Real-Time Inventory Management 101: Features, Benefits, & How To Start

In 2020, I was selling pre-loved clothes from my bedroom. 

Solid marketing? Check. Eco-friendly packaging? You bet. Loyal customers? Yessir.

But then came the Instagram DMs…

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“Hey, is this available? Oh, and how many pieces do you have?” Each time, I’d dash to our living room with a measuring tape between my teeth to find the item before the customer lost interest—and I lost their business.

The truth? My mother and I managed our shop’s inventory like a flea market—based on memory and gut instinct. 

Turns out, we weren't alone. A surprising 43% of small businesses don't actively track inventory, says Myos.

We had to get back to customers saying, “Sorry, we’re out 😞” and have sales fall through. 

If I could rewind history, the first thing I’d invest in is real-time inventory management software. 

Wherever you are on this spectrum—from outdated spreadsheets to a “just-in-case” inventory system—the solution is the same: real-time inventory management. 

Here, we’ll look at the key features and benefits of real-time inventory tracking solutions. Then, I’ll walk you through a six-step guide on how to implement them for your ecommerce business.

Let’s get ready to rumble.

What Is Real-Time Inventory Management?

A real-time inventory management system is powered by technology to track, view, and manage your stock levels across the whole ecommerce supply chain on demand. 

In contrast, businesses without real-time inventory track stock levels manually, and often their tech stack isn't integrated with their inventory systems. 

They may update their stock levels periodically at fixed intervals—whether once a day, week, month, etc.

In other words, there’s a lag time between when your inventory physically changes and when it’s reflected in your systems.

How does real-time inventory software eliminate this lag time, you ask?

Think of it like a live feed from your warehouse, constantly updating you on what's coming in, what's leaving, and what's sitting on the shelves. 

Why Real-Time Inventory Management Is Important

An outdated approach to inventory management comes at a high cost. And the consequences extend far beyond your balance sheet. (We learned this the hard way.)

Let’s take a closer look at how real-time inventory solutions give you a competitive advantage.

Better customer experience

When was the last time you ordered something online, waited for more than a week, and still left a 5-star review? 

There’s a reason Amazon Prime has 200 million subscribers worldwide. 

The modern consumer is smart, technology-savvy, and ultimately—impatient. 

As of June 2022, roughly half of online shoppers are willing to wait two to three days for their orders. While 30% “prefer to wait” just one day, and 8% want same-day delivery. 

The way you manage your inventory can directly impact your customer retention rates, and over time, customer loyalty. 

How?

I spoke with Joosep Seitam, Founder of Icecartel, a leading ecommerce platform in the jewelry industry, via email. 

“Since implementing real-time inventory management,” he says, 

We have reduced stockouts by 35% and improved our order fulfillment speed by 25%, leading to a 20% increase in customer retention rates.

Offsetting negative business impact

$1.1 trillion. That’s how much capital is tied up in inventory. 

Along with accounts receivable and accounts payable, this represents 7% of the United States GDP. (Enough to build a real-life Starship Enterprise.)

Operationally, inefficient inventory management wastes resources: warehouse space, labor, and transportation. And wasted resources? That’s money down the drain. No bueno. 

Basically, a poor inventory tracking system is a logistical rock in your shoe. And it affects every part of your business, from the order management process to customer satisfaction. 

Key Features of Real-Time Inventory Systems

A real-time inventory management system is powered by technology—and several features make for a solid tracking solution. 

Below, we’ll look at the five most commonly used technologies that help ecommerce businesses make more informed decisions.

Barcode scanners and radio frequency identification (RFID) tags

Ever wonder how stores keep track of stock without counting it by hand every night? There are two powerful tools you need: barcode scanners and RFID tags.

The two technologies work together to streamline inventory tracking and maintain inventory data accuracy.

Here’s how:

• Barcode scanners read the black and white stripes (barcode) on product labels. The barcode then identifies each item in the store's inventory system with its details (price, description, etc.).

Peter Hoopis, President and owner of Hoopis Pickleball, an ecommerce retail platform for pickleball enthusiasts, swears by this technology:

We use barcode scanners and keep our inventory system updated in real time. This way, if there's an issue with stock levels, we know right away and can fix it fast.

• RFID tags are microchips embedded in tags that transmit information about products via radio waves. An RFID system consists of two parts: tags and readers. A reader emits radio waves, which activate the tag. Once the tag is activated, it sends its data back to the reader via radio waves, even if the tag is hidden behind clothing or inside boxes.

Internet of Things (IoT) devices and sensors

Picture this: millions of life-saving doses, held at just the right temperature, traveling across the globe. 

