Irrespective of the size and scale, inventory is crucial to the business. Studies show that managing inventory costs helps reduce 10% of business costs.
Looking for Inventory Management Software? Check out SoftwareSuggest’s list of the best inventory software solutions.
Inventory tracking helps estimate customer demand and maintain the right amount of inventory across the entire chain of activities. Doing so helps improve business efficiency, reduce costs, and enhance customer lifetime value.
In this blog, we have covered everything you need about inventory tracking – the types, methods, benefits, and challenges involved. Read the blog to understand the best strategies for inventory management.
What Does Inventory Tracking Mean?
As it implies, inventory tracking is tracking and maintaining inventory levels to help businesses handle customer requests while reducing costs. Inventory requirements constantly change with customer demands, so businesses must watch regularly to meet the requirements.
Businesses are on a spree to gain a competitive edge and increase sales, revenue, and profits. Using the right inventory tracking software system, you can achieve more profits, reduce inventory costs, and promote higher customer satisfaction.
Large enterprises have dedicated resources and investments for warehouse tracking and inventory control. At the same time, it is hard for small businesses to allocate exclusive resources. Inventory management software solutions have evolved to help businesses track inventory regularly.
Inventory tracking tools help businesses automate the process of inventory management so they stay equipped to meet customer demand. In the process, businesses can also reduce costs due to excess inventory.
Tracking the inventory of a business in real-time helps bridge the gap between supply and demand and ensures that the business is armed with supplies to meet customer demand.
What Are Inventory Tracking Methods?
Several methods exist to track and manage inventory, yet most businesses use one of the following three- 1. Manual spreadsheets 2. Inventory management systems 3. Inventory tracking applications. Businesses must choose one of these methods based on their operation’s nature, size, and scale.
1. Manual Spreadsheets
Small businesses and startups that usually deal with low inventory levels and limited product categories rely on manual spreadsheets to manage inventory. They create sheets for different SKUs and then add columns for product categories.
As the spreadsheet has to be updated manually, it usually gets harder when businesses scale their operations. They may need real-time inventory data to be able to make reliable forecasts. So, businesses explore ways to automate the system.
2. Inventory Management Systems
Inventory management systems help businesses decipher where and how much the stock is at each point in the supply chain. Businesses can track stock levels throughout the entire chain using inventory management software.
Businesses also add barcode modules and RFID scanners as part of the inventory management system, making it easy for them to track inventory in real-time. Automated inventory management systems are an appropriate choice for businesses with several stock units and many different product categories, and high stock volumes.
3. Inventory Tracking Applications
Inventory tracking applications help make informed business decisions and reduce uncertainty. Installing inventory tracking applications on your mobile phones allows you to manage stock levels on the go from anywhere, anytime.
Access to real-time data helps forecast customer demand and plan raw material sourcing and other activities in the supply chain. Doing so helps businesses achieve an optimal inventory level and manage performance even remotely. Using inventory apps helps you avoid errors and flaws resulting from manual methods like Excel Spreadsheets.
Suggested Read: 5 Smart Tips for Inventory Scanning with Barcode
Manual vs. Automated Tracking
A manual tracker for inventory systems is sufficient if you are a small business with few stock-keeping units. But when you scale your business or own an enterprise with many SKUs, it may become cumbersome to maintain inventory using automated methods.
Manual methods like spreadsheets will complicate the process and impact inventory forecasting accuracy. For instance, if you do not forecast properly for an upcoming holiday season, you may miss out on a huge sales opportunity.
Automated inventory tracking methods offer real-time data and visibility into the process when you have inventory-keeping units across multiple locations. The best thing about automated methods is that they generate real-time reports that help streamline the entire process.
How Do You Effectively Track Inventory?
While we presented an overview of the common inventory tracking methods in the previous section, we have outlined some broader methods to track inventory in the coming section.
1. Pen and Paper
Small businesses still use paper and pen to record the transactions and track the stock levels. But, it is cumbersome, and the process may be flawed. So, many businesses are avoiding this method and have moved to Spreadsheets and inventory tracking software.
