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Key Takeaways

Lubricate Your Sales: Top-notch inventory management software is crucial for ecommerce success, automating stock levels, purchases, sales, and shipments for efficiency and accuracy, avoiding the pitfalls of pen-and-paper methods.

Real-Time Magic: Real-time inventory tracking through modern management software offers unparalleled visibility and control over stock across warehouses and sales channels, dramatically reducing human error and enhancing operational efficiency.

Cost-Cutting Wizardry: Implementing inventory management software significantly reduces costs associated with human errors, overstock, stockouts, and inefficiencies, while robust data analytics aid in forecasting and optimizing inventory levels.

Supplier Harmony: Enhanced supplier relationships stem from precise demand forecasts and order histories provided by inventory management tools, allowing for confident negotiations and improved supply chain reliability.

Data-Driven Decisions: Inventory management software empowers businesses with data-driven decision-making by consolidating data for a comprehensive view of inventory, enabling accurate demand forecasting, and optimizing stock management.

Inasmuch as there are lots of moving pieces, successful ecommerce brands could be considered well-oiled machines. People, products, boxes, trucks—all moving to and fro to get delightful baubles to your customers.

As with any machine, it won't oil itself. It needs care and maintenance. In this case, the proper lubrication comes in the form of top-notch inventory management software.

If you don't have it, your operations become sluggish as the grinding sound of using pen and paper to record inventory levels slows you to a halt. It's brutal and easily avoidable.

As retail has evolved and a significant portion has moved online, so has the way we track inventory. As a business, you gotta do the same. Obviously, there are still many challenges in inventory management, but using prehistoric systems shouldn't be one of them.

Seriously.

To convince you fully (I see your skeptical gaze), let's dig into the benefits of using a modern system for inventory management. By the end of this, you'll get it.

What is Inventory Management Software?

Inventory management software isn't your grandpa's inventory tracking system—it's a real-time digital tool that automates the tracking and management of stock levels, purchases, sales, and shipments.

Ecommerce brands use it to maintain optimal inventory levels across every sales channel and warehouse location to avoid too little or too much stock.

This means your customers experience fewer out of stock notifications, late deliveries, or incorrect orders.

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10 Benefits of Inventory Management Software

If you are still using pen and paper, or perhaps just using a subpar inventory system, you might be missing out on major benefits.

The below isn't to make you sad, if so, but rather to show you what you could have if you just made the switch. So, let's take a look at the advantages of using good inventory management software.

1. Enhanced accuracy and efficiency

efficient accurate inventory management

The average inventory accuracy level for many businesses is a modest 63%. That's barely a passing grade, so it shouldn't be good enough for your business.

Accuracy is the difference between someone buying your product now and going elsewhere because "Oops... that's out of stock!" ain't going to cut it.

If you know how much of any product you have on hand at any point, you can easily keep stuff in stock and keep your customers (or prospective customers) happy. You can replenish stock at exactly the right time, so you always have it but aren't overstocked.

This just-in-time method of inventory keeps your held stock at the right level, saving you money and extra effort in having to offload it later. Great inventory management software enables tighter inventory control to make JIT methods possible.

Your cash flow will thank you.

Beyond that, you can increase efficiency by sussing out troublesome bottlenecks in your processes and supply chain and fixing them. Voila, extra cash flow!

Businesses with optimal supply chains can have three times faster cash-to-cash cycles.

So, if you like good things like cash flow, implementing efficient inventory management tools can put you on the right path.

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2. Real-time inventory tracking

As I inferred before, real-time inventory tracking changes everything.

You can see where products are in your warehouses and how they're moving through the supply chain in real time. What a wonder of modern technology!

This eliminates human error from the equation. No data entry here, just automated inventory updates! So, from manufacturer to warehouse to shipping box to customer, you have an eye on what's going on with all those lovely products you sell.

Whether you operate from one warehouse and one sales channel to multiple of both, you have that sweet visibility you need to run your business better.

This very benefit is what enables massive brands like Amazon to track each little item they sell across the multitude of warehouses they have. This, plus robotics and a ton of employees, creates unmatched experiences for customers.

Similarly, Walmart uses these tools for real-time inventory management, empowering the organization to ensure its shelves are regularly stocked and reduce lost sales.

3. Cost reduction

Human error, deadstock, overstock, stockouts, warehouse inefficiencies—these all cost you money. You want to keep that money.

