Inventory management software
Encyclopedia
Inventory
management software is a computer-based system for tracking product levels, orders, sales
and deliveries. 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 Microsoft Excel
spreadsheets.
or store, it can be tracked via its bar code and/or other tracking criteria, such as serial number
, lot number or revision number.
is required to read barcodes and look up information on the products they represent.
of performing them.
(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. This helped drive down costs for inventory management because retailers in the United States and Canada didn’t 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, PCs debuted and started becoming popular. 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 didn’t 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 store
s, 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.
Inventory management software is used for a variety of purposes, including:
and locations. Inventory management software helps companies cut expense
s 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.
or PC to check current inventory numbers.
. This can speed up the inventory-management process and save managers’ time.
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.
s 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.
Inventory Management Software
Inventory
Inventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...
management software is a computer-based system for tracking product levels, orders, sales
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
and deliveries. It can also be used in the manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
industry to create a work order
Work order
A work order or job order is an order received by an organization from a customer or client, or an order created internally within the organization...
, bill of materials
Bill of materials
A bill of materials is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, components, parts and the quantities of each needed to manufacture an end product...
and other production-related documents. Companies use inventory management software to avoid product overstock and outages. It is a tool for organizing inventory data
Data
The term data refers to qualitative or quantitative attributes of a variable or set of variables. Data are typically the results of measurements and can be the basis of graphs, images, or observations of a set of variables. Data are often viewed as the lowest level of abstraction from which...
that before was generally stored in hard-copy form or in Microsoft Excel
Microsoft Excel
Microsoft Excel is a proprietary commercial spreadsheet application written and distributed by Microsoft for Microsoft Windows and Mac OS X. It features calculation, graphing tools, pivot tables, and a macro programming language called Visual Basic for Applications...
spreadsheets.
Components
Inventory management software is made up of several components, all working together to create a cohesive inventory and stocks for many organisations control systems. These components include (in alphabetical order):Asset tracking
When a product is in a warehouseWarehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...
or store, it can be tracked via its bar code and/or other tracking criteria, such as serial number
Serial number
A serial number is a unique number assigned for identification which varies from its successor or predecessor by a fixed discrete integer value...
, lot number or revision number.
Barcoding
Barcodes are the means whereby data on products and orders is inputted into inventory management software. A barcode readerBarcode reader
A barcode reader is an electronic device for reading printed barcodes. Like a flatbed scanner, it consists of a light source, a lens and a light sensor translating optical impulses into electrical ones...
is required to read barcodes and look up information on the products they represent.
Order management
Once products reach a certain low level, 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.Service management
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 costCost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...
of performing them.
History
The Universal Product CodeUniversal Product Code
The Universal Product Code is a barcode symbology , that is widely used in North America, and in countries including the UK, Australia, and New Zealand for tracking trade items in stores. Its most common form, the UPC-A, consists of 12 numerical digits, which are uniquely assigned to each trade item...
(UPC) was adopted by the grocery industry in April 1973 as the standard barcode for all grocers, though it was not introduced at retailing
Retailing
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
locations until 1974. This helped drive down costs for inventory management because retailers in the United States and Canada didn’t 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, PCs debuted and started becoming popular. 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 didn’t 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 store
Grocery store
A grocery store is a store that retails food. A grocer, the owner of a grocery store, stocks different kinds of foods from assorted places and cultures, and sells these "groceries" to customers. Large grocery stores that stock products other than food, such as clothing or household items, are...
s, 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.
Purpose
Companies often use inventory management software to reduce their carrying costs. 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 shippingShippingShipping has multiple meanings. It can be a physical process of transporting commodities and merchandise goods and cargo, by land, air, and sea. It also can describe the movement of objects by ship.Land or "ground" shipping can be by train or by truck...
items from a warehouse. - Keeping track of product sales and inventory levels.
- Cutting down on product obsolescenceObsolescenceObsolescence is the state of being which occurs when an object, service or practice is no longer wanted even though it may still be in good working order. Obsolescence frequently occurs because a replacement has become available that is superior in one or more aspects. Obsolete refers to something...
and spoilage.
Manufacturing uses/applications
Manufacturers mainly 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
There are several advantages to using inventory management software in a business setting.Cost savings
In many cases, a company’s inventory represents one of its largest investments, along with its workforceWorkforce
The workforce is the labour pool in employment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic region like a city, country, state, etc. The term generally excludes the employers or management, and implies those involved in...
and locations. Inventory management software helps companies cut expense
Expense
In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often...
s by minimizing the amount of unnecessary parts and products in storage
Storage
Storage may refer to:-Storage of goods:* Warehouse, a commercial building for storage of goods* Self storage, public storage facility-Containers:* Dry cask storage, storing high-level radioactive waste* Food storage...
. It also helps companies keep lost sales to a minimum by having enough stock on hand to meet demand.
Warehouse organization
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, packing and shipping to customers.Updated data
Up-to-date data on inventory conditions and levels is also an advantage inventory management software gives companies. Company executives can usually access the software through a mobile device, laptopLaptop
A laptop, also called a notebook, is a personal computer for mobile use. A laptop integrates most of the typical components of a desktop computer, including a display, a keyboard, a pointing device and speakers into a single unit...
or PC to check current inventory numbers.
Time savings
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 securitySecurity
Security is the degree of protection against danger, damage, loss, and crime. Security as a form of protection are structures and processes that provide or improve security as a condition. The Institute for Security and Open Methodologies in the OSSTMM 3 defines security as "a form of protection...
. This can speed up the inventory-management process and save managers’ time.
Disadvantages
The main disadvantages of inventory management software are its cost and complexity.Expense
Cost can be a major disadvantage of inventory management software. Many large companies use inventory management software, but small businesses can find it difficult to afford it. Barcode readers and other hardwareHardware
Hardware is a general term for equipment such as keys, locks, hinges, latches, handles, wire, chains, plumbing supplies, tools, utensils, cutlery and machine parts. Household hardware is typically sold in hardware stores....
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.
Complexity
Inventory management software is not necessarily simple or easy to learn. A company’s management team must dedicate a certain amount of time to learning a new system, including its software and hardware, in order to put it to use. Most inventory management software includes training manualTraining manual
A training manual is a book or booklet of instructions, designed to improve the quality of a performed task. Training manuals are widely used, including in business and the military.A training manual may be particularly useful as:...
s 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.
See also
- Document automationDocument automationDocument automation is the design of systems and workflow that assist in the creation of electronic documents. These include logic based systems that use segments of pre-existing text and/or data to assemble a new document. This process is increasingly used within certain industries to assemble...
in supply chain management & logistics - InventoryInventoryInventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...
- Inventory control systemInventory control systemAn inventory control system is a process for managing and locating objects or materials. In common usage, the term may also refer to just the software components......
- Operations managementOperations managementOperations management is an area of management concerned with overseeing, designing, and redesigning business operations in the production of goods and/or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as little resources as needed, and...
- Supply chain managementSupply chain managementSupply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...
- Warehouse management systemWarehouse management systemA warehouse management system, or WMS, is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking...
Inventory Management Software