Inventory Management

What is Inventory Management?

What is Inventory Management?

Inventory Management Helps You:

  • Maintain organized storage practices
  • Gain visibility into inventory
  • Forecast and manage demand
  • Choose an inventory management strategy
  • Find and develop partnerships with suppliers

What is inventory management, and how can a system help optimize your daily processes? Before we dive any deeper, at its most basic inventory management involves ordering, storing and profiting from non-capital goods. It sounds simple, but this couldn’t be further from the truth.

Putting together an inventory storage system that not only keeps things organized but also optimized for distribution is a daunting task. Luckily, inventory management includes features focused on doing these exact things.

Maintain organized storage practices

Organizing your inventory is key when looking for ways to increase efficiency. If your products are arranged in an intuitive way, important goods and be accessed quickly and moved to distribution at a moment’s notice. Leveraging helpful tools like barcode scanners and SKUs can keep things in order while also greatly increasing pick-and-pack speed. Businesses with complex inventories can use collaborative inventory features as well. This way, vendors can remotely manage inventory and keep their partners stocked. These features can help keep inventory manageable and organized:

  • Mobile barcode scanning
  • SKU tools
  • Goods organization management
  • Product categorization
  • Collaborative inventory
  • Cycle counting

Gain visibility into inventory

Data visibility is very helpful when it comes to optimizing any portion of a supply chain. Management systems drill down into daily processes to provide users with a view of where and how they can improve their inventory management. This is where features like analytics and reporting come into play. Without them, employees would have to compile and study data from every daily inventory process. Adopting these tools gives users the ability to truly find out what to sell, when to reorder and how to prepare for the future.

Increasing visibility is also important when attempting to increase customer satisfaction. By adopting a management system, automatic alerts can be sent to clients and customers that give them real-time information on where their product is and when it should arrive. Not only are customers happier, but owners can also cut costs and prevent losses by adopting analytics tools from a management system. When looking for a system that provides data visibility, make sure these tools are available:

  • Customer management
  • Analytics tools
  • Asset management
  • Customized reports
  • Drill down data

Forecast and manage demand

Planning for and managing changes in demand is a vital piece of the inventory management puzzle. Strategies for dealing with constantly shifting demand can take a few forms, depending on the size of the business. Smaller businesses often have less room to store goods and have to be careful of ordering too much or too little of a product. Larger companies usually have more room available to store large amounts of goods, and in some cases can sit on these large numbers of a product until demand rises again. The type of goods in storage are also very important; you wouldn’t want a large backstock of perishable goods just sitting around. Without forecasting tools managing these types of variables would mostly be guesswork.

Forecasting tools give users the ability to take a peek into the future to better understand what and when they should order. By aggregating the data gathered from daily inventory management processes, a system can connect past demand fluctuations with real-time information. Analyzing past and present trends can give users a leg up on the competition by preparing them for the future today. Keep these features in mind when considering an inventory management system:

  • Forecasting tools
  • Trend analysis
  • Product histories
  • Automatic reordering
  • Stock inquiries

Cultivate an inventory management strategy

When it comes to deciding on the best way to handle inventory management, there are a few common strategies to consider:

  • Just-in-time Management (JIT)
  • Materials Requirement Planning (MRP)
  • ABC Analysis
  • Days Sales of Inventory (DSI)
  • Qualitative Inventory Analysis

The strength of these strategies depends on the business they are being adopted by. For example, JIT inventory management is a riskier approach that is focused on cost-cutting. This strategy calls for extremely low inventory volumes to reduce waste and shrink storage costs. However, if demand suddenly takes a dramatic swing, this strategy could easily fall behind. To counter these shortfalls, companies that employ this strategy need robust forecasting tools in place to accurately predict their next move. Saving money is great, but facing a crowd of customers that you can’t deliver to is far worse.

A more traditional method would be an MRP inventory management strategy. This strategy is often used in the manufacturing and distribution industries through forecasting and dividing goods into two categories. Independent demand stock is made up of completed items like cell phones, while dependent demand stock includes component pieces. This setup uses forecasting tools to establish planning through data gathered from sales reports. By using the data from these reports, inventory needs can be communicated to suppliers as quickly as possible.

