory Management Systems?
Do you integrate with my accounting software? Inventory management vendors typically support a range of accounting integrations out of the box, but they might not integrate with your particular system, or they might charge extra for the integration. If you're using QuickBooks, you should evaluate the many vendors that specialize in QuickBooks integrations.
How many active clients do you have in my particular industry vertical? Different industries track different things (e.g., color, size, expiration date, style, serial number). Many inventory management vendors specialize in industries such as apparel or pharmaceuticals. Vendors without experience in these verticals may claim to be able to handle an implementation in your industry, but implementation costs may be prohibitive and the functionality limited. Be sure your vendor has experience with businesses in your industry.
What level of support do you offer for warehouse processes? While many inventory management vendors claim to offer warehouse management functionality, typically it's basic, e.g., generating paper pick lists and tracking by warehouse location. If you need advanced features such as voice-directed picking or slotting, you may need to look into specialized warehouse management systems.
Do you sell POS systems? What other hardware will I need? Retailers in particular should evaluate inventory management vendors that also sell POS systems. Distributors will typically need barcode scanners, label printers and other hardware to go along with the inventory management system.
What Are Some Drawbacks I Should Watch Out For?
There are no real drawbacks to using inventory management software, but there are drawbacks to choosing the wrong vendor for your business.
Only ERP systems offer lot traceability. Lot traceability requires the using a lot number as an item attribute for inventory tracking in all of the supply chain/inventory management/accounting software a business uses. Realistically, businesses should consider an integrated ERP system for lot tracking.
Crucial functionality for certain industries is missing from many platforms. Businesses that price inventory by weight (e.g., meat vendors, produce distributors) need to weigh inventory at crucial points in the supply chain for costing and inventory tracking. This is known as "catchweight management," and it's only found in specialized products. Additionally, advanced expiration date tracking and costing will require specialized products.
Inventory management offers varying levels of support for supply chain functions. Inventory management solutions are frequently scaled-down in comparison to ERP systems. They may lack some support altogether for supply chain functions, such as procurement or route optimization (for businesses with their own fleets). Logistics providers or 3PLs should be particularly careful when choosing a platform, since they specialize in areas of the supply chain where some inventory management vendors lack functionality.
Tips & Tools
Build a Business Case for Inventory Management Software
Here are three major ROI drivers for inventory management software:
Improved inventory accuracy. Periodic inventory systems based on spreadsheets are inefficient and prone to human error. Once businesses hit a certain size, they can realize major cost savings simply by improving inventory accuracy.
Synchronized inventory. By synchronizing inventory across multiple physical stores and e-commerce channels, you can avoid stock-outs and satisfy customers.
Automation of manual processes. Spreadsheets are incredibly time-consuming, as are inventory counts and the pick/pack/ship process. By partially or fully automating these processes, inventory management software can make your business run much more efficiently.
Popular Inventory Management System Comparisons
Recent Events in Inventory Management
Microsoft Launches Dynamics 365: In summer of 2016, Microsoft began consolidating its ERP and CRM offerings into a single product line—Dynamics 365. Some of the older editions of Dynamics are now being phased out.
Infor acquires Birst: In April 2017, cloud ERP giant Infor announced the acquisition of business analytics and data visualization vendor Birst. This move promises to considerably beef up the data visualization features of Infor's ERP line.
Top Products - September 2017 FrontRunners
Our FrontRunners™ Quadrant
FrontRunners quadrants highlight the top software products for North American small businesses. All products in the quadrant are top performers. Small businesses can use FrontRunners to make more informed decisions about what software is right for them.
To create this quadrant, we evaluated over 115 Inventory Management products. Those with the top scores for their capability and value made the quadrant.
You can download the full FrontRunners for Inventory Management report here.
Small businesses should use FrontRunners to make more informed decisions about which software is right for them. See our About FrontRunners page for more information.