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Selecting the Right Inventory Management Solution

Updated: Nov 7

The inventory management landscape is rapidly evolving due to automation, significantly altering retail business practices. As operations grow in complexity, there's a pressing need for more sophisticated inventory management systems that not only track but also add strategic value. Gone are the days of spreadsheet-based, haphazard order placements of the 2010s—today's retailers demand multifunctional, intelligent solutions to stay competitive.

Automated inventory management systems often outperform by eliminating biases, personal incentives and focus solely on organizational objectives.

Operational teams aim to reduce write-offs by ordering fewer low-demand items. However, when KPIs focus on sales, manual reorders might prioritize best-sellers over low-demand products, skewing inventory. Recognizing these inefficiencies, technology-driven online inventory systems emerged, replacing manual Excel and basic ERP systems. These automated systems streamline order processes, eliminating time-consuming manual calculations and enhancing efficiency.

Contemporary inventory management systems have transformed order processes by fully automating them. These systems proficiently analyze sales data across numerous SKUs, monitor fluctuating demand, and autonomously determine necessary restock quantities, seemingly fulfilling every retailer's wish. Yet, it's crucial to note that without strategic business process planning, even the most advanced software cannot guarantee a boost in profits.

Importance of inventory management system in business

In retail, financial performance hinges on the operating cycle's length, influenced by inventory turnover and business credit. A longer cycle means more funds for operations and growth. Business credit is reserved for reputable companies and relies on good vendor relations. Inventory turnover, indicating management efficiency, is calculated using stock and sales data to show time until restock, and is affected by product mix and management tools used.

So, an inventory management system software streamlines retail business processes to maintain optimal stock levels, ensuring product availability meets customer demand. These business processes are:

  • Replenishment of store and central warehouse inventory. Including the goods of regular demand, promotional, seasonal products (taking into account all retailers and suppliers SC restrictions);

  • Analysis of inventory key performance indicators;

  • Response to emerging problems;

Consider a retailer with 30 stores, each carrying 5,000 unique SKUs. This totals 150,000 items, each with individual demand, supply, and performance metrics. Calculating restock quantities for such a vast inventory requires meticulous analysis. This scenario underscores the necessity for an automated inventory management system. Such a system handles complex calculations and analysis, freeing managers to focus on strategic activities, KPIs, and development. When selecting or upgrading an inventory management system, prioritize the following functions:

  • Accurate order quantity generation for restocking each SKU.

  • Comprehensive demand tracking and analysis, adaptable to seasonal and sales fluctuations.

  • User-friendly analytics for critical inventory performance indicators.

Related:"Revolutionize your supply chain with AI - The future is here, are you ready?"

Essential Attributes of a Robust Inventory Management System:

Advanced Automation & User-Friendly Interface: A superior inventory management system should offer high automation and a quality UI/UX. It enables creation of tailored task lists for users who can then monitor inventory levels, manage order and delivery schedules, and access customized reports on inventory status, deficits, and delayed deliveries. Moreover, it should swiftly identify and notify users of potential errors.

The system's usability and intuitive design are crucial for its overall effectiveness. It should be easily navigable, allowing users at all levels to comprehend data and operate the system with minimal learning time.

Enhancing Financial Performance An online inventory management system can bolster profitability through:

  • Automated tracking and restocking calculations for each SKU, with real-time inventory updates reflecting demand shifts, delivery schedules, and packaging changes.

  • Streamlined restocking and reshipping within the supply chain, facilitating automated order placements to suppliers, warehouses, and stores.

  • Tailored restocking volumes for stores and distribution centers, informed by analyses of seasonal trends, sales performance, and demand surges for promotional or perishable items.

Each product category has its nuances. An inventory management system must account for these by analyzing product-specific characteristics. For instance, in managing dry goods, the system should track:

  • Average daily demand

  • Seasonal fluctuations

  • Upcoming promotions and sales

  • Supplier reliability and reputation

For fresh goods, an inventory management system must additionally manage:

  • Daily demand variations by day of the week

  • Targeted availability and merchandising for specific customer groups

  • Product expiration dates

The system should be adaptable, with customizable algorithms to suit unique business needs and objectives. For instance, when generating orders for the main warehouse, the system should factor in:

  • Store-specific sales demand

  • Promotional and sales activities per store

  • Seasonal demand fluctuations

  • Distribution Center (DC) sales

  • Other variables affecting orders within a delivery cycle

Advanced Order and Restocking Functions:

  • Order Optimization: The system refines order quantities based on cost, weight, and product count, adjusting for supplier minimums or budget constraints.

  • Logistics Adaptation: It splits orders to match logistical capacities, like vehicle load and fleet size.

  • Substitute Management: The system identifies and uses substitute products, tracking their presence in the inventory.

  • Supplier Diversification: It facilitates working with alternative and additional suppliers for robust supply chain management.

Managing Promotions and Seasonal Inventory:

  • Automated restocking post-promotions and seasonal peaks.

  • Detailed analysis of seasonal demand variations.

  • Tracking and anticipating holiday logistics delays, ensuring timely order placement.

  • Proactive inventory preparation for promotional periods.

  • Real-time monitoring and adjustment of promotional demand.

  • Efficient tracking of additional supplier commitments during promotions.

  • Balancing inventory at the end of promotional events.

  • Clear visual analytics for evaluating promotional sales and demand.

Performance Monitoring and Troubleshooting:

  • Comprehensive, real-time analytics for key metrics like stock levels, turnover, and sales.

  • Alerts for critical tasks needing urgent action, such as inventory adjustments for promotions.

Data Management and Transparency:

  • Quick generation of stock status reports and detailed order histories for responsive decision-making.

  • Tracking of user modifications within the system for accountability.

Real-Time Analytics:

  • Advanced reporting tools for analyzing lost sales, overstock, and inventory metrics, with customizable filters.

  • Supplier performance reports covering reliability and order fulfillment.

  • Detailed inventory turnover and availability insights.

  • Tracking of like-for-like metrics.

  • Specialized reports for fresh products and promotional activities.

  • Audit trails for user-made changes.

Cross-Platform Accessibility and Adaptability:

  • Remote access from any device, anywhere.

  • Highly adaptable settings for bespoke business requirements, avoiding costly programming.

  • Seamless integration with various reporting systems.

  • Fast operational speed.

Continuous Support:

  • Round-the-clock technical support from the provider.

Related: Businesses adopting AI will be better positioned to take advantage of growth and stay competitive!

In summary, key considerations for selecting an inventory management system include:

  • Adaptive restock algorithms attuned to market and demand fluctuations.

  • User-friendly interface.

  • Customizability to fit your business requirements.

  • Transparent, real-time analytics and KPI monitoring.

  • Proactive notification system for inventory-related risk management.

Related: Balancing Inventories: A Vital Strategy for Retail Profitability

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