Inventory management is often one of the most time-consuming and challenging aspects of running a business. On average, 27% of business owners who manage their own inventory spend between 15 and 40 hours a week managing, according to new inventory management statistics.
Of course, you never want to sell out of your most popular items. But letting inventory pile up can get expensive. Bad decisions around inventory planning cost the retail industry $1.9 trillion in revenue. Another report found that retailers lose $634.1 billion stockouts annually.
For many merchants, the time and effort spent on inventory management is half the battle. Tracking inventory levels, managing product returns and exchanges, and re-ordering at the right time is a tricky endeavor. And as a business grows, sellers will have to manage inventory levels across multiple sales channels.
An automated multichannel inventory sync solution can solve all of these issues. The benefits of automated inventory management can be realized virtually overnight. When merchants automate these processes, they can spend less time restocking and more time on high-value tasks.
As you consider ways to invest in your business' future, inventory management automation should be a top priority.
How does an automated inventory management system work?
Inventory management automation software can help keep tabs on current stock levels, reduce storage costs for excess inventory, and improve relationships with suppliers and vendors.
Tools like Webgility, for example, will instantly track and sync orders, inventory quantities, and prices across all stores, marketplaces, and your QuickBooks.
But the answer to, “What is an automated inventory management system?” is a little complicated. These tools come in many forms. Some solutions integrate with your POS system.
Some offer a mobile app that can scan barcodes for simpler physical inventory counts, manage stock, and interface with suppliers while on the go. Many products are cloud-based, which can cut down on your hardware costs and make the tool more accessible.
At a high level, most automated inventory management systems perform five functions.
- Collect data on inventory levels using barcode scanners, RFID tags, or other data collection devices.
- Enter inventory data in one centralized database through integrations with other systems, such as your point-of-sale or an e-commerce platform like Shopify.
- Sync inventory between your stores, POS system, and accounting software and alert you when you’re running low on certain items.
- Analyze inventory data to identify seasonal trends and patterns you can use to make decisions about when to order more stock or when to mark down items that aren’t selling well.
- Generate reports on inventory levels and inventory performance to help identify problems and make decisions about inventory management and profitability.
What are the business benefits of an inventory management automation system?
First and foremost, inventory management automation frees up business owners to spend time on high-value tasks. According to our survey, nearly a quarter of merchants would spend more time focusing on their customers if they could spend less time on inventory.
For growing sellers, in particular, inventory management automation is the key to understanding the drivers that will take your business to the next level.
“You'd be surprised to hear a lot of merchants just look at their cash flow and think that's profit. And ultimately, you have to be thinking about SKU-level profitability so that you can optimize your catalog and the sales of that SKU,” said Webgility’s founder and CEO, Parag Mamnani, on the future of inventory.
“But if you can get down to product- and order-level profitability, you’ll get to the heart of the unit that's making you money.”
1. Improve inventory accuracy
Many merchants are still managing their inventory using Excel spreadsheets. This can lead to a lot of costly errors. Automated inventory management systems reduce the risk of human error, which, in turn, reduces stockout risk and increases profitability.
When you know exactly how much inventory you have on hand, you can be sure to always have enough to meet customer demand.
2. Lower costs
Poor inventory management practices can cause you to lose money due to avoidable errors and overstocked items. Automated inventory management systems can help to reduce costs by eliminating the need for manual inventory counting and data entry.
Many inventory management solutions also forecast demand, so you know exactly how much you need to order over time. This can free up your employees' time so they can focus on other tasks, such as customer service or sales.
3. Sync prices and quantities across stores
Automated inventory management software makes multichannel selling easy. Webgility, for instance, empowers merchants to manage product listings between QuickBooks, Amazon, and other stores, including prices, SKUs, images, descriptions, and conditions. Transferring product details and downloading new orders in real time gives everyone a clear picture of what’s in stock and where.
4. Improve customer satisfaction
Ultimately, improving inventory management leads to better customer satisfaction. Automatically tracking inventory can ensure that customers can always find the products they want. This assurance can lead to repeat business and positive reviews, which can help grow your business.
How to choose an automated inventory management system
Start by defining the specific needs of your business before you research the different inventory management automation solutions available.
Some companies want to understand profit and loss, open a new sales channel, or improve accuracy in a specific part of their logistics. There’s no one-size-fits-all approach to inventory management automation. Defining your needs can help you narrow down your options.
Then look for something that’s scalable, easy to use, and integrates with your existing technology. For instance, automation software like Webgility for QuickBooks syncs your QuickBooks account with all your online stores, giving you real-time inventory tracking across platforms.
As your business grows, you may need to upgrade your inventory management system. So choose one that’s scalable and can grow with your business.
Talk to other businesses in your industry and ask them about their experiences with different inventory management systems. This can help you narrow down your options and choose the best system for you.