Find and develop partnerships with suppliers

A management system can help organize and boost a business’s inventory performance, but there are external variables to consider. Suppliers are, obviously, integral to inventory management as they provide the materials and products necessary to the operation. Inventory management can help users connect with affordable suppliers while also measuring their performance over time. This way, business owners and suppliers can discover new methods to optimize and improve overall performance.

For example, a management system can track how often extra or unnecessary goods are received and then returned. These discrepancies can then be talked about with the supplier and remedied. Depending on the organization, there may be stricter regulations suppliers need to meet. A business that stores medical supplies must adhere to more stringent rules than a basic retail operation. Make sure your purchasing and supplier management features are up to date with these inclusions:

  • Supplier management
  • Partial receiving
  • Purchase orders
  • Backordering


How Does the Cloud Help Inventory Management?

Cloud-based systems are on the rise, and for a good reason. Adopting management systems that are deployed via the cloud conveys a number of helpful advantages:

  • Secure file storage
  • Mobile access via internet-enabled smart devices
  • Easy setup and integration
  • Lower cost of entry
  • Easily scalable and agile
  • Painless file exchange and recall

The cloud is here to stay, and before long, most businesses are going to jump on the bandwagon. Adopting the cloud is especially attractive to new or smaller companies thanks to its lower cost of entry through subscription-based pricing. This way, businesses that normally wouldn’t be able to afford a management system can. The safety provided by a cloud-based system is also a price effective benefit of cloud-based solutions. Expect to see more and more vendors offering cloud systems in the coming years.

How Does the Internet of Things (IoT) Impact Inventory Management?

As more and more technology begins to work collaboratively through the sharing of data, supply chains and networks become stronger. This teaming-up of technology through the transfer of data is referred to as the internet of things, and it is taking the world of supply chain management by storm for a variety of reasons:

  • B2B applications of the IoT will generate $300B in revenue by 2020
  • Potential contributions to inventory, supply chain and warehouse management could reach $560 billion to $850 billion by 2025
  • The IoT is generating multiple forms of value in manufacturing today, with inventory management as a lead profit contributor
  • Customer insights can be gathered through the aggregated data provided by distribution networks

How Do I Select an Inventory Management System?

When choosing, it is important to ask yourself a few questions to narrow down the landscape of vendors. How big is your business? How much room is there in the budget for a new system? Do you require a certain deployment strategy? By asking these probing questions, curious parties can focus their search on vendors that meet their unique set of requirements. It is human nature to see a large price tag and assume that a product is the best choice. As in most cases, this is a bad idea. Purchasing an overly complex system will do more harm than good in the end. If you need a little more guidance, check out our Inventory Management Requirements Checklist or our list of Inventory Management Features and Requirements.

Recent Articles

Confidence Comes from Data

Inventory management software selection is complex and beset with problems for both IT buyers and solution providers. We do three things to make it fast and simple:

FREE Software Selection Platform

Our platform provides best-practices, including requirements templates & vendor comparisons, to help you make the right decisions for your unique needs, in a fraction of the time. Try it FREE.

Aggregated Reviews

We have collected every software review available online, crunched every last word using our proprietary Sentiment Analysis algorithms, all so we can tell you how a software product is viewed in its marketplace, retrospectively.

Professional Analysis

We relentlessly collect and analyze data about software, then compile and share it so every company has the same access to the information. The information we gain is then used in our Software Selection platform to help you find the right software.

Your Guides

Our industry journalists proudly distill the helpful information you read on SelectHub, always on the mission to share what matters so you can make your best decisions independently.

Inventory management articles are written and edited by:

Zachary Totah

Content Manager

As SelectHub’s Content Manager, Zachary Totah leads a team of more than 35 writers and editors in their quest to provide content that helps software buyers find the right system for their company.

Show More

Ryan McElroy

Content Editor and Senior Market Analyst

Ryan McElroy is a Content Editor and Senior Market Analyst at SelectHub who writes content on EHR, EMR, home health, telemedicine and construction scheduling.

Show More

Amrita Chakraborty

Technical Content Writer and Market Analyst

Amrita is a Technical Content Writer and Market Analyst at SelectHub. She writes content for categories such as inventory management and procurement.

