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Key Takeaways

Clicks and Bricks: Starting an ecommerce business or scaling an existing one requires efficient inventory management to ensure smooth operations and customer satisfaction.

Smart Storage Solutions: Choosing the right inventory management system is crucial for keeping track of stock levels, minimizing overstock, and avoiding stockouts, thereby improving overall business efficiency.

Seamless Selling: An effective inventory management strategy allows ecommerce businesses to streamline their operations, enhance customer experience, and increase sales through better product availability and timely fulfillment.

Whether you’re starting out in ecommerce, or a seasoned, successful, ecommerce business owner, you need a way to manage your inventory that works for your business. 

I’m here to tell you that the days of pen and paper stock checks are long gone. Let’s welcome inventory management software to the stage. (The crowd goes wild)

You’ve heard the term “Inventory Management Software”, but maybe you’re not entirely sure what it is or where to start? There’s no such thing as a silly question here. 

In this guide, I’ll both decode and demystify modern inventory management software. Plus, you’ll learn that the right inventory management system can boost your ecommerce sales.

Goodbye antiquated systems, hello future technology!

What is Inventory Management Software?

Imagine an automated process that prevents your brand going ‘out of stock’, delivering late, or sending wrong orders to your hard-earned and treasured customers. Sounds great, huh? 

Well, imagine no more—because this is what inventory management software can do for you. 

This modern software tracks your stock, predicts the right amount of inventory you need to optimize your service, and manages your purchases, sales, and shipments in real-time. 

So, you can reduce lead times, give your customers the best possible service (so they’re more likely to reorder), and navigate common inventory management challenges with ease.

Better service means happier customers, and fewer headaches for you. 

If you’re questioning whether you need more software, I hear you. You may well have already invested in software for order management or a warehouse management system

However, getting inventory management software in place means that your orders are not just delivered, but your business delivers the correct item promptly. 

And even better, it’s automated. Less work, more efficiency. Winner. 

How Does Inventory Management Software Work?

how does inventory management work infographic

Let's get into the nitty-gritty. 

Ecommerce inventory management involves several key processes to make the magic happen. At a basic level, inventory management software oversees your stock, manages serial numbers, and tracks inventory throughout its lifecycle. 

The system will automatically update the inventory count every time you make an online sale (which is hopefully quite often).

 It provides real-time inventory levels, the location of products, purchase orders, and order status. 

This streamlines stock management for your ecommerce business—taking time-consuming processes like spreadsheet data entry and automating them like a dream.

Many inventory management solutions use barcode scanning or radio frequency identification (RFID) tags to boost accuracy and efficiency. No more guessing games when it comes to tracking and managing your stock.

To ensure seamless inventory control, many systems also integrate with other business software

This includes ecommerce platforms, accounting software, CRMs, and ERP systems. Integration enables smooth data flow across business functions, painting an accurate picture of your inventory needs and future demands.

By linking these tools, you can make smarter decisions and optimize your stock levels, ensuring you have the right products available when your customers need them.

Benefits Of Inventory Management Software

Investing in an excellent inventory management system will lead to happier customers, happier suppliers, and ultimately a happier, healthier business. 

While the benefits of having inventory management software in place are significant, here are three of the top benefits for your ecommerce business. 

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Accurate and efficient stock levels

Out of stock—three words that are the stuff of nightmares for any ecommerce brand. While stock outs can give chills to the best of us, poor stock management is easy to avoid. 

An inventory management system will ensure you hold just the right amount of stock. 

You’ll optimize both production and operations by using the just-in-time inventory management process

Meaning you’re not only ensuring your products are available for your hard-earned prospective and returning customers, but also boosting the efficiency of your business. 

Avoiding overstocking and boosting your cash flow is the ultimate win in the ecommerce game.  

Real-time, automated processes

We all make mistakes; it’s what makes us human. 

But you don’t want to use that excuse too often. Automating your stock management process using a clever inventory management system minimizes the chance of human error. 