This was DHL’s inventory challenge for a successful COVID-19 vaccine rollout. By the end of May 2021, 200 million vaccines were transported across 120 countries on 9,000 flights.

How did they pull this off? 

You guessed it—IoT sensors. 

When you deploy IoT devices for your business, it’s like a network of tiny sensors embedded in your stock, transmitting valuable inventory data up to the second.

Here are a couple of examples:

• Temperature and humidity sensors: These help monitor storage conditions for sensitive items, like food, electronics, or vaccines, to prevent damage or spoilage. 
• Movement and location sensors: They help you track inventory movements in your warehouse, find misplaced items, and streamline your inventory management processes.

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AI and machine learning integration

Real-Life Story: What do you think most people buy before a hurricane?

If you’re thinking battery-powered radios or flashlights, it’d be a smart guess. 

But way off.

When Hurricane Frances threatened to hit Florida hard in 2004, Walmart’s integrated AI and machine learning models combined with their historical data had stocks flying off the shelves. 

Linda Dillman, Walmart's chief information officer, tasked her team with analyzing the sales data from Hurricane Charley that had hit several weeks earlier. 

According to their reports, strawberry Pop-Tart sales jumped seven-fold before Hurricane Charley made landfall.

As for the most popular pre-hurricane item? Beer. 

After that, Walmart dispatched trucks loaded with pastries and six-packs to stores within Hurricane Frances’ path. 

The majority of items they proactively stocked before the hurricane quickly sold out.

Their real-time inventory solutions met customer demand smack-dab in the middle of a natural disaster—with razor-sharp accuracy. (And showed me a whole new side of the human mind.) 

Cloud-based systems and application programming interface (API) integrations

Connor Butterworth is the CEO & Owner of Southwestern Rugs Depot—an ecommerce store that sells unique, American-made area rugs. 

He knows that juggling multichannel inventory isn't easy. A lack of accurate stock leads to frustrated customers and a loss of sales.

So, I asked him: How do you keep track of your inventory? 

We're using a cloud-based inventory management system that updates stock levels instantly as soon as a purchase is made. This ensures we always have an accurate count of our products, helping us avoid overselling and disappointing our customers.

A cloud-based system or API integration allows for real-time inventory data to flow smoothly across platforms, allowing for accurate stock control and informed decision-making.

Real-time data synchronization

A real-time data synchronization system keeps your inventory information always up-to-date, so you can make proactive data-driven decisions on stock allocation, order fulfillment, and stockout prevention.

As inventory levels change, data is continuously synced from various sources (sales figures, warehouse stock levels)—creating a dialogue about it as it happens. 

This way, you can get instant insights and make proactive adjustments to meet your customers’ expectations. 

Author's Tip

Take Amazon, for example. The retail giant ships an astounding 66,000 orders every hour.

This means that they must have some form of solid inventory management solution, right?

They do—it’s called Amazon's Supply Chain Optimization Technology (SCOT). 

The company predicts customer demand for over 400 million products every day and optimizes inventory allocation across its global network to make sure the right products are always in stock.

Top 10 Benefits Of Real-Time Inventory Management

If you run an ecommerce business with outdated inventory data, it's a lot like driving at night with only one headlight. Real-time data flips on the other light, giving you a clear view of the road—and your stock levels—ahead.

How? In 10 distinct ways. 

Let’s find out!

1.  Avoid stockouts

Nobody likes an “Out of Stock” message—especially a customer who’s ready to click buy.

Even though the cost of a stockout is unique to your business and changes by SKU, the result is the same: lost business. 

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The ability to manage inventory in real time and make proactive corrections lets your customers enjoy a frictionless journey free of disappointing messages—and keeps your sales moving. 

Because you can’t sell what you don’t have. 

2. Enhance customer satisfaction

49% of online shoppers “prefer” same-day delivery. 

But even if same-day delivery isn’t possible, customers expect to track their package from the moment it leaves your warehouse. 

The joy of a package that arrives the next day, with clear tracking information, and in perfect condition, is second to none. 

A real-time inventory system can speed up order processing and fulfillment, leading to faster delivery options.

For your ecommece business, this means a happy customer. 

For the customer, it means a satisfying online shopping experience. One that they’d be compelled to repeat soon.

3. Reduce dead stock and overstocking

I know firsthand that there are two twin inventory nightmares—having too much of it, or not nearly enough.

In addition to higher carrying costs, overstocking can result in dead stock. 

These are items that go unsold due to seasonality, expiration dates, or a decrease in demand over time. Think, perishable goods such as seasonal fruits, or New Year’s party goggles. 

Therefore, the ability to know which SKUs are available at any given time is essential for inventory accounting, profitability, and meeting customer expectations.

