Research by Gartner Digital Markets reveals that 41% of businesses still rely on manual methods, whilst 26% struggle with basic spreadsheets for tracking inventory.
The impact of using these outdated/inefficient inventory management—stockouts, overstocking, and missed sales opportunities.
Solution—update your inventory management method!
The same report found many major retailers are cutting inventory costs by 30% in 2024 through smart inventory management systems!
Whether you're in retail, healthcare, construction, or e-commerce, the right inventory software helps you
- Monitor stock levels in real-time across locations
- Automate routine tasks and reordering
- Make data-driven inventory decisions
- Reduce carrying costs and prevent stockouts
- Integrate with your existing business tools
From choosing between periodic and perpetual systems to implementing advanced features like forecasting, this guide breaks down everything you need to know about an inventory management solution.
What is an Inventory Management System?
An inventory management software helps ensure product availability to deliver as fast as possible to customers when they order them and track all products physically and financially through your warehouse.
Types of Inventory Management Solutions
The two most common types are
Periodic Inventory System
The periodic inventory system is a method of manually counting inventory at set intervals
- Monthly
- Quarterly, or
- Annually
It is best suited for small businesses with simple inventory needs and lower transaction volumes.
Benefits
The primary advantage of this inventory management system is that counting is simple and accurate due to smaller quantities.
Downsides
It's not recommended for large businesses with extensive inventories, as counting such amounts might take too long, and human errors are inevitable.
Best for
Companies selling lower quantities of either niche, high-ticket, or large-sized products.
Perpetual Inventory System
A perpetual inventory control system uses software to track changing inventory levels continuously and automatically in near real-time.
In this system, item information is stored in a central database and updated after each sale or order, allowing for easier reporting and auditing.
Benefits
No manual counting is required, as the system automatically tracks stock movement, giving a clear view of exact quantities at any interval.
Making it easy to access detailed insights about ordering, replenishment, discounts, sales, clearance, and more.
Downsides
The primary disadvantages are the cost of the software and the potential for inaccurate inventory levels, which often go unnoticed due to damages.
Best for
Companies with large volumes of inventory that cannot be managed manually.
Benefits of an Inventory Management Software
Four profound benefits of implementing an inventory system in your business.
Prevents Product Spoilage
Inventory software helps maximise the impact of fulfilment techniques used to prevent product spoilage, such as:
- First in, first out (FIFO)
- First expired, first out (FEFO)
- Last in, first out (LIFO)
By providing real-time data on stock lifecycles.
In the case of the FIFO strategy, the system will identify and prioritise selling the oldest items first to keep your products fresh.
With an FEFO system, your tool will ensure that perishable items like food or beauty products are sold first.
And in a LIFO method, the stock inventory management system will help you sell the newest products on your shelf first.
Helps Avoid Deadstock With Improved Forecasting
Deadstock is when an item sits unsold on a shelf for 12 months, often because of seasonality, changing trends, etc.
It's only if you see past product history that will allow you to forecast consumer demand accurately and avoid deadstock.
With an inventory platform, you get to analyse this information and make data-backed decisions on whether you have enough inventory to meet the demand or excess that may not sell.
Eventually saving you from overstocking costly items and potential product shortages due to understocking.
Helps Organise Warehouse
Other than tracking these systems keep your warehouse setting organised, making it easy to locate, move, or replace items.
Clear placement in the software helps you plan placement properly so that every order is traced, picked, packaged, and shipped in time.
It prevents inaccurate order delivery and lastly saves costs associated with lost inventory.
Proper warehouse organisation is crucial for efficient operations, especially when managing returns. Understanding the difference between warehouse management and returns management systems can help optimise your operations and reduce costs.
Additional Benefits
- Helps lower storage costs and determine the right reorder time using the Economic Order Quantity formula.
- Saves money on taxes by assigning each item its true cost to calculate the cost of goods sold.
Key Features to Look for in an Inventory Management Platform
Inventory management software features differ from tool to tool, depending on the use case and who will be using it.
