How to Choose the Right Inventory Management Software?

Inventory management is the lifeline of retail and manufacturing businesses. It also equally affects logistics, 3PL, and distribution businesses. Inventory comprises all the raw materials, finished goods, MROs, in-transit inventory, and buffer stock that is kept in stores, warehouses, and godowns. Now for all businesses, managing stocks, and their variations (you know products have thousands of SKUs, variants, and types) can be an overwhelming task. One has to segregate and classify products as per brands, sizes, shapes, types, utility, and even transit frequency.

Then comes the mapping of products as per suppliers, tracking inventory during the transit, and stock verifications. All these require assistance from technology to improve inventory management's speed, accuracy, and analytics capabilities. This is where quality inventory management software is a must-required system for businesses wanting to manage their inventory without hassle.

However, choosing the right inventory management software is a mammoth task considering the plethora of options. All inventory management software vendors market their products as the best.

Amidst that, one may get confused and need help assessing the alternatives and deciding on the most suitable inventory management software for one’s unique business needs. This is what this article is all about.

The article will help businesses select the best software tools or custom inventory software solutions.

5 Key Functional Levers of Inventory Management

Inventory management software is required to manage the 5 basic functions of inventory management.

Inventory Recording & Categorization

Inventory recording and categorization involve documenting and organizing stock items systematically.

• Challenge: Manual recording is error-prone and time-consuming.
• Solution: Inventory software automates recording and provides customizable categorization

Inventory Control

Inventory control maintains optimal stock levels through tracking movements and setting reorder points.

• Challenge: Balancing stock levels across multiple products and locations is complex.
• Solution: Software uses real-time data to optimize stock levels and automate reordering.

Inventory supply chain management

This oversees inventory movement from suppliers to customers, including supplier relationships and deliveries.

• Challenge: Coordinating suppliers and tracking shipments is challenging.
• Solution: Software enables supplier integration and real-time shipment tracking.

Inventory Audit

Regular audits verify and ensure physical inventory matches records.

• Challenge: Physical audits disrupt operations.
• Solution: Software solutions like inventory management software enable efficient cycle counting and automated tracking.

Inventory Forecasting & Analytics

This uses data to predict future needs and optimize processes.

• Challenge: Accurate forecasting requires processing complex data.
• Solution: Inventory software provides data-driven forecasts and insights.

Step-by-step guide to Choose Inventory Management Software

Inventory is crucial in any business whether it is retail, e-commerce, or manufacturing. Inventory management improves business operations and increases its worth. A business faces serious concerns in organizing and monitoring inventory effectively. These concerns can be solved by a step-by-step guide for selecting the best inventory management software.

The worldwide market for inventory management software is anticipated to hit USD 4.79 billion by 2032, reflecting a compound annual growth rate (CAGR) of 9.6%. This shows that there is a growing trend for companies that deploy inventory management software. This guide lays down the best practices for choosing inventory management software.

Let’s have a look at the guide to solve your inventory management concerns.

Step 1: Shortlist all the top Inventory Management Software in Your Business Category

Choosing the right inventory management software for your business requires a proper understanding of options suitable for your category of business. Here is a guide to assist you:

It is essential to understand your business before starting the hustle of choosing the best inventory management options. Every business has its own needs, and one software suitable for a company might not be appropriate for another. Hence, you should analyze the scale and size of your business, and the industry it is working in. Small businesses may need basic software whereas large companies may need advanced features in the software such as automated replenishments, demand projections, etc.

Also, if you have business in different locations then you will need software supporting inventory management at multiple locations.

Furthermore, industries play a critical role in selecting an inventory management solution for any business. Different industries have their own needs for inventory management. For instance, a manufacturing business may need advanced features to track raw materials and work-in-progress inventory. While a retail company may require an Omnichannel point-of-sale (POS) Software. Also, the inventory volume plays a key role in influencing your selection decision.

High-volume enterprises need software that can tackle large data volumes efficiently.

Along with this, you have to conduct proper market research to determine top inventory management software suppliers in your respective industry. You can perform this research on different websites, such as listing websites. You can also look for quality certifications to evaluate the credibility of the inventory management software.

Step 2: Assess Your Inventory Management Requirements and Inventory Management Challenges

Selecting inventory management solutions will require a proper assessment of inventory management requirements and its challenges.

Inventory Management Requirements

Understanding the inventory management requirements is crucial to run a successful enterprise. Efficient management of inventory includes organizing, projecting, tracking, and monitoring inventory to fulfill demands and reduce waste. It has some key components that should be considered.

Stock Classification: Stock is something that one has to keenly monitor in any business. Stock requires efficient control of inventory. There are various techniques for stock classification.