That's where inventory management software comes in, proving its worth not just through boosting your revenue, but also by trimming those pesky costs.

It minimizes human error by automating data entry and inventory tracking, ensuring accuracy in stock levels and orders (as we discussed earlier).

Plus, with robust data analytics, you can anticipate which products will be in high demand during specific seasons. This foresight enables you to avoid unnecessary expenses and overstocking.

Advanced forecasting tools help optimize inventory levels, ensuring you have just the right amount of stock (JIT method)—reducing the costs associated with excess inventory and stockouts.

Inventory management software also streamlines warehouse operations. Efficient stock organization and retrieval processes reduce the time and labor costs associated with managing inventory, contributing further to cost savings.

Essentially, it acts as a safeguard against the various inefficiencies that can drain your resources, allowing you to retain more of your hard-earned revenue, which we love.

4. Improved supplier relationships

Without great suppliers, what would you have for that customer base you spent precious time building? Your relationship with your suppliers is critical to your overall success.

Inventory management software can help with this matchmaking.

With these tools, you're not just guessing your inventory needs—you've got real-time, accurate data at your fingertips.

You can go into supplier meetings armed with precise demand forecasts and detailed order histories, allowing you to negotiate with confidence, knowing exactly what you need and when.

But it's not just about what you know—it's about how you use it.

With inventory software predicting your needs, you can give suppliers a heads-up well in advance. No more stressful last-minute rush orders. And suppliers love customers who plan ahead.

It could mean faster deliveries, better pricing, or first dibs on premium products.

And here's a bonus: consistent, timely orders make you a "predictable" customer—in the best way possible. In the world of supply chain, predictability equals reliability. You become the customer suppliers want to go the extra mile for.

And in a world where supply chains can make or break a business, that's not just nice to have—it's a competitive edge.

5. Data-driven decision making

Think about all the moving parts in your business: demand patterns, sales records, production schedules, supplier lead times. It's a lot to juggle, right?

But here's the magic: inventory management software can gather all that info automatically. No more spreadsheet shenanigans or data entry nonsense. Instead, you get a clear, comprehensive picture of your inventory landscape.

One of the most powerful features of this software is its predictive capability. Advanced algorithms analyze historical data and real-time sales to forecast future demand accurately.

This foresight allows businesses to optimize reorder points and safety stock levels, ensuring they're prepared for demand fluctuations without overstocking.

Also, inventory management platforms can consolidate data from multiple sources, providing a more consistent view.

In one case study, product managers for an organization had few details about product turnover rates and had a significant need for better production planning and performance metrics. They manually generated reports at the time, and ad-hoc reports were created on the fly with slight consistency or governance.

Modernizing their business information efforts made inventory data available and allowed them to address how much inventory they needed to meet demand, optimize stock management, reduce product recall impact, and identify how to prevent stock-outs or surpluses.

6. Scalability and flexibility

scale operations with inventory management software

Growing an ecommerce business takes a lot of care, support, and flexibility, and your inventory management system can be a key tool in making that happen. As your business grows and you expand into new markets, your inventory needs will change.

A 2023 consumer study found that 55% of products are out of stock more frequently. With these stock issues becoming the norm, you can give your business an edge by managing inventory better as you scale to ensure product availability.

Many inventory management tools come with automated features that offer the flexibility and scalability your company needs to adapt to changing demands.

Also, with the right software, you can easily add new products, warehouses, and sales channels, ensuring you can remain flexible without having to make costly upgrade investments.

7. Enhanced customer satisfaction

Happy customers are good business. They write positive reviews, come back to buy more, and tell their friends and family about your wonderful stuff. That sort of trust and credibility is priceless.

76% of consumers will stop buying from a brand after one bad experience, and having better inventory control means customers get their products when they want them.

Inventory management software is designed to make your brand shine in your customers’ eyes. Here's how:

  • Increased accuracy means the right product gets delivered to the right place at the right time.
  • Automation speeds up the process, getting orders out of the warehouse doors faster.
  • Real-time updates keep your customers in the loop about when shipments leave your storage and when they’ll arrive at their doors.

When customers know exactly when to expect their products, it reduces their worries and saves you from having to answer a ton of questions. It’s a win-win—customers are happy and feel taken care of, and you get to build trust and credibility in your market.

8. Compliance and audit readiness

Keeping accurate and up-to-date inventory records, as we've discussed, is required for any serious business. Not only does it make you more money in various ways, these accurate records also protect your company from getting penalized or fined.