Some platforms cater to retailers whilst others are manufacturer-centric, each will have unique capabilities to solve specific problem areas.
However, any basic inventory management system must possess certain common features that are essential for efficient inventory management.
Below is a list of the features you should look for
Inventory Tracking and Control
The first key objective you should expect from a system is complete inventory management.
- Consider what SKU data, such as product characteristics or product costing methods the tool supports
- Does it show general stock levels in real-time to prevent backorders and stockouts
- It should connect with your order management system so you only receive orders you can fulfil
- Does it provide sales, orders, and dedicated stock data, especially for multi-channel businesses such as e-commerce, FBA, or wholesale
- It should onboard new stock entries in the warehouse and make it live for sale instantly
- Does it show live stock movement
- Does it offer sales, retail open, and stock planning functionality
- Does it support Request for Proposal (RFP) development to help you track raw materials, finished goods, lot numbers, recall, FDA, etc.
Point of Sales (POS) integration
A POS helps track real-time product sales across sales channels such as
- Physical store
- Online E-commerce
Every time a product is scanned through a scanner or added to an online cart, it is automatically counted as a sale by the POS system.
And if your stock inventory management system supports POS integration, stock replenishment will become even more efficient. Because it automates reordering, ensuring you maintain a healthy stock level to fulfil new orders quickly.
Forecasting
It should be able to calculate
- Rate of sale
- Average selling plans
- Vendor lead time
- Item history by years
- Sales data
To project future demand accurately.
Your inventory tool must predict optimal reordering points using past inventory data to match changing demand throughout the year.
So you can optimise inventory levels without running out of stock, especially on important occasions like Christmas or New Year.
Inventory Categorisation
For retailers in apparel or wearable space where each SKU has multiple sizes or colours, your system should be able to categorise inventory by specific unit types.
Additionally, it should also classify products by
- High and fast selling
- Low and slow-selling
- Least and non-selling
And accordingly set replenishment time category-wise for faster order fulfilment.
Barcode and Scanner support
Barcoding helps maintain accurate records without manual data entry by scanning items during receiving, storage, and shipping.
A barcode contains machine-readable data linked to specific information such as
- SKU numbers
- Purchase orders
- Lot numbers
Once integrated with your warehouse management system, tracking product inflow and outflow from the storage facility becomes easy.
Common functionalities include serial tracking for high-ticket goods and batch barcoding for high-volume items.
Integrations
Look for integrations with other tools, either native, add-on, API, or custom as they help automate and synchronise data flow across inventory operations.
For example, retailers selling through an Omni channel approach may need to integrate with other e-commerce platforms.
Similarly, manufacturers may require warehouse management or CRM integration to track sales to retail clients.
Additional features to look for
- Inventory alerts to predict future stock levels based on current sales velocity.
- Actionable dashboards to flag product alerts, stock-outs, and calculate purchase orders.
- Stock returns management to track the entire cycle from creating a return request to pickup.
Common Challenges in Inventory Management Tools
No inventory management software is enough for your inventory management needs; every solution is unique in its way and also limited.
Here are three challenges you may face in your inventory solution.
High product volume
Your stock inventory management system should be able to handle large product and SKU ranges.
Managing this much volume requires precision and real-time monitoring, which many solutions lack.
Cross channel integrations
Companies especially in the D2C space selling through multiple channels, often struggle to track sales and inventory, which leads to mismanagement of figures.
The software must standardise and digitise this multi-channel complexity, through standard naming conventions or consistent identification for product categories and SKUs.
Real time updates
If your system is causing frequent product stockouts, understocking, overstocking, or wrong placement, it's possibly because the inventory is not up to date.
How to Choose the Right Inventory Management Solution?
A stock inventory management system is like the heart of your e-commerce business, if it stops everything else stops.
Hence, you must choose the right inventory management tool to match your unique requirements.
Here are five clear points about choosing the right inventory system
1. If you outsource production, you can opt for simpler tools without manufacturing features, whilst companies handling their own production need reliable systems for cost tracking and workflow management.