First, ABC Analysis (Pareto Principle) is a technique to determine the worth of inventory items as per their importance to the enterprise. It ranks items on cost, risk, and demand.

The second approach is Category-based Organization in which items that have similar traits such as type, size, or purpose are grouped into one category. Third is SKU Management which assigns codes to every product, making identification and searching for products a lot easier.

Demand Projections: Forecasting inventory accurately is a challenging task for businesses. It includes a collaboration of data analysis, industry experiences, and customer insights. Inventory forecasting saves cost and time, and provides strategic insights to the business.

Certain elements for appropriately forecasting inventory include:

• Existing Stock levels
• Historical Trendlines
• Outstanding Purchase Orders
• Forecasting Period
• Projected Demand and Season
• Possible Stock Levels
• Sales Trends
• Customer Response

Tracking and Monitoring Inventory: Real-time tracking of inventory helps in avoiding over or under-stocking. RFID or Barcoding is used to track items easily with higher speed. Barcodes provide accuracy, save cost, and keep control of inventory. Also, if your business has multiple warehouses then multi-location tracking is useful. Batch tracking is used by companies having expiration dates such as pharmaceutical or food companies.

Stock Verification: You must check your stock frequently and keep records of the checked inventory. Stock audits can be performed as per your stock quantity. Less quantity can be checked monthly, but more quantity needs daily or weekly audits.

Inconsistency in Tracking: Manual processes of tracking inventory across different spreadsheets consume more time and are more prone to errors. A centralized system for inventory tracking including accounting features is suitable for every business, even small enterprises.

Inaccurate Data: You must be aware of the amount of inventory available to you at any moment. Any small mistake in counting your inventory can lead to severe losses. You have to stay updated with your inventory count and must perform a stock audit at least twice a month.

Changes in Demand: One of the severe challenges of managing inventory is the constant shift in customer demand. Excess inventory in your warehouse leads to obsolete stock. Hence, creating order strategies and using technology can help in compensating for shifting demands.

Limited Visibility: When you find it hard to locate inventory in the warehouse, it creates delayed or inaccurate shipments. Finding the correct amount of stock helps in bringing efficiency to warehouse operations and makes consumer experiences positive.

Complex Supply Chain: The shift in global supply chains places a burden on your business for inventory planning. Manufacturers and wholesalers require flexibility for shipping inventory. Hence effective inventory management software is required.

Step 3: Decide if you need a cloud-based or on-premise inventory management software

For selecting a suitable inventory management system, you will need either cloud or on-premise solutions. Software solutions are stored remotely on the web and can be purchased for a relatively cheap rate or subscription pricing. These are user-friendly and can be accessed via the internet from anywhere. It is favorable for companies with remote staff or several branches and can be expanded as per your requirements. However, they rely on the internet and store data in another location which might be a security issue.

On-premise software is hosted on the servers of your company. This provides you with more control over your data. Also, it remains a viable option for industries that have extensive operational regulatory standards. However, it can be costly initially, and is dependent on IT resources for management, and, unlike methods relying on the Internet, it is still functional in the absence of a connection.

Hence, the decision will be made as per your business needs.

Step 4: Evaluate if you need an off-the-shelf inventory solution or custom-made inventory software

Off-the-shelf inventory management software and custom-made solutions are used for managing inventories. Off-the-shelf solutions are cheap, easy to implement, and robust thereby ideal for small, and medium-sized companies. They provide frequent updates but are not tailored for business solutions with complicated processes.

Custom-made software is more suitable to address organizational requirements as it is completely customizable, easily scalable, and compatible with most existing processes. It can be effective for large organizations or specialized industries. However, it takes more resources to set up, takes a long time to create, and will always need to be updated.

You can make the decision by looking at your budget, operational requirements, and future planning to see which solution fits best to your business.

Step 5: Make a list of Features, Integrations, and Add-ons You Need

First, make a list of essential features to select the appropriate system for your company. Concentrate on tasks such as tracking current location, encoding barcodes, generating reports, and bringing automation. Determine if advanced features such as trend prediction or working with multiple locations are needed. Selecting a system that aligns with the organizational operations will be effective.

Next, verify its compatibility with other software of your company such as accounting or ERP. Choose options that connect with the internet outlets or have additional features including, reports, or individual profiles. In this way, you can identify actually which features you are looking for in the inventory management software. As advanced techs like AI, IoT, blockchain, and big data are making new frontiers in inventory management, businesses are deploying AI to evaluate new data sets that can improve supply chains. You can incorporate such new tech in your software too.

