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Inventory management software

From Wikipedia, the free encyclopedia

Inventory management software is a computer-based system for tracking inventory levels,

orders, sales and deliveries.[1] It can also be used in the manufacturing industry to create a work
order, bill of materials and other production-related documents. Companies use inventory
management software to avoid product overstock and outages. It is a tool for organizing
inventory data that before was generally stored in hard-copy form or in spreadsheets. It is often
associated with and is similar to distribution software, as distributors that can compete with less
cash tied up in inventories have a distinct advantage over their competitors. [citation needed]
Contents
[hide]

1 Features
o

1.1 Order management

1.2 Asset tracking

1.3 Service management

1.4 Product identification

2 History

3 Purpose

4 Manufacturing uses

5 Advantages

5.1 Cost savings

5.2 Increased efficiency

5.3 Warehouse organization

5.4 Updated data

5.5 Data security

5.6 Insight into trends

6 Disadvantages
o

6.1 Expense

6.2 Complexity

7 See also

8 References

Features[edit]
Inventory management software is made up of several key components, all working together to
create a cohesive inventory for many organizations' systems. These features include:

Order management[edit]
Should inventory reach a specific threshold, a company's inventory management system can be
programmed to tell managers to reorder that product. This helps companies avoid running out of
products or tying up too much capital in inventory.[2]

Asset tracking[edit]
When a product is in a warehouse or store, it can be tracked via its barcode and/or other tracking
criteria, such as serial number, lot number or revision number.[3] Nowadays, inventory
management software often utilizes barcode, radio-frequency identification (RFID),
and/or wireless tracking technology.[4]

Service management[edit]
Companies that are primarily service-oriented rather than product-oriented can use inventory
management software to track the cost of the materials they use to provide services, such as
cleaning supplies. This way, they can attach prices to their services that reflect the total cost of
performing them.

Product identification[edit]
Barcodes are often the means whereby data on products and orders is inputted into inventory
management software. A barcode reader is used to read barcodes and look up information on
the products they represent.[5] Radio-frequency identification (RFID) tags and wireless methods of
product identification are also growing in popularity.

History[edit]
The Universal Product Code (UPC) was adopted by the grocery industry in April 1973 as the
standard barcode for all grocers, though it was not introduced at retailing locations until 1974.
[6]
This helped drive down costs for inventory management because retailers in the United States
and Canada didnt have to purchase multiple barcode readers to scan competing barcodes.
There was now one primary barcode for grocers and other retailers to buy one type of reader for.
In the early 1980s, personal computers began to be popular.[7] This further pushed down the cost
of barcodes and readers. It also allowed the first versions of inventory management software to
be put into place. One of the biggest hurdles in selling readers and barcodes to retailers was the
fact that they didnt have a place to store the information they scanned. As computers became
more common and affordable, this hurdle was overcome. Once barcodes and inventory
management programs started spreading through grocery stores, inventory management by
hand became less practical. Writing inventory data by hand on paper was replaced by scanning
products and inputting information into a computer by hand.
Starting in the early 2000s, inventory management software progressed to the point where
businesspeople no longer needed to input data by hand but could instantly update their database
with barcode readers.[8]
Also, the existence of cloud based business software and their increasing adoption by
businesses mark a new era for inventory management software. Now they usually allow
integrations with other business backend processes, like accounting and online sales.

Purpose[edit]

Companies often use inventory management software to reduce their carrying costs. [9] The
software is used to track products and parts as they are transported from a vendor to a
warehouse, between warehouses, and finally to a retail location or directly to a customer.
Inventory management software is used for a variety of purposes, including:

Maintaining a balance between too much and too little inventory.

Tracking inventory as it is transported between locations.

Receiving items into a warehouse or other location.

Picking, packing and shipping items from a warehouse.

Keeping track of product sales and inventory levels.

Cutting down on product obsolescence and spoilage.

Avoiding missing out on sales due to out-of-stock situations.

Manufacturing uses[edit]
Manufacturers primarily use inventory management software to create work orders and bills of
materials. This facilitates the manufacturing process by helping manufacturers efficiently
assemble the tools and parts they need to perform specific tasks. For more complex
manufacturing jobs, manufacturers can create multilevel work orders and bills of materials, which
have a timeline of processes that need to happen in the proper order to build a final product.
Other work orders that can be created using inventory management software include reverse
work orders and auto work orders. Manufacturers also use inventory management software for
tracking assets, receiving new inventory and additional tasks businesses in other industries use it
for.

Advantages[edit]
There are several advantages to using inventory management software in a business setting.