2. Check integration compatibility based on brand size, location, and connected logistics partners. The system must integrate with your sales platforms, accounting software, and shipping solutions to provide real-time updates across all operations.
3. Evaluate your fulfilment strategy before making a choice. Companies using third-party logistics (3PL) providers can select systems without warehouse management features, to avoid unnecessary costs and complexity.
4. Assess the pricing structure against your business scale. Whilst some platforms start free with basic features, others charge based on order volume, user count, or connections. Select a system that accommodates your expected growth.
5. Match the software capabilities to your operational requirements. Review specific features like
- Multi-warehouse support,
- Sales volume capacity, and
- User limits
These factors ensure the system aligns with your daily business processes.
Popular Inventory Management Software in the Market
Three inventory management systems to consider for your company.
Pragma (formerly Logisy)
Pragma is an end-to-end D2C Operating System, providing the pr-purchase , post-purchase, and post-delivery essentials in India.
But let’s just discuss what Pragma can bring to the table in terms of Inventory Management by collaborating with 3PL’s…
Key features
- Real-Time Stock Tracking:
Continuously monitor stock levels, movement, and location across warehouses, ensuring up-to-date inventory status.
Example: A D2C fashion brand tracks their latest collection across two warehouses and three marketplaces, updating stock availability on Shopify etc in real time. - Real-Time Optimisation During Holiday Periods:
Dynamically adjusts stock levels and replenishment schedules to handle fluctuating demand during peak seasons or promotions.
Example: A clothing brand can adjust its inventory for last-minute holiday sales by redistributing fast-moving items. - Inventory Relocation for Faster Fulfillment:
Automatically identifies slow-moving stock in one location and reallocates it to regions with higher demand to optimise delivery times.
Example: A home decor store can shift surplus cushion covers from Chennai to Bengaluru to meet local demand during a festival. - End-to-End RTO Analysis and Tracking:
Provides detailed tracking and analysis of Return-to-Origin (RTO) orders to prevent inventory mismanagement and financial loss.
Example: A footwear brand can flag high RTO rates in Tier-2 cities, optimises courier partner routes, and introduces order confirmation steps. - Automated Reordering and Alerts:
Automatically triggers purchase orders or sends low-stock alerts when inventory drops below pre-defined thresholds.
Example: A grocery delivery platform uses reorder points to automatically restock perishable items like fruits and dairy. - Batch and Lot Tracking:
Enables tracking of specific batches, expiry dates, or lot numbers for perishable or regulated goods.
Example: A pharmaceutical company can monitor batch numbers to track expiry and recall batches if needed. - Demand Forecasting:
Uses machine learning and historical sales data to predict demand trends and optimise stock replenishment.
Example: A footwear retailer forecasts high demand for ethnic styles before the festive season, ensuring adequate inventory. - Multi-Channel Inventory Synchronisation:
Ensures inventory consistency across physical stores, online shops, and third-party marketplaces.
Example: A cosmetics brand aligns inventory data across Nykaa, their website, and Instagram shop to avoid overselling. - SKU-Level Analysis:
Provides granular insights into SKU performance, identifying high-performing and slow-moving items.
Example: A lifestyle brand spots low sales for a specific T-shirt SKU and decides to discontinue it while doubling production for a top seller. - Warehouse Management Integration:
Facilitates efficient storage, retrieval, and shipment of products through integration with warehouse management systems (WMS).
Example: An electronics retailer can map product locations within the warehouse to ensure faster picking and packing during sales. - Barcode and QR Code Scanning:
Simplifies inventory updates with handheld scanners or mobile apps for real-time input.
Example: Compile logistics company barcode scanning to track incoming shipments and update inventory instantly. - Returns and RTO Management:
Tracks return inventory and updates stock levels while managing quality checks for resale.
Example: A D2C apparel brand can efficiently process returns from RTO orders, restocking them after quality validation. - Customisable Dashboards and Reports:
Offers detailed insights into stock turnover, carrying costs, and order fulfillment rates, customisable to business needs.