Even better, you can see where your products are at any time. 

Tracking customer orders when they leave your warehouse to when they arrive safely gives you ultimate peace of mind.

Predictions and forward planning

If only we had a crystal ball and could see future trends and customer demands—we’d  be rich. 

While you may not be able to see into the future, inventory management software uses both historical and real-time sales data to forecast future product demands based on seasonal factors

This helps you to meet demand and prevent stock outs. You keep your customers happy and watch your ecommerce brand thrive. 

Types Of Inventory Management System

Now I’ve covered what inventory management software is, how it works, and why you should have it in place for your business. 

Next on the list: what types of software are on the market?

I have picked out the three main categories of inventory management software below, but you can read an in-depth review of specific inventory management software to get the full story. 

1. Cloud-based vs on-premise solutions

cloud-based vs on-premise solutions infographic

The majority of inventory management software products on the market are cloud-based, reflecting the world we live in. 

Using a cloud-based solution allows flexibility, so you can access the system remotely— all you need is an internet connection. 

On-premise solutions are also available, so you can access the system offline if this suits your business, but they can be more tricky to find. Plus, there’s a lot more technical complexity and access is severely limited.

Here's a quick comparison to help you decide which might be best for your business:

Cloud-Based SolutionsOn-Premise Solutions
AccessibilityRemote access from anywhere with internetAccess limited to physical location
InstallationQuick and easy, no hardware requiredRequires hardware and on-site installation
MaintenanceManaged by the provider, automatic updatesRequires in-house IT team for maintenance and updates
CostSubscription-based, scalable costsOne-time purchase with potential ongoing maintenance costs
FlexibilityHighly flexible, scalable, easy to upgradeLimited flexibility, harder to scale
Data SecurityProvider-managed, high security standards but depends on internet accessControlled internally, potentially more secure but dependent on in-house measures
Internet DependenceRequires stable internet connectionOperates independently of internet

2. Industry-specific solutions

While most general software has functionalities which suit the needs of many businesses, there are industry-specific solutions on the market which include tailored features.  

For example, a retail specific inventory management system will include integration with point of sale (POS) systems, whereas an inventory system designed for the manufacturing marketplace will include bill of materials (BOM) and quality control management. 

Here's a comparison to illustrate the differences:

Retail-Specific SolutionsManufacturing-Specific Solutions
IntegrationPoint of sale (POS) systemsBill of materials (BOM) and quality control (QC) management
Key FunctionalitiesInventory tracking, sales data analytics, customer behavior insightsProduction planning, work order management, supplier coordination
ComplianceEnsures compliance with retail industry standardsEnsures compliance with manufacturing regulations
CustomizationTailored to retail workflowsTailored to manufacturing processes
User InterfaceUser-friendly for retail staffTechnical interface suited for manufacturing teams
These specialized features ensure compliance with industry standards and streamline operations unique to each sector.

3. Small business vs enterprise solutions

If you have a small scale ecommerce brand, it’s likely that the more advanced inventory management systems will have unnecessarily advanced functionalities. 

Look for a system which is small business-friendly—it’ll be more affordable, accessible, and relevant. 

There is even free inventory management software available on the market, which could be a good place to start.  

For enterprise-level businesses, robust solutions that handle high volumes of transactions, multiple warehouses, and complex supply chains are essential.

These systems offer advanced analytics, extensive integrations, and scalability to grow with your business. 

Here's a breakdown to help you understand the differences:

Small Business SolutionsEnterprise Solutions
CostAffordable, often with free or low-cost optionsHigher initial investment with long-term ROI
ComplexitySimple, user-friendly interfacesAdvanced features with steep learning curve
ScalabilityBasic scalability for growthHigh scalability to support large-scale operations
SupportLimited support, often online resourcesComprehensive support including dedicated account managers
IntegrationBasic integration capabilitiesExtensive integration with multiple enterprise systems

Many solutions catered to small businesses also have higher tiers for enterprise brands, so you can scale your IMS as your business grows.

