Best Inventory Management Software of May 2023 – NerdWallet

How does inventory management software work?

Inventory management software automatically tracks how many products you have in stock, how many you’ve sold and where each item is located. More sophisticated software will forecast stock levels based on previous sales and tell you how much inventory you should order and when. That way, you’ll have your most in-demand products in stock when you need them.

On the flipside, inventory management software can also prevent your business from buying too much product. Items that sit on the shelves for too long take up space that new products in higher demand could fill. Then they can begin to depreciate in value or expire altogether. And if you have to sell them at a discounted rate or throw them away, you could lose money on your investment.

How to choose inventory management software

Consider the following factors to find out which inventory management software is the right fit for your company’s needs.

Industry specificity

Basic inventory management software can help your business run more smoothly, but industry-specific options will maximize efficiency. For example, managing perishable inventory, like food or cosmetic products, is very different from managing nonperishable products, like clothes. The type of inventory you work with will dictate how long it can stay on the shelves, how much of it you should order and how frequently you should order it.

Integrations

Your inventory management software should integrate with all of your sales channels — both online and in person. That means your e-commerce platforms and your POS system. On top of that, make sure it integrates with your accounting software. Inventory is considered a current asset account and appears on your balance sheet. Direct, built-in integrations are typically better than indirect integrations and you usually don’t have to pay extra for them.

Scalability

Will the inventory management software or app you choose be able to grow as your business does? The last thing you want is to have to manually reenter all your inventory if you outgrow your current system. Second, how many users will eventually need access to your inventory management software? Having to pay for extra users can add up quickly. Be sure to include yourself and anyone filling or counting inventory, and maybe even your accountant.

Cost

Cost can vary from free inventory management software to products that cost hundreds or even thousands of dollars per month. Free or low-cost products may be adequate for very small operations, but businesses with more complex inventory needs may need to opt for a more expensive option, especially if they stand to lose a significant amount of money from an inventory mistake.

What features does the best inventory management software have?

Think about where you or your employees spend the most time when it comes to managing inventory. Where are most of the miscalculations made? Maybe you’ve overestimated how much inventory you should carry or spent hours manually counting inventory after a big delivery. Perhaps a purchase order slipped through the cracks and you ended up running out of a best-selling item. Inventory management software can help solve these issues, and first determining your business’s pain points can help you choose the one with the most useful features.

Here are a few key inventory management features to consider:

• Real-time inventory tracking: This is important for businesses that need to track inventory items as they move through the supply chain and order fulfillment process. Systems with this feature will immediately update when returns and sales are made, too. 

• Multichannel inventory management: Businesses that sell products in multiple places will need to centralize their sales and inventory data in one place. 

• Low-stock alerts and reorder points: You can set custom reorder points so that you’re notified when it’s time to order more inventory. Some software will even suggest or calculate reorder points for you. 

• Purchase order management: Creating purchase orders and sending them to vendors is much more convenient when you can do it from within your inventory management software. This is especially true if you use the just-in-time inventory strategy and frequently make purchase orders to restock what’s been sold. 

• Digital labeling and barcode scanning: Counting inventory by hand takes time and is prone to human error. Scanning items’ barcodes is much more efficient. You can scan digital labels as inventory items get delivered and as you pack them out for shipment or sell them in store. Some software lets you use mobile devices as scanners. 

• Kitting and/or parts and assembly tracking: Maybe you sell subscription boxes with multiple related products — together, these items make up a kit. Or, if you manufacture something like bars of soap, you might want to track raw materials and finished products. 

• Reporting: Look for reports on inventory forecasts, cost of goods sold, inventory profitability and sales by item or product. 

• Item variants and units of measure flexibility: Businesses that sell the same shirt in multiple sizes and colors, for example, will need inventory management software that lets you record variants (like color and size), as well as descriptions. Some businesses will need to switch between units of measurement, too. Each shirt could count as an individual unit, but you might want to measure material in yards.

• Order fulfillment options: When a customer orders something online, it has to be picked from the warehouse, packaged and shipped to the correct address. Inventory management software with shipping add-ons or features helps you manage this process end-to-end.

How can inventory management software benefit your business?

Inventory management software can save your business time and money in a variety of ways. Ordering too much inventory can be a costly mistake if it sits on the shelf for too long and depreciates or, even worse, expires. At the same time, you don’t want to run out of inventory and lose opportunities to turn a profit. Software can help solve this by calculating reorder points and forecasting inventory levels. It can also speed up inventory counts with barcode scanners, automate purchase orders and streamline different stages of the order fulfillment process, such as shipping.

A more efficient inventory management system could boost your inventory turnover ratios, too. In general, a higher ratio means your business’s inventory is selling well. Products sitting on your shelves for too long, however, can drag your ratio down.