Cost savings[edit]
In many cases, a companys inventory represents one of its largest investments, along with
its workforce and locations.[10] Inventory management software helps companies cutexpenses by
minimizing the amount of unnecessary parts and products in storage. It also helps companies
keep lost sales to a minimum by having enough stock on hand to meet demand. [11]

Increased efficiency[edit]
Inventory management software often allows for automation of many inventory-related tasks. For
example, software can automatically collect data, conduct calculations, and create records. This
not only results in time savings, cost savings, but also increases business efficiency.[12][13]

Warehouse organization[edit]
Inventory management software can help distributors, wholesalers, manufacturers and retailers
optimize their warehouses. If certain products are often sold together or are more popular than
others, those products can be grouped together or placed near the delivery area to speed up the
process of picking. By 2018, 66% of warehouses "are poised to undergo a seismic shift, moving
from still prevalent pen and paper processes to automated and mechanized inventory solutions.
With these new automated processes, cycle counts will be performed more often and with less
effort, increasing inventory visibility, and leading to more accurate fulfillment, fewer out of stock

situations and fewer lost sales. More confidence in inventory accuracy will lead to a new focus on
optimizing mix, expanding selection and accelerating inventory turns." [14]

Updated data[edit]
Up-to-date, real-time data on inventory conditions and levels is another advantage inventory
management software gives companies. Company executives can usually access the software
through a mobile device, laptop or PC to check current inventory numbers. This automatic
updating of inventory records allows businesses to make informed decisions. [15]

Data security[edit]
With the aid of restricted user rights, company managers can allow many employees to assist in
inventory management. They can grant employees enough information access to receive
products, make orders, transfer products and do other tasks without compromising
company security. This can speed up the inventory management process and save managers
time.

Insight into trends[edit]

Tracking where products are stocked, which suppliers they come from, and the length of time
they are stored is made possible with inventory management software. By analysing such data,
companies can control inventory levels and maximize the use of warehouse space. Furthermore,
firms are more prepared for the demands and supplies of the market, especially during special
circumstances such as a peak season on a particular month. Through the reports generated by
the inventory management software, firms are also able to gather important data that may be put
in a model for it to be analyzed.[16]

Disadvantages[edit]
The main disadvantages of inventory management software are its cost and complexity.

Expense[edit]
Cost can be a major disadvantage of inventory management software. [17] Many large companies
use inventory management software, but small businesses can find it difficult to afford it. Barcode
readers and other hardware can compound this problem by adding even more cost to
companies. The advantage of allowing multiple employees to perform inventory-management
tasks is tempered by the cost of additional barcode readers. Use of smart phones as QR code
readers has been a way that smaller companies avoid the high expensive of custom hardware
for inventory management.[citation needed]

Complexity[edit]
Inventory management software is not necessarily simple or easy to learn. A companys
management team must dedicate a certain amount of time to learning a new system, including
both software and hardware, in order to put it to use. Most inventory management software
includes training manuals and other information available to users. Despite its apparent
complexity, inventory management software offers a degree of stability to companies. For
example, if an IT employee in charge of the system leaves the company, a replacement can be
comparatively inexpensive to train compared to if the company used multiple programs to store
inventory data.[18]

See also[edit]

Enterprise resource planning

Document automation

Inventory control system

Operations management

Supply chain management

Vendor-managed inventory

Warehouse management system

References[edit]
1.

Jump up^ Lesonsky, Rieva (1998). "Tracking

Inventory". Entrepreneur Magazine.

2.

Jump up^ Lesonsky, Rieva (1998). "Inventory

Control". Entrepreneur Magazine.

3.

Jump up^ "Inventory Control Systems". Reference for Business,

Encyclopedia of Business, 2nd ed.

4.

Jump up^ "inventory software". Webopedia. Retrieved 23

November 2012.

5.

Jump up^ DeBaise, Colleen (August 10, 2010). "Technology

Basics for Business". The Wall Street Journal.

6.

Jump up^ Dolinsky, Anton. "Inventory Management History Part

Four". Almyta Systems. Retrieved August 17, 2010.

7.

Jump up^ Polsson, Ken. "Chronology of Personal Computers

1981". Polsson's WebWorld. Retrieved August 17, 2010.

8.

Jump up^ Moskowitz, Robert. "Using Your Computer for Inventory

Control". Accvision. Retrieved August 17, 2010.

9.

Jump up^ Piasecki, Dave. "Optimizing Economic Order Quantity

Carrying Costs". Inventoryops.com. Retrieved August 17, 2010.

10. Jump up^ K, Scholasticus (May 26, 2010). "Inventory

Management Techniques". Buzzle.com.
11. Jump up^ Brooame, Jr., J. Tol (June 1999). "The Benefits of
Smart Inventory Management Software". CBS Interactive.
12. Jump up^ "Advantages Of Inventory Management Software".
AuthorStream. p. 7. Retrieved 23 November 2012.
13. Jump up^ DesMarais, Christina (24 May 2011). "Choosing the
Best Inventory Tracking Software". Inc.com. Retrieved 23
November 2012.
14. Jump up^ Lu, Clara (March 27, 2014). "Recent Study Shows that
66% of Warehouses Plan to Expand Technology Investments by
2018". http://tradegecko.com/.

15. Jump up^ Lockard, Robert (29 November 2010). "3 Advantages
of Using Inventory Management Software". Inventory System
Software Blog. Retrieved 23 November 2012.
16. Jump up^ "Inventory Management Software". EGA Futura.
Retrieved 23 November 2012.
17. Jump up^ "Inventory Control Systems". ClockWork Accounting.
Retrieved August 17, 2010.
18. Jump up^ "Debunking the Top Eight Myths Surrounding Smallbusiness Warehouse Management Systems" (PDF). HighJump
Software. May 2008.

Categories:

Distribution, retailing, and wholesaling

Inventory

Logistics

Manufacturing

Supply chain management

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