Inventory compliance audits are key to making sure your records are spot on.

Inventory management tools can help you regularly perform these audits, catching and fixing discrepancies before they become big problems.

This proactive approach keeps you compliant with regulations, properly represents the value of your inventory, and helps you avoid hefty fees from non-compliance, like higher insurance rates.

For example, a cannabis company in Ontario, Canada, recognized the importance of compliance and regulation in the cannabis industry.

They implemented a monthly compliance reporting tool for the Alcohol and Gaming Commission of Ontario (AGCO) to save time and improve workflow for month-end reporting. The company was able to meet cannabis regulatory requirements by automating the compliance reporting process.

9. Multiple warehouse coordination

If you strive to scale your brand, you'll someday have multiple warehouses to manage.

Big brands are usually the early adopters for inventory management tools for this very reason. This software is great for managing multiple warehouses and consolidating product info into one place.

If you have several warehouses, the inventory management tool you use can give you a better big-picture analysis to help with long-term decision-making. You’ll get a birds-eye overview of your entire supply chain by tracking stock and its movement between warehouse locations.

Inventory management software can show you which warehouse has a particular product, how much it has, and its price.

So, when one warehouse runs low on inventory of a specific item, you can quickly process orders from another location. Some advanced tools even help you place orders while automatically updating the product count.

10. Data security

data security inventory management

Your data shouldn't be accessible to just anybody. That's true of customer data, obviously, but it's also true for product data.

Inventory management tools are great for controlling who has access to what information. You can restrict user access based on their role, so only the right people can see or edit certain data.

This means fewer mistakes and tighter security all around.

For instance, you can set it up so someone on your team can input data about specific items, but it only gets finalized once a manager approves it. This extra layer of oversight ensures everything is accurate.

You can also customize access rights for employees, letting them see only the data they need. This way, you can prevent data loss or leakage by keeping sensitive information on a need-to-know basis.

How to Choose the Best Inventory Management Software for Your Ecommerce Business

Finding the perfect inventory management software is not simple, but as you can see, it'll pay off in various powerful benefits.

The right system will not only save you time but also reduce labor costs and eliminate the inefficiencies of manual processes.

With so many tools to choose from, you have to figure out what factors to consider to make the choice easier.

Let's look at a few.

  • Accurate inventory and real-time data. Effective inventory management relies on accurate, up-to-date information. Real-time data tracking ensures precision in managing SKUs across warehouse operations, minimizing excess inventory and preventing stockouts.
  • Forecasting and just-in-time inventory. Inventory management software aids in forecasting and adopting a just-in-time approach. By analyzing sales data and customer trends, it helps predict demand and adjust inventory levels, reducing excess stock and associated costs.
  • Integration with ERP and accounting software. Seamless integration with ERP and accounting systems offers comprehensive control over business operations. It synchronizes data across platforms, enhancing decision-making and customer experience by ensuring efficient order processing and fulfillment.
  • Advantages for small businesses. Small businesses benefit significantly from optimized inventory management. Automation reduces labor costs and improves resource allocation. Choosing scalable, functional software helps small businesses compete effectively without being overly complex or expensive.

Those are just a few considerations. But, if you are serious about this decision, you should check out our full guide to the inventory management features you should see in a top tier pick (complete with a buyer's guide!).

Our Top Inventory Management Software Picks

Of course, we also have opinions on the matter. A big part of what we do at The Ecomm Manager is find the best software for ecommerce brands, then tell the world what we think.

We base this on a variety of factors, benefits, and features. Your perfect option is likely in there, even if it isn't at the top. Take a look at our picks for best inventory management software.

And, here's a peek at the top ten shortlist from that in-depth guide:

Start Reaping The Benefits of a Great IMS

As a serious ecommerce brand, you need serious inventory management software. Anything less would be criminal. Plus, it would do you zero favors.

There are many benefits to be had from choosing well. There are many disadvantages from choosing poorly. So, choose well.

This is a step in the right direction. Once you know what the benefits are from choosing well, you can be tuned into the right things as you come to your final decision.

You're going to crush it once you have the right tools!

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Sean Flannigan
By Sean Flannigan

Sean is the Senior Editor for The Ecomm Manager. He's spent years getting to know the ecommerce space, from warehouse management and international shipping to web development and ecommerce marketing. A writer at heart (and in actuality), he brings a deep passion for great writing and storytelling to ecommerce topics big and small.