Inventory Management Guide

Field Service Management Complete Guide 19 January

An inventory management system has numerous benefits for businesses. As a prospective venture, you can incorporate this system in your operations, manage your stocks, and develop a constructive process to do so. In the following blog, we will explain what this system is really about and why it is beneficial.

What is an Inventory Management System?

An Inventory system or, more specifically, inventory management is the system through which you can track all the products available in your inventory, as well as their movement throughout the entire supply chain. From purchasing to the end sales, an inventory management system can help you to manage your inventory and the products efficiently.

Every company has a particular amount of stocks that need to be managed in a unique way. Depending upon the size and nature of your business, you can manage your inventory appropriately using a well-placed system.

Why do you need Inventory Management?

Any business responsible for handling the stocks needs a system that can accurately track and control the products. Without such a system in place, you can run into various problems caused by understocking or overstocking. An inventory system and similar order management solutions can, therefore, tell you the number of products you need in order to manage the order flow. Without such information, your existing products might erode, or you might end up getting orders for products that are not even available. Here are more reasons for having an inventory management system:

1. Meet Production Demands

The production plans change according to the stocking, sales, and estimates patterns. In this way, the demand for the raw material supply also changes with the production plans, particularly in terms of specific SKU and batch quantities. With an inventory management system, you can coordinate with your warehouses and respond to any issues.

2. Meet Seasonal and Cynical Demands

The demand for certain products also varies according to the season. For instance, the demand for certain products increases during festivals and national holidays. In this way, it is imperative for companies to anticipate the expected demand and have all the appropriate products in place. Accordingly, the companies can then stock up raw materials, rush supplies, and meet the demand of the market.

3. Reduce the Transit Cost

When the raw materials are being imported from a foreign country or a vendor that is located far, one can save a lot of cost by ordering products in bulk and saving the transportation cost. However, in doing so, It is crucial that the company knows how many products will be viable to order. In this regard, an inventory management system can prove to be very useful.

What are the Objectives of Inventory Management?


An inventory management system can be grouped into four categories. These are as follows:

1. Raw Materials

The raw materials are basically bought from another company in order to be passed through a constructive production process and get transformed into a finished good.

2. Work in the Inventory

This group consists of all the processes of transformations that use the raw material and convert them into a finished product.

3. Finished Goods

These are all the products that have been completed and are now ready to be sold.

4. Maintenance and Repair

These items are used in order to support the production of the finished goods since they are purchased from the distributor.

Since the investments for all of these stages is relatively high, it is crucial for the businesses that mainly deal in wholesale, retail trade, and manufacturing that they manage their inventory and, therefore, all the crucial products in an effective manner. The amount of investment spent on buying, processing, and storing products is sometimes the highest amount that is reserved for all the other assets and profit.

In this way, an inventory management system becomes even more critical. Almost 90 percent of the total working capital is also invested in the inventories by the businesses. Therefore, the management is expected to do proper planning before new products can be bought, handled, processed, stored, and distributed.

The main objective of any inventory management system is to ensure that there are no problems of overstocking or understocking. If the products are overstocked, then the company can fail to get any return on its investment. On the other hand, if the products are understocked, then it can lose customers and perhaps, ruin its reputation in the market as well. In this way, the inventory management system ensures the company has full control over its supply chain. This makes the business more financial and operational while reducing the issues that might arise in the inventory.

What are the Benefits of Inventory Control?

Inventory management system for small business particularly has a lot of benefits. It can ensure that there is a continuous supply of both the materials and stock, so the customers can get appropriate services while the production can continue without any hindrance. It mainly avoids the problem of understocking and understocking that many businesses experience and then eventually fail to address.

It further ensures that the company gets a return for its investment. As already discussed, companies spend a lot when it comes to managing their inventories. In this way, it is harmful when there is management in the supply chain. By managing the inventory appropriately, organizations can ensure that they are working towards their goals.

This is mainly because the inventory management system prevents duplication in the ordering stocks, minimize losses through damages and wastages, optimizes the various costs involved in inventories such as storage and purchase cost, keep the material cost under control, and maintain the minimum working capital as needed for sales and operational activities.

It further ensures that there is a systematic record of the inventory, so in the future, if the company wants to present its stock records (for instance, to the government or the customers) and make data-driven decisions, it can use the information and records available.

What are the types of Inventory Management Systems?

