Inventory Management Software Development: Best Practices to Ensure Uninterrupted Stock Flow

Managing inventory can be one of the most complex and challenging aspects of running a business. From maintaining the right stock levels to minimizing costs associated with mis-shipments, spoilage, or overstocks, the challenges are many. Without a robust system in place, businesses risk inefficient operations, lost sales, and poor customer satisfaction. That’s where inventory management software development comes into play.

By leveraging custom inventory management software, businesses can tackle these challenges head-on. Whether you’re looking to streamline stock tracking, optimize order fulfillment, or reduce wastage, inventory software development services provide the tools you need to gain real-time visibility, automate key processes, and improve decision-making.

Partnering with an experienced inventory management software development company can help you design a solution tailored to your specific needs, ensuring a more efficient, cost-effective, and scalable approach to managing inventory.

What Is Inventory Management Software?

Inventory management software, also known as inventory software, is a solution for supply chain management that allows businesses to track the movement of products from one endpoint to another.

What is the picture that comes to your mind when you hear the phrase “inventory management software”? Chances are, you think of a warehouse storing an assortment of goods to be delivered to rightful end consumers (or to vendors who will further sell them wholesale or retail). Being generally true, this vision omits a few essential details.

First of all, Industry 4.0 has ushered a line of intangible products (like software), so IT inventory management, for instance, deals with virtual merchandise located in digital depots only. Second of all, inventory planning and tracking embrace not only finished products waiting in a warehouse to be sped to the consumer. Other items included in the broad category of inventory are:

• Raw materials that the manufacturer uses to produce its output;
• Decoupling inventory which encompasses those raw materials that serve as an emergency stock to prevent any downtime in manufacturing;
• Unfinished products which aren’t ready to be sold yet;
• In-transit goods which are no longer in the warehouse but are being shipped to their destination;
• MRO (maintenance, repair, operating) goods that cover supplies needed for an uninterrupted production cycle;
• Buffer inventory with a safety stock of depleted products kept in case a sudden spike in demand or supply chain suspension occurs;
• Anticipation inventory, which consists of items kept in stock that may be needed to satisfy customers’ demands during a certain event or season (like candy and cards for St. Valentine’s Day or warm clothes for winter).

Before choosing inventory tracking methods that will allow you to efficiently manage any kinds of goods listed above, you should have a clear understanding of the entire procedure of inventory management software development.

Inventory Management Software Development in Detail

The whole algorithm seems quite natural and foolproof, so some entrepreneurs (in fact, as much as 43% of small businesses) may wonder if they even need to bother about any inventory control methods. Indeed, what can go wrong?

The first possible pitfall is understocking. You may underestimate the number of raw materials or MRO products necessary for a seamless workflow. As a result, your company’s operations will be suspended indefinitely. You will lose precious time waiting for the necessary items to be delivered, and downtime is always about the loss of revenues. If your miscalculations involve finished products, your clients will give you a piece of their mind as to the quality of service at your organization and its reliability as a business partner.

The second problem is the opposite – overstocking. If you manufactured more items than customers need just now, additional storage space must be found for them, which involves an increase in related expenses. Besides, if those goods are flowers or foodstuffs, they can’t sit on the shelves for long even under the best storage conditions. And losing them spells financial damage again.

Now you see the inventory management importance, don’t you? By leveraging the right inventory strategies and applying effective inventory control techniques, you can significantly improve your business operations. Inventory management software development plays a key role in streamlining these processes, helping you optimize cash flow and minimize costs related to mis-shipments, out-of-stocks, spoilage, overstocks, and more. With the right tools, you can enhance the overall efficiency of your business, ensuring that inventory is always at optimal levels while reducing unnecessary expenditures.

Features of Inventory Management Software

What are the most popular features to consider for inventory management software?

Economic Order Quantity (EOQ)

This formula takes into account a set of variables (demand rate, order cost per purchase order, and annual holding costs per unit) to identify the optimal number of products to be bought and thus rule out overstocking.

Minimum Order Quantity (MOQ)

While the previous number is supposed to watch for excessive supply, this one is called to determine the smallest quantity of goods that will keep the business going.

ABC Analysis

As the name hints, the technique divides goods into three categories (A, B, and C) depending on their impact on the overall inventory cost. The first group includes the most valuable products that give the most profit. The third group comprises items whose significance is the smallest. Group B consists of products that cover the middle ground between A and C regarding profitability.

Just-in-Time Inventory Management

This inventory control method is used to receive products on demand when needed instead of receiving them in excess and risking some parts of them turning into dead stock.

Safety Stock Inventory

It runs contrary to the previous method because it consists of ordering extra inventory just in case. Although leading to certain additional expenditures, it safeguards the company against stock-outs due to imprecise forecasting, unexpected fluctuations in demand, or supply chain disruptions.

FIFO and LIFO

FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) are two commonly used inventory management methods. FIFO prescribes selling older inventory first to ensure that stock remains fresh and reduces the risk of obsolescence. On the other hand, LIFO involves selling the most recently received items first. Inventory management software development can automate these processes, helping businesses implement the right method according to their needs.

LIFO is often used for big-ticket items like cars or machinery, as it can help save on tax payments. Since the most recent products are usually more expensive, using LIFO reduces net income and, consequently, taxable income. Inventory management software development can track these methods to ensure proper accounting and reporting for tax efficiency.