Example: A furniture store can use dashboards to monitor inventory carrying costs and adjust procurement cycles. - Integration with ERP and Accounting Systems:
Seamlessly integrates with ERP or accounting tools for end-to-end business operations.
Example: A retail chain syncs inventory data with their ERP system to automate invoicing and stock valuation. - Serial Number Tracking:
Tracks individual items through serial numbers, vital for warranty and service management.
Example: A consumer electronics brand uses serial tracking to manage warranty claims and replacements for specific devices. - Order Prioritisation and Allocation:
Optimises stock allocation for high-priority or urgent orders based on customer needs or delivery deadlines.
Example: An e-commerce brand prioritises same-day delivery orders and allocates inventory accordingly. - Inventory Auditing Tools:
Automates cycle counting and reconciliation to maintain accuracy in inventory records.
Example: A grocery store can conduct weekly cycle counts using handheld devices to validate stock levels. - Kitting and Bundling Support:
Manages bundled or pre-assembled products without disrupting individual item tracking.
Example: Monitor ‘Gift Store’ pre-bundle holiday hampers, tracking the components and finished kits separately. - Geo-Location Tracking for Inventory:
Tracks inventory across multiple warehouses or stores, providing visibility into location-specific stock levels.
Example: A sportswear brand can monitor inventory in warehouses across Mumbai, Delhi, and Bengaluru to optimise delivery.
Netstock
Netstock, a cloud-based inventory solution offers e-commerce businesses real-time stock monitoring across sales channels for future planning.
The platform integrates with leading ERP systems to unlock important data and analytics for efficient supply and demand response.
Key features
- Detailed inventory visibility
- Supplier performance analysis
- Forecasting using machine learning
- Integrated operations and sales strategy creation
- Recommendation on inventory planning and resource allocation
Zoho Inventory
Zoho Inventory is a leading solution for tracking inventory, managing orders, and automating shipments.
It supports multiple warehouses and barcode scanning, and integrates with e-commerce platforms like Amazon, Shopify, and eBay.
And tracks stock levels, creates sales orders, and stays updated on order status with its mobile app.
Key features
- Advanced SKU generation
- Vendor payments management
- Real-time post-shipment updates
- Item grouping, bundling, serial and batch tracking
- Complete customer lifecycle tracking from order creation to dispatch
Whilst choosing the right inventory management software is important, understanding how it fits into your broader e-commerce logistics strategy also matters.
Best Practices for Using an Inventory Management System
Regardless of your experience handling inventory management systems, mismanagement is inevitable.
But can be fixed easily if you follow these best practices routinely.
Cross Check Inventory Data
Often data is misinterpreted incorrectly when you migrate from your manual system into an automated platform.
Invest a little more time and effort to monitor the data transfer, preferably by someone with prior experience in inventory management software.
The last thing you would want is wrong numbers in your inventory tool.
Use System Analytics to Guide Inventory Decisions
Set your stock inventory management system to create product performance reports and create automated alerts for declining sales patterns.
From the system's data analytics, track key metrics like sales frequency, stock turnover rates, and demand patterns for each product.
Regularly review these system-generated insights to spot underperforming items before they become obsolete stock.
Invest in System-Specific Staff Training
Provide training programmes to your team to maximise the adoption of your inventory management solution.
Design a structured onboarding process that covers both basic and advanced features of the software.
Maintain Accurate Real-Time Inventory Records
Set up your inventory management system to provide continuous visibility of stock levels across all storage locations.
Implement barcode scanning or RFID technology to update stock counts instantly as items move in and out of your warehouse.
Implement Data Security Measures
Make data protection a top priority when using stock inventory management systems.
Establish multiple layers of security protocols, including regular data backups, access controls, and current security patches.
To safeguard your inventory data against potential breaches whilst ensuring business safety and continuity.
Role of Technology in Modern Inventory Management
New technology in inventory management is driven by the fact that as much as 80% of organisations reported a responsive supply chain as one of their core digital transformation priorities.
Here are three technologies that are fuelling this transformation.
AGV and AMR
Automated guided vehicles and automated mobile robots are AI-powered tools that help optimise space.
