Inventory management is an essential aspect of any business, regardless of size. Many small and medium-sized businesses (SMBs) are becoming more competitive and their revenue shares are growing bigger and bigger.
Matthew Gatchalian, Financial analyst
That said, many SMBs are still stuck with old-school inventory management solutions. As more businesses and organizations are migrating their operations to the cloud, utilizing outdated, traditional inventory management practices can be detrimental to the growth of SMBs.
The good news is that with the introduction of the cloud-based inventory management software, SMBs are able to enhance both inventory efficiency and productivity. The following are more ways of how inventory management software can impact SMBs.
1. Graduate from a Pen-and-Paper System
The trusty pen-and-paper approach to inventory management has glaring flaws and limitations. However, most businesses in the early stages are still using this method. According to the 2017 State of Small Business Report, 46% of SMBs either use a manual system to track their inventory or do not monitor their inventory at all.
For those who do, they usually supplement with Excel spreadsheets. While spreadsheets and paper-based reporting may seem to be great solutions for SMBs at first, it can be a serious pain point in the supply chain.
As more inventory items come in, the need to regularly update your inventory data becomes bigger. It doesn’t matter how skillful you are with spreadsheets or with your paper-based inventory lists. Mistakes and mishaps are bound to occur with such a system. And they can be costly.
With the inventory management software, entering data into your inventory is easy. Most of the essential yet repetitive and mundane tasks such as regular backing and updating of data are automated and synchronized across multiple systems and devices. That means whenever you access your inventory for a quick look, you are always getting the same information whether you are using your smartphone or your computer.
2. Eliminate Inventory Shrinkage and Theft
Businesses that still stick to a manual sales and inventory system are more likely to experience inventory shrinkage. Inventory shrinkage occurs when your recorded stock count doesn’t reconcile with the number of products you physically have on-hand. This is a common problem, especially in businesses that do inventory management by eye.
There are many factors that contribute to inventory shrinkage, such as unrecorded damaged goods, cashier errors, and misplaced items. However, the most common cause is theft. The National Retail Federation 2018 Retail Security Survey ranks shoplifting or external theft (35.7%) and employee or internal theft (33.2%) are two leading sources of inventory shrinkage, respectively.
The advent of the inventory management software has provided SMBs with a platform to tightly monitor all products in their inventory. It enables business owners and managers to generate real-time views and reports on their stocks. Integration with POS (Point of Sale) systems allows users to monitor inventory status and sales via receipts and scheduled orders.
An inventory management system automatically updates its inventory data whenever a product is sold or moved to a different location. Due to the tight monitoring, employees with limited to no access to the software are discouraged to even take items from the store’s inventory.
3. Prevent Overselling and Underselling
Overselling happens when you continue to accept orders for a product that is not currently in your inventory. On the other hand, underselling occurs when you can only sell a limited quantity of items when the demand is high.
Both overselling and underselling can cause your business distress and drive customer satisfaction rating down to the ground. Overselling and underselling can lead to out of stock (OOS) orders. When this happens, customers receive that standard and familiar “We’re sorry, but the item you ordered is out of stock” message.
Customers become frustrated and look for other sources. Often times, they leave a negative comment about your business. Not only does this damage your reputation, but you also lose the business of both your current and potential customers.
One of the key steps in inventory management is to find a middle ground where you don’t have to deal with surplus but not left with empty shelves. An inventory management software helps you monitor and update your inventory status in real-time. It lets you synchronize your inventory and display current stock counts to your sites and other marketplaces, preventing you from overselling and underselling.
SMBs with Reliable Inventory Forecasting Capability
Being able to make an informed estimation of how much stocks you need to order and when to make the order is something that requires hours of data analysis, extensive business experience, and high business acumen. Most SMB operators and owners rely mostly on hunches and guesstimates when it comes to restocking their inventory.
However, with the coming of inventory management software, SMBs are now able to predict product demand with almost pinpoint accuracy. Historical data such as customer trends, sales, sentiments, and even the weather are thoroughly analyzed to make reliable demand projections.
This functionality helps business owners make smart inventory-related decisions, fully optimize their inventory, and increase their revenue while drastically reducing their costs.
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