When you invest in real-time inventory tracking solutions, you know exactly what, and how much stock you have. 

4. Improve supply chain operations

A real-time inventory data system automates updates and forecasts demand, reducing manual errors and optimizing stock levels. 

The system can set automatic reorder triggers to replenish high-demand products and avoid stockouts when numbers are consistently accurate through automatic updates and technology-enhanced inventory counting methods like scanning or RFID. 

Another benefit? Optimizing your storage space. You can see what's moving and what's lingering with real-time data. Then, you can allocate storage space strategically, keeping in-demand products readily available. 

The result: A supply chain that’s more efficient and customer-friendly, so your ecommerce business doesn’t have excess inventory or miss out on sales.

5. Monitor multiple channels

You've got a thriving business—Amazon’s on lock, your online store is booming, and you've even scored a sweet deal with a department store across 10 locations. Kudos!

But, wait. How do you stay on top of all this multichannel inventory?

To track in-store sales, missing items, theft, and returns, brick-and-mortar stores require reliable point-of-sale (POS) systems.

The solution? An inventory management system you can use in real time, connected to everything, keeping stock levels continuously updated.

6. Minimize data entry errors

There’s a human story behind most errors. People get tired. They make mistakes. 

According to Conker, 20% of businesses spend their operational budget on addressing and correcting human errors.

Automating your inventory system eliminates manual updates, thereby reducing errors and allowing for greater inventory control. 

So you can focus on sales, not spreadsheets.

7. Streamline purchase orders

Imagine never again having to manually reorder stock. 

You can keep track of stock levels automatically with an automated inventory management system. You're also likely to make fewer mistakes in inventory counts because there’s minimal human intervention.

Using real-time data, you can predict your business’s needs, create streamlined purchase orders, and keep your inventory accurate. 

8. Make informed decisions

Forget guesswork. 

Real-time inventory visibility shows your best-selling products across channels, predicts future demand, and flags slow movers. 

This means you can make more informed decisions based on this information: target promotions, optimize pricing, and improve inventory accuracy. 

9. Reduce shrinkage and theft

There are four leading causes of inventory shrinkage, according to the National Retail Security Survey: shoplifting, employee theft, administrative errors, and supplier fraud. 

This may be a bit jarring to hear—but 75% of employees admit to stealing at least once from their employer. 

Whether it’s cash, property, or merchandise, inventory theft is among the top reasons for many small businesses’ failure. 

So, think of real-time inventory management as a bouncer for your products. 

Say a box of iPhones vanishes. You’ll get a notification in real time that flags the missing items, giving you time to investigate (hopefully) before they walk out the door.  

10. Lower labor costs

Automation saves your workers’ time by taking over repetitive, rule-based work. 

For your ecommerce business, this means reduced labor costs and improved resource allocation.

A real-time system tracks stock levels and triggers reorders automatically, doing away with counting and entering data manually.

How To Implement Real-Time Inventory Management (6 Steps) 

You’re sold on real-time inventory tracking. Great! But how do you start?  

1. Assess your needs and plan

Take a look at your current inventory processes and needs. 

• What are your biggest inventory headaches? Do you have stockouts or overstocks all the time? Have you got a slowdown with manual data entry?
• How many sales channels do you have? Do you sell online, in stores, or both? The type of real-time software you choose will depend on how complex your sales network is.
• What's your current inventory management process? Are you using spreadsheets or a basic inventory management system? You can determine how much integration is needed with the new real-time system by analyzing your existing setup.

By answering these questions, you can begin to sketch out a checklist for your inventory management software.

2. Select the right software and equipment

Consider two factors:

1. The size of your business size—small, medium, or large; and 
2. The complexity of your workflows.

For my thrift shop, for example, I’d invest in barcode scanners because our inventory comprised largely pre-loved clothes, and was relatively small in size.

For software, Andrew Grella of Formen Makeup says NetSuite is “a solid option.” 

NetSuite, according to him, works well for “larger operations, with comprehensive features that cover end-to-end business processes.”

On the other hand, Tiago Pita, Brand and Ecommerce Director at Whole Food Earth, swears by Zoho Inventory for its “scalability, integration ease, and robust reporting features.”

Different strokes for different folks. As you’ll see, no two businesses’ needs are the same. While there isn’t a perfect one-size-fits-all solution, here are our top picks for inventory management software:

1. 1. WhereFour — Best for demand-driven inventory forecasting
2. 2. Cin7 Core — Best for manufacturers and product sellers
3. 3. MRPeasy — Best for manufacturers
4. 4. SkuVault — Best for its detailed restocking recommendations
5. 5. Settle — Best for CPG businesses
6. 6. Linnworks — Best for multichannel management automation
7. 7. Softengine — Best for handheld device operations
8. 8. KORONA POS — Best for multi-location inventory management
9. 9. Helcim — Best for small business inventory + POS in one
10. 10. Sage X3 — Best enterprise resource tracking (ERP) package

3. Migrate your inventory data

Now comes the big move. Don’t worry, it’s less intimidating than you think.