Logistics and manufacturing companies deploy these systems in their warehouses to save time as they can pick and place goods at a rate of 500 to 600 per hour.
Hybrid Warehousing
Hybrid warehouses are capable of serving retail, wholesale, and also end-to-end supply chains.
Using AI and other digital tools these warehouses maximise the use of every corner of your space for additional profitability.
Distributed Inventory Management
This strategy involves storing and shipping inventory in multiple storage and fulfilment facilities to achieve
- Faster shipping
- Lower cost of shipping
It uses AI for fulfilment forecasting and stock management across locations.
Inventory Management Systems Across Industries
Key Metrics to Track in Inventory Management
Four key inventory management metrics you need to measure for effective business outcomes.
Inventory Days of Supply
It measures how many days of sales you have in your inventory.
Example:
If you sell two items a day and have 20 more in inventory, it means you have 10 days of sales in your inventory.
Inventory Turnover
It shows how fast or slow your inventory is moving. The longer you keep inventory, the higher the chances of losses.
The higher the metrics, the better.
Example:
You sell 500 shirts per year, with an average inventory of 100 shirts. Your inventory turnover is:
Inventory Turnover = 500 shirts / 100 shirts = 5 times per year
It means your shirt inventory sells out and is replaced 5 times per year, indicating relatively fast-moving inventory.
Cash to Cash Cycle
It calculates the number of days from the investment in raw materials until you make money from it, getting cash back in your business.
The shorter the cash conversion cycle, the better.
Example:
Let's say you're a manufacturer and you invest in raw materials on Day 1.
It takes you 30 days to produce the goods, 60 days to sell them, and 30 days to collect payment from customers.
Meanwhile, you have 60 days to pay your suppliers.
Cash-to-Cash Cycle = 30 days (production) + 60 days (sales) - 60 days (payment to suppliers) = 30 days
It takes you 30 days from investing in raw materials to receiving cash from customers.
Inventory Accuracy
When you compare the manual and inventory management system counts, those that match are accurate.
It implies a match in unit, lot, or batch numbers and the location. Unlike in finance where only units are counted.
Example:
If your system indicates a total of 5,000 units in the main warehouse and manually you found 4,500 in the main warehouse and 500 in a display.
Accuracy per finance: 100%
Accuracy per supply chain: 90% because of the location mismatch
To Wrap it Up
An inventory management system should align with your specific operational requirements and growth plans.
For smaller brands, a periodic system with manual counts might provide enough control, whilst larger companies benefit from perpetual systems with automated tracking.
The key lies in selecting features that address your unique challenges—be it multi-location tracking, advanced forecasting, or specialised industry compliance.
With proper implementation, these systems improve operational costs whilst providing the insights needed for strategic decision-making.
Hence, selecting the right system sets the foundation for overall inventory optimisation.
FAQs (Frequently Asked Questions on Inventory Management System)
1. What are the 4 types of inventory management systems?
• Periodic (manual counting at set intervals)
• Perpetual (real-time automated tracking)
• ABC Analysis (prioritising items by value)
• Just-in-Time (JIT) systems (ordering stock only when needed)
2. What is the most commonly used inventory system?
Perpetual inventory management systems are standard for medium to large companies mainly due to their automated tracking capabilities.
3. What do inventory management systems do?
- Track stock levels,
- Automate ordering,
- Monitor product movement,
- Generate reports, and
- Provide analytics.
4. How do inventory management systems work?
These systems use barcodes, RFID tags, or SKU numbers to track items entering and leaving inventory. They update stock counts automatically with each sale or purchase, calculate reorder points, and provide real-time inventory visibility across locations.
5. What is ABC inventory analysis?
ABC analysis categorises inventory items based on their value and importance.
- 'A' items (high-value, 20% of inventory),
- 'B' items (medium-value, 30%), and
- 'C' items (low-value, 50%).
It helps prioritise inventory control and optimise storage management.
Talk to our experts for a customised solution that can maximise your sales funnel
Book a demo
.png)
.png)