2. Excel Spreadsheets
Companies that deal with minimal product categories and low stock levels use Excel spreadsheets to record the stock levels. They can create one sheet for each stock unit and update it accordingly so the sheet displays the inventory at any time.
As mentioned earlier, using an Excel spreadsheet may result in flaws and errors. Also, it is hard to get a real-time picture of the inventory as it is static. To make this more realistic, you must use automated methods like inventory tracking software.
3. Google Forms
While Spreadsheets help track inventory levels, the entry is manual and time-consuming. It is static, and every time there is an update, you must record them manually. The good news is that you can connect the Excel Spreadsheet to a Google Form and create the fields you wish to create. Every time you create a new entry, the responses will be recorded, and the Spreadsheet will change dynamically.
4. Third-party Logistics
Another way to manage inventory in startups and small businesses is to let the process of inventory tracking to third-party logistics companies. These firms take care of the end-end inventory management process from packing to dispatching and updating the inventory levels. Doing so helps businesses gain a real-time picture of the inventory and stock levels.
5. Mobile Apps
Many businesses today prefer to use dynamic mobile apps instead of Excel Spreadsheets. Many firms offer mobile apps for inventory tracking, and you can choose one among them. The best thing about mobile apps is that you can update and manage inventory levels without being on the desk.
6. Inventory Tracking Software
Inventory tracking software offers a much more realistic view than mobile apps and static methods like Excel spreadsheets or Google Forms. Businesses can integrate the software with a barcode scanner that automatically records transactions when a commodity enters or leaves the warehouse.
As the inventory tracking software is updated dynamically, it becomes easy to gain a real-time idea of the inventory at any time. Doing so enhances the accuracy of forecasts and offers a more accurate reporting structure. Businesses are equipped with data and can make informed, data-driven decisions.
Inventory tracking software anticipates changing customer preferences and fluctuations in demand, and so helps businesses avoid the problem of excess stocking. They gain a data-led picture of when to reorder and achieve optimal inventory levels.
Interesting Read: What Is a Barcode Inventory System?
What Are the Benefits of Efficient Inventory Tracking?
Now that you are aware of the different methods of inventory tracking and management, in this section, we will walk you through the benefits of efficient inventory tracking.
1. Enhances Accuracy
A survey conducted by GS1 Standards shows that using barcodes and RFID (radio frequency identification) enhances the accuracy of inventory tracking by 95%. When a business gains an accurate picture of stock levels, it can make informed decisions, make more profits, and save business costs.
Suggested Read: RFID vs Barcodes: Which One Should You Choose?
2. Save Time and Money
Traditionally, businesses relied on pen-and-paper methods and Excel Spreadsheets to track inventory. They were time-consuming and lacked the abilities of dynamic reporting. Using automated inventory tracking methods helps businesses save time they invest in managing stock levels. They can invest their time into performing other crucial business operations.
Also, maintaining an optimal inventory level helps businesses increase their revenue and reduce inventory costs, which leads to significant cost savings.
3. Improves Overall Efficiency
Integrating the inventory tracker system with technologies like barcode scanners, QR scanners, etc., helps automate the process and reduce manual tasks. Doing so helps businesses streamline the entire process and achieve higher efficiency.
4. Avoid Out-of-stock Conditions
You can make efficient purchases with access to reliable inventory forecasts. Doing so helps businesses achieve an optimal level of inventory at all points in time. So, with the inventory tracking system, you can mitigate out-of-stock conditions and deliver a better customer experience.
5. Promotes Customer Longevity
In today’s fast-paced world, customers expect things to be delivered right at the moment there is a need. Inventory tracking and management help reduce stockout conditions, so businesses can meet customer demands more efficiently. So this increases customer satisfaction, and they tend to make repealed purchases, increasing their loyalty and customer lifetime value.