Six Sigma and Lean Six Sigma

In manufacturing quality assessment, the Greek letter sigma is used to represent deviations from the standard. There are six indices that represent six standard deviations, which can be applied in inventory management to ensure the timely delivery of defect-free products. Inventory management software development can integrate these principles to enhance accuracy and efficiency.

Reorder Point Formula

The reorder point is a crucial indicator that triggers the ordering of goods when the available stock in the warehouse falls below a minimum threshold. To ensure adequate stock levels, this number should account for lead time and slightly exceed the safety stock index. Inventory management software development helps automate this process by calculating the reorder point and sending alerts when inventory reaches the set threshold. This ensures businesses avoid stockouts, maintain smooth operations, and reduce the risk of running out of essential products.

Batch Tracking

Batch tracking allows you to group similar items and monitor vital parameters, such as expiry dates or the identification of defective items, by tracing them back to their original batch. Inventory management software development enables efficient batch tracking, making inventory handling much more streamlined and accelerated. With the right software, you can easily track and manage batches, ensuring product quality and reducing waste, all while improving overall inventory efficiency.

Bulk Shipments

Bulk shipments involve handling items in large quantities, allowing businesses to save on delivery costs by shipping products together in one large batch. This approach is especially beneficial when you have the capacity to stock up on products for a single shipment. Inventory management software development plays a crucial role in managing bulk shipments by helping businesses track large quantities of goods, optimize shipping schedules, and reduce overall logistics costs. By automating and streamlining the bulk shipment process, businesses can further reduce expenses and enhance operational efficiency.

Consignment Inventory

As you can guess, this approach is employed for the consignment business model in which the wholesaler allows the retailer to pay for the obtained inventory only after it is sold. Technically, the wholesaler still owns the goods and is ready to wait for the money from the vendor without any upfront payment.

Perpetual Inventory Management

This is one of the classical methods of inventory control when items are registered (either manually or by using barcode and RFID devices) as soon as they arrive. In this way, you can monitor your inventory in real time and see its movements 24/7.

Dropshipping

It is a perfect scheme if you want to get rid of the storage headache. Instead of keeping inventory at your facilities, you buy the item on demand from a third party (that will defray all warehouse maintenance expenditures) and deliver it to the customer.

Cross-Docking

Demand Forecasting

Having historical data on purchases, you can predict the demand and plan supply delivery in advance. All these techniques will work well if you reinforce them with the life hacks we would like to offer.

Inventory Management Tips to Heed

What else should you do while mapping out your inventory management strategies?

1. Come to Grips with Your Supply Chain

Since inventory management is only one cog in the supply chain mechanism, you should have a clear vision of the whole cycle. It means detailed information on all stakeholders and business partners (your supplier, the logistics company that delivers goods, customers you sell your products to, banks you cooperate with, etc.). When you have all their merits and demerits at your fingertips, you will be able to make data-driven decisions as to each element in the supply chain.

2. Monitor Sales

It is not just calculating what is sold at the end of the day. You should find out what items are sold more often than others and why. Is it because of seasonal tides and ebbs? Is it because of their quality? Do some items always accompany each other in sales? In this way, you will have a deeper understanding of consumer habits and will be able to forecast future developments in your niche.

3. Track Product Data

All information about each product (origin, manufacturer, price, supplier, barcode, SKU, etc.) should be entered into your records and updated in case it changes. Special attention should be paid to parameters liable to shifting (such as price) to determine the pattern of changes and figure out possible reasons for fluctuations (for instance, seasonality or scarcity).

4. Audit Your Inventory

Make it a rule to perform a headcount of your inventory at certain intervals. Instead of assuming what you have by doing simple addition to and subtraction from the previous numbers, get the true-to-life picture of your assets. You will be surprised to discover how many ghost items there are in your records. There are surely products lurking on your back shelves being unaccounted for in the database. And you may still be easily selling them at your own expense. Besides, some inventory items might appear to be damaged, broken, or unusable. As a result, such roll-calls will help fine-tune EOQ, MOQ, and other mission-critical indices.

5. Ditch Slow-Moving Products

Some items may remain on the shelves for extended periods, occupying valuable storage space and tying up finances that could be better allocated elsewhere. Inventory management software development can streamline the audit process, helping you identify slow-moving products. By using specialized tools to track inventory turnover rates, you can easily spot these underperforming items and remove them from your inventory. This improves storage efficiency, frees up capital, and allows for better stock management.

6. Employ Inventory Management Software

With such a scope of inventory control tasks and the slew of techniques used to solve them, it is obvious that you can’t do it manually. To achieve effective inventory management, you have no choice but to harness specialized software. The seasoned team of high-profile IT experts at Forbytes can develop a custom inventory management solution of any complexity that will impress you with a broad range of features, seamless functioning, and a moderate price.

Drawing a Bottomline

In today’s competitive landscape, no business can thrive without a robust inventory management policy. Implementing inventory management software development solutions is key to achieving this. By leveraging specialized tools to track product movement, you can streamline your enterprise’s workflow, automate the majority of shop floor tasks related to inventory handling, reduce costs, and significantly improve your company’s overall performance.