What Key Features Should You Expect In Inventory Management Systems?

Once you’ve decided on the type of inventory management software you want for your ecommerce brand, it’s time to ensure that the system you choose is worth the investment. 

There are a number of must-have inventory management software features, including:

  • Tracking stock levels, sales, returns, packaging, and transfers. Comprehensive tracking ensures you always know what you have, what’s moving, and what needs attention.
  • Product categorization and analysis. Helps prioritize inventory management efforts by focusing on high-value items while not clogging resources with less critical ones (see: ABC analysis).
  • Restock notifications and alerts. Maintains optimal stock levels and avoids stockouts by forecasting and predicting product demand.
  • Integration capabilities. Seamlessly integrates with ecommerce platforms, accounting software, CRMs, and ERP systems for smooth data flow and unified operations.
  • User-friendly interface. Easy to navigate, saving time and reducing errors, and simplifying staff training.
  • Mobile access. Manage inventory on the go, providing flexibility for busy business owners and managers.
  • Reporting and analytics. Helps make data-driven decisions and spot trends with robust reporting features.

If a system does not have these functions, it’s unlikely to work for your business.

If you’re investing in an inventory system, it must meet all of your business needs, and you may want it to be scalable as your business grows. 

Think about the future, and think big! 

How To Choose the Right Inventory Management System For Your Brand

How To Choose the Right Inventory Management System For Your Brand infographic

When deciding which inventory management software to invest in, there are a number of factors to consider.

  1. Assess your business needs
  2. Work out the integrations you require—such as CRM and ERP systems 
  3. Ensure your chosen system can scale with your business
  4. Remember not to get swayed by bells and whistles!

Getting the right software in place will make the difference between an excellent customer experience and a massive ‘out of stock’ fail. 

As mentioned above, think big for your business. 

Whether this is simply a larger inventory, or multiple sales channels and warehouses, who knows how your business will grow with the right inventory management system in place. 

Take a look at this comprehensive selection criteria for ecommerce inventory management software, which will help you to make an informed decision and effective investment for your business. 

What Are The Best Inventory Management Software Options For Ecommerce Brands?

Each ecommerce brand is unique, so the ideal inventory management software for your brand will depend on your specific business needs.  

While the ‘perfect’ system for all may not exist, here’s our shortlist of top inventory management software available on the market.

Final Thoughts

Phew! We made it through our deep-dive, complete guide to inventory management software. 

There was a lot of information there for you to digest, but here are the biggest takeaways;

  • Inventory management software can transform your business, optimizing stock levels, enhancing the customer experience, and streamlining your processes. 
  • There are many types of inventory management software to choose from—cloud-based or on-premise, industry-specific, small business, or multi-site enterprises .
  • Investing in the right software for your business needs is essential to ensure you reap the benefits of your investment.

If you choose the right inventory management software for your ecommerce brand, it will work hard for you. It’ll streamline processes, enhance cash flow, and help your business grow. 

That's why taking your time and getting the right advice is essential when investing in a new system.

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Inventory Management FAQs

Finally, let’s knock down a few lingering questions you may have about inventory management systems.

What is the difference between inventory management software and ERP systems?

Inventory management software and ERP systems differ in their scope, functionality, and cost.

While ERP systems may include inventory management, they also cover a broad spectrum of other business processes.

As a result, they are often more complex and costly to implement. Inventory management software focuses specifically on inventory management tasks, is often faster to implement, and usually involves a smaller initial investment and ongoing cost.

Can inventory management software integrate with my existing ecommerce platform?

Yes, it can and should. When researching which inventory management software to invest in and implement, it’s s essential to consider whether the system will complement your existing ecommerce platform.

Achieving this aim means your brand fully benefits.

What are the costs associated with inventory management software?

The cost of implementing inventory management software for your ecommerce brand can vary depending on the size of your business, your business needs, and the solution you choose.

Pricing can include initial licensing costs and implementation, as well as training, support, and additional integration charges.

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.