There are ample types of inventory management systems. Here are two main ones:

  1. Periodic Inventory System
  2. Perpetual Inventory System

Periodic vs. Perpetual Inventory Systems

The periodic inventory system acts as a bridge between the perpetual and manual systems. It helps in managing the inventory both periodically and manually. Facilities can implement this system by having a barcoding feature that can tag the inventory items.

These barcodes can be scanned in order to track the item throughout the supply chain process. A central computerized tracking system can then be used in order to provide routine access to all the locations, as well as the quantities of the present items. It can also initiate the process of re-stocking the orders.

On the other hand, the perpetual inventory system is a sophisticated inventory management system that helps in managing stocks using real-time data. As soon as any product is updated in the inventory, all of the information in the central system is immediately updated in order to correct the inventory data.

For this system, the radiofrequency identification (RFID) tags are very important. The active RFID tags can be used in order to send the data continuously and offer real-time information. Conversely, passive RFID tags make use of electromagnetic energy from a reader in order to transmit data. Accordingly, data from these tags can then be sent to a central management system, allowing more transparency to be incorporated in the inventory levels and thus, make smarter decisions.

What are the major system specifications of the inventory management system?

There are numerous specs that come with this system. Here are some of them:

1) Inventory Management

This feature allows the centralization of the most essential warehouse features. From providing complete inventory details such as product history and stock levels to syncing all the essential data, this system ensures that you can run your business operations in the most effective way. You can get automatic stock-out reports, stock inquires, product history, measurement, and categorization to manage your inventory.

2) Inventory tracking

Tracking your inventory is particularly important because it allows you to manage your serial numbers, barcodes, RFID tags, and other IDs while keeping an eye on all the products. These tools and other tracking devices ensure that your business knows every part of the supply chain, can deal with any sort of inventory issue, and make timely decisions. Such a feature also ensures you can make an audit trail in order to boost the productivity of your warehouse and decrease the labor costs.

3) Transfer Management

Enterprises that manage various businesses, warehouses, or inventories can use this feature in order to manage their sites and move their products from one place to another. Bundling and kitting the products can be very attractive to most customers, especially when it is a particular time of the year where they need such products. This is why a transfer management system is incredibly essential. This feature can also ensure multi-location tracking, order picking, stock transfer, and voice picking.

4) Purchasing

Purchasing is a critical feature of the warehouse that heavily relies on the existing state of the inventory. This feature ensures that the users can create as well as manage their purchase orders. Many systems also have templates that populate them with real-time data, so companies can make appropriate decisions when buying more products. On the other hand, purchasing is also facilitated by the customers’ side. Using these features, customers can reach out to the business using live chat and track the shipping process.

5) Order Management

Many inventory management systems come with an order management feature, allowing the companies to customize pricing, track orders, send quotes, and manage the returns. Many advanced systems also sync the orders according to the inventory levels, mark items according to the shipment requirements, and support multichannel sales.

6) Reporting & Analytics

Reporting and analytics are also imperative for businesses in order to grow their business. Without knowing how well your inventory is performing, businesses cannot evaluate the process patterns, identify areas of strength and weaknesses, forecast future demands, and cut down the cost where required. However, the inventory management system makes it easy for businesses to generate timely reports and keep an eye on the analytics.

What are the inventory management techniques?

Businesses make use of various inventory management techniques in order to manage the inventory holding costs and increase potential profits. Here are some of the most common techniques:

  1. Consignment
  2. Dropshipping and cross-decking
  3. Bulk shipments
  4. ABC inventory management
  5. Backordering
  6. Just in time
  7. Cycle counting

How do you Create an Inventory System?


To create an effective inventory management system, you will need to have appropriate software and tech available in order to integrate different processes as part of the supply chain operations. There are many off-the-shelf inventory management systems available out there.

However, many businesses opt for customized inventory management systems in order to optimize it just in the way they want. This is particularly helpful because businesses have unique needs, and therefore, it is worth having a system that directly addresses your needs. For building your very own inventory management system, you can get in touch with any software company that can understand your software need and builds a system accordingly.

Basic Inventory Management Software


An Inventory management software is basically a tech solution that helps in optimizing and automating the inventory processes. From a single screen, you can manage your entire inventory, as well as warehouses located in different places. This software comes with numerous features that make them different from one another. The software can also be used on the mobile as an application, so you can manage your inventory on the go.

When to Upgrade your Inventory Management?

It is best to upgrade your inventory management when new technology is available, or your business is growing. Nonetheless, even a basic inventory management system can prove to be very useful for your business and overall inventory.

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