Step 6: Do a price-to-benefit analysis of the shortlisted software solutions

The price you are paying for the inventory management software must provide you with enough quality and services. Cost considerations when selecting inventory management solutions are important. You have to perform a price-to-benefit analysis of the shortlisted software. You can do this by evaluating the abilities each option possesses against the price of the same options. The elements like scalability, compatibility with other tools, automation, and customer services.

The price-to-benefit analysis includes calculating the return on investment of the software. The price of the software must be less than the actual value it offers.

Step 7: Check the experience, expertise, and development capabilities of the software vendor or software development company

You must check the expertise, experience, and development abilities of the software supplier to purchase the software for your business. A vendor or software development company must know the industry requirements and related challenges.

For example, off-the-shelf software may be suitable for a medium-sized retail business. Because they need basic features related to inventory control and sales management. A company managing warehouses will need a proper ERP platform to control multiple aspects of the business including inventory management.

Step 8: Go for a free trial or demo (Ask questions)

Free trial or demo means that the company can work with the inventory management system, before deciding on the purchase of software. It becomes essential, during this period, to ask some right questions as to whether or not the system is good for the organization.

For instance, a retail business might pose the question, “Does the system give real-time updates of stock at multiple locations?”

A manufacturer can ask a question; ‘Can it track raw materials or items in progress?’ An online store could ask a question such as ‘Concerning my website how does it interconnect and update stock in real time?’

These questions assist in finding out whether the software will enhance operations or is not worth it.

Post Selection Guide: What to Consider After Implementation of Inventory Software?

This inventory software selection guide is incomplete without discussing the post-implementation requirements. Once you have deployed the inventory management system after doing a thorough analysis of inventory management software features or attempting a meticulous inventory software comparison, the next task is to manage the software.

Consider the below-mentioned points for a successful post-implementation performance:

Step 1: Decide who will access the system

Inventory records are sensitive documents. They contain data that can be misused or taken advantage of if leaked to competitors or unscrupulous persons. Unauthorized access to inventory management software must be prevented at any cost. Therefore, once you select and deploy the inventory management software, go for access controls. Set who can access the software and provide login credentials to trusted employees or authorized personnel only.

Step 2: Set the security features

Security features in inventory management software include:

• Encryptions
• Multi-level authentication & control options
• Designated functional roles
• Configurable security measures
• Cyber security measures
• Patch management

Step 3: Update the inventory system

Inventory management is a dynamic activity. Various events like sudden demands, supply chain disruptions, the advent of new tech, or advancements in inventory management frameworks and methods will affect the ‘processes’ and ‘way of inventory management’. With this will come the need to regularly update the inventory management software. This update will require the introduction of new features or enhancements or modifications of existing features.

For instance, most introductory inventory management software only had desktop-based stock verification that required hand-held barcode scanners, but with the need for increased speed in stock management, the contemporary software added mobile-based stock verification. Adding features and modules is key to keeping the inventory software relevant.

Step 4: Add more integrations and APIs

Integrating your inventory management software with other business tools is essential for creating a comprehensive ecosystem.

Key benefits include:

• Seamless data flow: Connect with ERP, CRM, and e-commerce platforms to reduce manual data entry
• Enhanced automation: Use APIs to automate processes between systems
• Real-time updates: Sync inventory levels across multiple channels instantly
• Improved analytics: Connect with BI tools for better inventory insights
• Scalability: Add new functions easily as you grow

Important integrations: Accounting software, e-commerce platforms, shipping providers, POS systems, and supplier tools.

Step 5: Backups and Recovery

Without a strong backup strategy, it will be difficult to protect inventory data from cyber-attacks, human error-led data deletions, or other data loss incidents due to hardware failures. Key considerations post the inventory management implementation include making a complete process and SOP for:

• Regular backups: Schedule automated, frequent data backups
• Multiple locations: Store backups across different locations
• Security: Encrypt all backup data
• Testing: Regularly verify backup and recovery processes
• Version control: Keep multiple backup versions
• Cloud backup: Understand provider policies and consider additional backup solutions

Conclusion

Your decision to choose inventory management software is essential for the efficiency and growth of your company. The process of selecting the right software for your business requires you to follow a step-by-step procedure. Whether you are looking for the best inventory management software for e-commerce or the best inventory software for small businesses, you should properly evaluate your business requirements, compare various software, and plan a post-implementation strategy.

The right software is accurate, and flexible, and helps in the growth of a business.

X-Byte Enterprise Solutions offers you better inventory management solutions that transform your mundane processes and time-consuming stock management activities to unprecedented precision and efficiency in overall inventory management endeavors.

Frequently Asked Questions