Show More

Differences Between Inventory Systems in Retail, Manufacturing and Distribution

No comments
November 16, 2023

Today, almost all businesses make use of stock control and inventory systems. The movement and management of resources plays a big part in the smooth functioning of retail stores, warehouses, wholesalers, distribution companies and more. After all, if you don’t know how much you’ve got, you won’t know how much money it’ll make.

SelectHubDifferences Between Inventory Systems in Retail, Manufacturing and Distribution
read more

Vendor Managed Inventory (VMI): Definition, Benefits, Limitations and More

1 comment
November 14, 2023
Inventory management is essential to improving any supplier or retailer’s profit margins. And vendor managed inventory can help suppliers and buyers mutually reap the benefits of successful inventory optimization. So what is vendor managed inventory?

Amrita ChakrabortyVendor Managed Inventory (VMI): Definition, Benefits, Limitations and More
read more

What Is Kanban Inventory? A Comprehensive Guide

No comments
November 6, 2023
Sick of identifying gaps in your inventory management processes? What if you had a visual map for your workflows? Sounds perfect, right? Kanban inventory to the rescue.

The world of supply chain management can be complicated, but having a system in place that optimizes workflows and reduces inventory costs can be beneficial. One such system worth looking at is Kanban inventory management.

Amrita ChakrabortyWhat Is Kanban Inventory? A Comprehensive Guide
read more

Best Cloud Inventory Management Software

No comments
November 2, 2023

For almost all businesses, inventory management is the “meat and potatoes” of corporate life. Cloud inventory management software is a relatively new development, but it’s quickly becoming the optimal choice for businesses.

Generally, inventory management may not be as glamorous as PR or digital marketing, but it’s the process that keeps everything moving. Without a close eye on your stock, there’s no way to tell what you need, what you’re selling or how much money you stand to make.

Hunter LoweBest Cloud Inventory Management Software
read more

What Is Inventory Logistics? A Comprehensive Guide

No comments
November 2, 2023
A robust inventory management process is crucial in this fast-paced global economy, where the demand for streamlined, automated operations is at an all-time high. Inventory logistics is one such solution that can provide this. It helps industries seamlessly execute their business operations while maintaining a stable inventory.

Amrita ChakrabortyWhat Is Inventory Logistics? A Comprehensive Guide
read more

The Benefits of Inventory Management with CMMS Software

October 31, 2023

A stock room should never look like an episode of Hoarders.  These stock rooms lead to inefficiencies, unhappy workers and lots of horror stories.  The worst nightmare of every inventory manager is a stock room with missing or wrong inventory.  The solution to this nightmare is, of course, inventory management software.  Prioritizing organized inventory management keeps your facilities and warehouses running smoothly.

SelectHubThe Benefits of Inventory Management with CMMS Software
read more

What is an Order Management System? Top Software Solutions

1 comment
October 27, 2023
On a good day, businesses around the world have to deal with an overwhelming number of order management processes. Maintaining a successful enterprise in this climate takes a lot more than just receiving orders and browsing through inventory management software and order management systems. Teams have to effectively work with their third-party (3PL) providers, handle a tangled web of shipping schedules, ensure that their inventory is properly synced up with their sales channels and that’s not even everything.

Hunter LoweWhat is an Order Management System? Top Software Solutions
read more

How the Internet of Things (IoT) is Revolutionizing Inventory Management

1 comment
October 25, 2023

The greater the speed, scale and accuracy of data collaboratively shared across supply chains, the stronger supplier networks become. The world’s best-performing supply chains, as defined by Gartner earlier this year in their annual Supply Chain 25 List, are all using digital transformation technologies including the Internet of Things (IoT) and predictive analytics in full production environments. IoT is revolutionizing every aspect of these world-class supply chains.

Louis ColumbusHow the Internet of Things (IoT) is Revolutionizing Inventory Management
read more

What Is an Inventory Management System? Types You Should Know About

Last Updated:
What if you could effortlessly overcome your inventory challenges and see your business thrive? With an inventory management system, this becomes a reality. But to experience seamless inventory management, how do you choose the best inventory system?

Amrita ChakrabortyWhat Is an Inventory Management System? Types You Should Know About
read more

What Is Just-in-Time (JIT) Inventory Management? Top Systems for Your Business

October 16, 2023
Inventory management is only as effective as the strategy you deploy to control and track your products and assets. From Apple to Kellog’s, Fortune 500 companies look to just-in-time inventory management to minimize on-hand inventory and maximize return on investment (ROI).