6. Reduce Inventory Costs
Inefficiencies in inventory management can adversely impact the accuracy of your forecasts leading to excess inventory. Reliable inventory forecasts, in turn, increase business costs and adversely impact your productivity. Doing so helps avoid the capital getting accumulated in dead stock.
Most Persistent Inventory Tracking Challenges
Now that you gained an awareness of the benefits of inventory tracking, in this section, we will walk you through the challenges involved in the inventory tracking process.
1. Managing Inventory in Multiple Warehouses
Managing inventory remains challenging in large businesses with multiple stock-keeping units and warehouses. Using a pen-and-paper or Excel spreadsheet to maintain a large business inventory may be impossible.
Depending on manual methods may increase the time and money they need to maintain inventory levels. An automated system helps businesses gain a centralized inventory picture and better plan their operations.
2. Time, Money, and Resources-consuming
As you scale your business and add more stock-keeping units, managing inventory may consume more time, money, and resources. In that case, businesses may have to spend a greater part of their time managing inventories.
But, with inventory tracking software, you can save a significant part of the resources and time, which you can, in turn, invest into performing other crucial operations that demand human intelligence. Investing time and resources into efficient operations can result in positive business growth.
3. Tracking the Movement of Inventory Isn’t Easy
A common problem with inventory tracking and management is that commodities keep moving from one place to another. It is always harder to keep track of items that keep getting transported. Inaccuracies in inventory tracking impact the quality of forecasts, which can, in turn, lead to problems like stockout levels, late orders, etc.
Ways To Streamline & Improve Inventory Tracking
Though there are challenges associated with inventory tracking and management, businesses can still streamline the inventory and win more opportunities. In this section, we have covered the best ways to track inventory.
1. Deploy a Reliable Inventory Tracking System
The best solution to handle most challenges associated with inventory management is to choose the right inventory software and configure the system to match your business requirements. Doing so helps businesses solve a majority of challenges, including efficient management of inventory in multiple locations, tracking the movement, etc.,
Choose an inventory management software system with advanced features and capabilities to deliver reliable forecasts, alerts and notifications, warehouse tracking, reports and analytics, inventory optimization, barcoding, scanning, etc. Doing so helps businesses eliminate the inaccuracies that result from manual methods and enhance the efficiency of the entire process.
2. Plan and Execute Frequent Audits
You must take up timely audits to gain better access to the stock flow and plan the financials accordingly. Doing regular audits helps businesses measure their financial performance and alter their inventory management strategies accordingly. You can also gain an understanding of where the inventory is flowing or excessively piling up.
3. Make Informed, Data-driven Decisions
Access to reliable inventory data allows you to unearth selling patterns, evolving customer trends, and fluctuations. You gain access to reliable forecasts when you access sales data from previous years and inventory turnover rates. With such data, you get to exercise better control over your inventory. Doing so helps businesses make data-driven, informed decisions.
Closing Thoughts
Inventory tracking is a significant part of any business and crucial to success. Inventory management can make or break a business’s functioning, especially if you run a large business with multiple stock-keeping units and high stock volumes. Though there are challenges in tracking and maintaining the inventory, deploying reliable inventory management software helps achieve the right amount of inventory and mitigate the challenges.
Inventory tracking helps businesses determine if all the supplies are intact to meet customer demand. It helps businesses mitigate adversities like excess supply, avoid stockouts, and streamline processes.
Some businesses do periodic inventory counts, say once every three months, six months, etc. Physical inventory is counted once every six months or a year, and cycle counting, where you count small pieces several times a year, happens almost every day.
Following are some of the ways to handle seasonal fluctuations in inventory.
- Classify seasonal inventory
- Enhance the quality of forecasts
- Understand the product lead times
- Deploy an inventory tracking system
Jainy Patel is a content editor having over 7 years of experience in the B2B & SaaS industry. With a keen eye for detail, she’s always striving to create content that resonates with the target audience. Her interests include reading, traveling, and staying up-to-date with the latest marketing trends.
