Inventory management is tracking and optimizing inbound and outbound flows of goods within your company so that storage costs are kept as low as possible and there are as few goods in stock as possible. With good inventory management, the right products are in the right place at the right time and in the right quantity. Storage of products costs money and as a business owner you want to keep your costs down, which makes inventory management a "must".

How can inventory management software help your business?

What is inventory management: 6 basic rules

Inventory management is about mapping out the rules that determine how much stock of each product, raw material or part can be held, so that orders and deliveries can be made on time. The following 6 basic rules serve as the basis for effective inventory management:

Inventory Planning

Know what you have on hand. Daily monitoring of inventory levels is needed. Only then does it become possible to determine how much stock you need based on your current inventory, expected incoming goods and expected shipments. These are the first parameters for your inventory management. Tracking is only possible if there is a logical structure to your inventory so that everyone knows exactly what is where and when. Capture this structure as well so that it is clear to you and your employees.

Choose an inventory management method

Choose an inventory management method that suits your business. Commonly used methods are Just in time (JIT), First in, first out (FIFO) and Last in, first out (LIFO).

Prioritize

Know which products should always be in stock, and which products have a slightly lower priority. That way, you can determine which products should be kept in safety stock. You want to use your usually expensive storage space as efficiently as possible right? Keep in mind periodic fluctuations here as well.

Keep records in order

In order never to order too much or too little, it is very important to have your administration in order. In doing so, make smart use of technology that suits your business. For example, there are inventory management systems, inventory control software, POS systems, barcode software and warehouse systems on the market. There are also free inventory management solutions.

Get fast and reliable suppliers

Be critical when choosing suppliers, go for quality and not just price. You must be able to rely on suppliers to keep your inventory up to date. Make clear agreements and make sure they stick to them.

Take stock

By carrying out periodic checks and spot checks, you check whether the records match the current stock. How often you do this so-called "balancing" depends on the type of business.

What are the benefits of inventory management?

Effective inventory management leads to increased sales, maximized profits, increased customer satisfaction and produces loyal customers. We list some of the benefits:

Low purchasing costs, because you never order too much.

Fewer dissatisfied customers; through good suppliers and always being able to deliver from current stock.

Lower inventory costs thanks to cost-saving storage and more efficient inventory.

Able to act proactively through insight into obsolete stock.

Insight into profit margins through effective inventory management allowing you to:

focus on brands and suppliers that generate the highest profits;

know which items are best sellers and which sell worst in terms of quantity and margin;

manage for discounts thanks to an accurate overview of the cost per item.

Inventory management software

There are several ways to keep track of inventory. Software for inventory management can offer good solutions. On Capterra you can find a comprehensive list of inventory management systems or department store management systems. Read reviews from other business users to make the right choice.

If you have a retail or hospitality business, a POS system is also an option for managing your inventory. Purchases are immediately processed into inventory by the system. If you want to know what available options are currently on the market, visit our list of POS systems .

This article may refer to products, programs or services that are not available in your country, or may not comply with your country's laws or regulations. We recommend that you contact the software vendor directly for information on product availability and compliance with local laws.