Amrita ChakrabortyWhat Is Just-in-Time (JIT) Inventory Management? Top Systems for Your Business
read more

The Best Free Inventory Management Software Systems for Inventory Tracking

October 16, 2023
Tidying up and organizing a messy inventory is no small task, even for small businesses. Maintaining order with pen-and-paper is a dying process prone to error, and purchasing inventory management software to shoulder the burden is expensive. If only there were a cheap way to manage inventory — enter free inventory software.

Amrita ChakrabortyThe Best Free Inventory Management Software Systems for Inventory Tracking
read more

Inventory Management Software System Features and Requirements Checklist

October 9, 2023
Effective inventory management is no easy feat, especially without software. But with so many options out there, how do you choose a platform suited to your organization?

Creating an inventory management requirements checklist is the first step to choosing a product that best fits your company’s needs.

Amrita ChakrabortyInventory Management Software System Features and Requirements Checklist
read more

Fishbowl Inventory vs NetSuite: Which is the Winner?

October 9, 2023

Undoubtedly, you’re already familiar with the massive impact small and mid-sized businesses have on our society and economy. And if you’re reading this article, you’re probably even more aware of the numerous inventory management software companies willing to cater to those SMBs. This abundance of choice is definitely a good thing, but products can start to seem the same with so many options. To save you time and energy, we’ve created an extensive comparison of the top features of Fishbowl Inventory vs NetSuite.

Kim O'ShaughnessyFishbowl Inventory vs NetSuite: Which is the Winner?
read more

10 Most Important Inventory Management KPIs and Metrics

October 6, 2023
If you ever wanted an in-depth look at a business, all you’d need to do is take a look at its inventory management metrics. In inventory management, inventory metrics and KPIs can tell you right away how a business defines itself, conveying the trends most important to the company.

Amrita Chakraborty10 Most Important Inventory Management KPIs and Metrics
read more

What Is A Perpetual Inventory System?

No comments
October 3, 2023
A perpetual inventory system is an accounting and inventory management method that continuously tracks and records inventory changes (with every transaction). It does this using supply chain management software and digital input devices such as point-of-sale (PoS) systems and barcode/RFID scanners. Along with the periodic inventory system, it is one of the two most employed and accepted methods to account for inventory

Amrita ChakrabortyWhat Is A Perpetual Inventory System?
read more

What is an Inventory Audit? Benefits, Procedures and Software Solutions

October 2, 2023

Performing an inventory audit is like doing your taxes — it’s tedious, takes up too much time and leaves you exhausted. But it’s something you must do. Adopting inventory audit software or an inventory management system can save you from operational chaos. Thirty-four percent of businesses admit their products weren’t shipped on time because of unavailable items in their stock. When you don’t have a clear snapshot of your goods, you can’t satisfy your customers’ needs.

Khaleel HayesWhat is an Inventory Audit? Benefits, Procedures and Software Solutions
read more

Inventory Reconciliation: How To Reconcile Inventory Effectively

No comments
September 20, 2023
Are you tired of discrepancies between your records and actual inventory counts? Inventory management software can help, but it isn’t always enough. You need to reconcile your inventory regularly to ensure accuracy and prevent losses. So, how do you perform effective inventory reconciliation?

Amrita ChakrabortyInventory Reconciliation: How To Reconcile Inventory Effectively
read more

Inventory Management Strategies: Leveraging the Most Cutting Edge

1 comment
August 24, 2023
Maintaining an organized inventory system is no small feat, especially when it comes to the more complex enterprises out there. Products are always in flux as they arrive for storage or leave for distribution. Messy inventory management can be devastating. Losing a customer is as easy as sending a wrong product or being consistently late with deliveries. Having successful inventory management strategies in place is vital to keeping customers happy and staying competitive.

Hunter LoweInventory Management Strategies: Leveraging the Most Cutting Edge
read more

Best Practices in Stock Control

1 comment
Last Updated:

Some people call it stock control. Others call it inventory control or management. Regardless of what you call it, whether you think of the materials used for business processes as stock or inventory, this type of operations management is important, and plays a critical role in a business that ships products to customers.

SelectHubBest Practices in Stock Control
read more