Did you know that poor inventory management is one of the top eight reasons why businesses fail? Furthermore, did you know that 43% of small businesses do not track their inventory or use a manual process? Statistically speaking, that’s a lot of small businesses that are doomed to fail.
We don’t say this to scare you, we say it to help you. We don’t want to see your business fail anymore than you do, which is why we want to introduce you to inventory management software programs that serve as a solution. But first, let’s take a deeper look at what inventory management software is and how it can streamline your day-to-day operations.
What Is Inventory Management Software?
Inventory management software refers to any computer application that is specifically designed to track, organize, and maintain merchandise, orders, sales, and shipments. Prior to inventory management software, business owners either collected this information by hand in the form of pen and paper, or they manually inserted these figures into an Excel sheet. Neither is very efficient, hence the need for inventory management software.
How Can Inventory Management Software Help My Business?
As previously mentioned, the traditional method of managing inventory is both tedious and time-consuming. But did you know that it’s also prone to human error?
In a study published in Management Science, researchers examined nearly 370,000 traditional inventory records from 37 stores and found 65% of them to be inaccurate. Inaccurate inventory records contribute to a longer lead time (the time between when an order is being placed and when it is fulfilled), which causes a slower response to market changes, demand, and stock outs. This can ultimately result in customer dissatisfaction if products aren’t available as needed.
It’s not a situation you want to be in as a small business owner, given all the data that illustrates the importance of shortening your lead time. American consulting firm Granite Bay, for example, saw an increase in market shares and profitability when they decreased the lead times of global manufacturers by 50-80%.
Inventory management software allows business owners to decrease their lead time—and thereby increase profitability—by using a more advanced and accurate method of monitoring supplies. This computer-based system uses barcodes or radio-frequency identification (RFID) to track when shipments arrive, where materials are located, and when products have been delivered. By having real-time access to this information, you avoid surpluses and shortages.
Which Inventory Management Software Should I Use?
While there are numerous inventory management software companies to choose from, we generally recommend the following for small business owners, particularly those focused on selling through online platforms such as Amazon or Shopify:
The prices for each vary depending on the volume of your sales, but small businesses can generally expect to pay anywhere between $39-$199 per month.
At the end of the day, the amount of time and money you’ll be saving will make the investment well worth the cost. Don’t believe us? Just take it from Ashok Rao, a successful serial entrepreneur who is currently on his fifth technology startup. In an interview with Entrepreneur magazine, Rao estimated that companies can “increase their profitability 20 to 50 percent or more through careful inventory management.”
We provided you with the statistics. Now the decision is yours.