• Take some time to clean up your existing data. Make sure your inventory is accurate (especially product codes and descriptions), and categorize it so it can easily be imported. Bad data is often worse than no data. Trust me.
• The majority of real-time inventory software offers different options for importing data. In some cases, you can upload manually, import a CSV file, or integrate inventory data directly with your current system. 
• Make use of your real-time software provider's expertise. You can ask their support team any questions you might have during the migration process.

Author’s Tip:

Don’t migrate everything at once! Test the import process on a small sample of your inventory data to identify potential formatting or mapping issues. Make course corrections before migrating all your inventory, if necessary.

4. Train employees on new tech

A shiny new inventory management system is a powerful tool. But it’s only as good as the people using it.

Nearly six out of ten workers say training helps them do their jobs better. The majority, 51%, believe that training gives them more confidence, and 41% believe it makes them more efficient. 

This has a positive cascading effect on your ecommerce business.

How?

A more engaged workforce is more productive, more attuned to customer needs, and more aware of processes, standards, and procedures. The profit margin of a company that offers comprehensive training is 24% higher. 

Having a well-trained team, therefore, will optimize your workflows, minimize errors, and increase your ROI.

5. Test and QA

You wouldn't launch a new product without testing it, right? The same goes for your real-time inventory system.

• Find any bugs or hiccups in data transfer, order fulfillment, or reporting by testing with a limited data set.
• A pilot helps identify areas for improvement and optimize workflows for a smoother, more efficient business-wide rollout.

6. Monitor and optimize

As your business grows and changes—so do your inventory needs.

Keep an eye on the system's performance so you can adjust it accordingly as your business evolves. 

Consider real-time data as your mechanic's diagnostic tool. 

You need to analyze this data regularly to spot potential issues, predict future needs, and make informed decisions to further optimize your inventory. 

Future Trends In Real-Time Inventory Management

You get instant, eagle-eyed stock updates across all your warehouses with real-time information. 

There's no wonder demand is skyrocketing—the industry is forecast to hit a cool $7.5 billion by 2034. 

• Advanced predictive analytics: AI-powered, machine-learning-powered predictive analytics will soon become the norm. Expect automated reordering, smarter demand forecasting, and dynamic stock-level management.
• Robotics and automation: AI-powered robots are going to become an important part of real-time inventory management. There are already hundreds of AI-enabled robots in store aisles helping optimize inventory. The automation extends to smart stock replenishment and pricing accuracy. (Along with built-in floor scrubbers.)
• Advanced IoT devices and integration: IoT sensors provide insight into consumer behavior, supply chain bottlenecks, and market changes. These data-driven insights will continue to make inventory management, procurement strategies, and customer engagement more precise for ecommerce businesses.

What I’m most excited about

More sustainable practices: A staggering 84% of consumers say a business’s poor environmental practices alienates them.

 

A business’s commitment to sustainability is very attractive to customers. I should know.

 

Optimizing stock levels minimizes waste and environmental impact. This matches up perfectly with the circular economy, which promotes reusing and refurbishing products.

Conclusion

A real-time inventory management system drives customer satisfaction and cost-savings while minimizing workflow disruptions—the holy trinity of a thriving ecommerce business.

So, whether you're a small business owner like I was, handling inventory from home, or a larger enterprise with complex supply chains, investing in real-time inventory management is a smart move.

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Real-Time Inventory FAQs

Got more questions? We got the answers!

How do you track real-time inventory?

A real-time inventory management system tracks stock levels using equipment like barcode scanners and RFID tags. The system automatically updates whenever an item is sold, received, or moved, giving you up-to-the-second inventory visibility.

What’s the best way to keep track of inventory?

For small businesses, spreadsheets are fine initially, but real-time inventory software with barcode scanners or tags offers continuous stock updates and automation as your business grows.

What are the challenges of implementing real-time inventory management?

You may need to invest in hardware and software such as scanners and tags to begin tracking inventory in real time. Plus, integrating it with your current system can be challenging. But in the long run, it’s so worth it!

How does real-time inventory management improve customer satisfaction?

Real-time inventory keeps customers happy by giving them:

1. Confidence to buy: Knowing what’s on hand eliminates “Out of Stock” frustration.
2. When stock levels are accurate, orders can be processed and fulfilled more quickly, meaning your customers don’t have to wait weeks for delivery.