Inventory Management Automation | How It Works, Benefits and Trends

Imagine a small business owner who is working every week, spending hours after hours on updating numbers, double-checking orders, and chasing suppliers. As the business grows, all these manual processes become harder to manage, taking up huge amounts of time and creating unnecessary stress. Moreover, a single mistake - like forgetting to update a sale can lead to overselling or stockouts.

That's where automated inventory management steps in. In this article, we'll walk you through how automation helps in businesses, the benefits, the essential features, use cases, and the steps to implement an inventory management system for your business successfully.

What is automation in inventory management?

It is the entire process that businesses use to order, store, use, and sell a company's inventory, including raw materials, components, and finished products. Instead of focusing on spreadsheets or constant manual updates, an automation system allows businesses to connect directly to sales channels, suppliers, and warehouses.

Automated inventory vs Manual inventory: 5 main differences?

Businesses usually follow one of the two approaches, either manual or automated. To better understand the differences, here is a comparison table.

4 reasons an inventory management system is necessary for your business

An inventory management system isn't simply a tool but a necessity for businesses in order to stay competitive and profitable.

Let's know more about why it's so valuable:

1. Prevents stockouts or overstocking

Running out of products can lead to lost sales and disappointed customers, while overstocking can end up putting your money in inventory that just sits on shelves. But if you use an inventory management system, it can notify you when items are running low, automatically reorder products whenever needed, and prevent you from over-purchasing.

2. Improves accuracy

While manual tracking can lead to errors, an automated system update will ensure accuracy in your records, whenever a sale is made, a shipment is received, or stock is adjusted.

3. Save a large portion of a business's time

The automated system removes all of the repetitive work, including updating records, counting stock and cross-checking sales orders. Your team can focus on other higher-value activities instead of spending hours updating spreadsheets.

4. Provide real-time insights

You can get all the valuable insights from the type of products that are selling fastest to the ones that are underperforming to the time when demand peaks for certain items. This real-time analytics will help you make better decisions about pricing, promotions and purchasing.

How the automated inventory management process works

At its core, the automated inventory management system ensures that each stock movement is tracked in real time.

Basically, the system integrates seamlessly with multiple sales channels, including online stores, point-of-sale (POS) systems and third-party marketplaces. So, anywhere a sale happens, the stock count will be updated instantly across all platforms.

Businesses can set reorder points for every product. The system will automatically trigger purchases or send alerts if stock runs low.

The dashboard basically acts as the main interface to monitor inventory activity. It provides a snapshot of everything from current stock levels to pending orders to sales trends.

Beyond just tracking, the system provides analytics and reporting tools to generate reports on sales, stock turnover, demand forecasting and more. There is a supplier integration that connects the inventory system with the supplier system and enables faster and smoother ordering and delivery processes.

6 benefits of automated inventory management

Using an automated inventory management system comes with many benefits; here are some impactful ones.

1. Full visibility across your inventory

You will always get a clear, real-time picture of all your stock. No matter where your stock is sitting in the warehouse, displayed in the retail store or committed to an online order, everything will be recorded instantly. Even beyond the day-to-day operations, full visibility benefits businesses with better collaboration across departments.

For example, the sales team can ensure accurate delivery timelines, where the finance teams can get more reliable numbers for cash flow planning.

2. Deliver better customer experience

The way you manage your inventory affects your customer experience. When your stock data is accurate and you are updating in real time, customers trust your business and see less chances of cancelled orders, unexpected delays or out-of-stock notices after purchase.

In the automated system, when an item is purchased, the system reserves it instantly while ensuring no duplicate orders are made. This encourages customers to make repeat purchases. Also, better inventory control offers customers more flexible options such as same-day delivery, click-and-collect, or pre-orders.

3. Make data-driven decisions

Automated inventory management doesn't just let businesses know what they have in stock but also assists them in using that data while making smarter business choices. Based on the knowledge, they can optimise pricing and promotions or even create targeted discounts as well on the items that are sitting in storage too long.

These insights support businesses in deciding when to launch the next items, expand into new markets or adjust supplier contracts.

4. Boost efficiency across operations

As there will be no repetitive manual tasks, it will allow the staff to focus on higher-value work. For example, instead of checking the shelves manually to update stock levels, barcode or RFID scanning is used to update the system instantly, allowing businesses to process more orders in less time while improving order accuracy.

The customer service team can respond way faster to inquiries, while the finance teams can get more accurate inventory costs for budgeting.

5. Simplify multichannel order management

The sale of today's businesses doesn't just come from one source, but rather from websites, marketplaces like Amazon or eBay, social media shops or physical stores. When done manually, these processes often lead to errors, delayed fulfilment or missed sales.

The centralised automated inventory management system solves the issue simply by syncing all orders into one platform. As they have all sales data in one place, businesses can easily analyse the channels that perform best, track the customer's buying pattern, and adjust strategies accordingly.

6. Scale easily with new SKUs

Most of the businesses gradually expand their product catalogue with new stock-keeping units (SKUs) or add new warehouses to reach more customers. When companies use an advanced inventory management system, it doesn't disrupt existing operations, as this is designed to scale with your business.

Suppose, if you expand to a new region, the system will sync the inventory across locations and allow you to shift stock as needed.

8 essential features of automated inventory

Barcode and RFID scanning: To quickly update all stock levels and
reduce errors with real-time accuracy.

Detailed reporting and analytics: To gain insights into sales trends, demand forecasting, and stock performance.

Centralised dashboard: To easily monitor inventory, orders, and performance from one central hub.

Multichannel integration: To keep stock in sync across websites, marketplaces, POS systems, and stores.

Automated reordering: To prevent stockouts by detecting purchase orders automatically at set levels.

Multi-location management: To manage inventory across several warehouses or stores.
Supplier and order management – To streamline purchasing and fulfilment through direct supplier integration.

Use cases across industries

The same inventory management system can solve different problems for different sectors, and the way they're applied can vary greatly depending on the industry.

Here are some examples:

• In retail and ecommerce, inventory systems help in keeping online stores, marketplaces, and physical shops in sync, which allows customers to see accurate availability.
• In manufacturing, the same system is used to monitor raw materials, trigger reorders, and keep production running smoothly.
• In healthcare and pharmaceuticals, it is used to track medical supplies and prevent waste from expired stock.
• In food and beverage, automation is used to replenish the perishable items on time, to minimise spoilage and shortages.
• In logistics and warehousing, it helps track goods moving across multiple facilities and reduces errors in shipments.
• In the automotive industry, it simplifies managing thousands of parts and accessories spread across dealers and service centres.

Some inventory management trends to watch out for

Inventory management is evolving rapidly. To stay competitive, it is necessary for businesses to keep an eye on the latest trends.

• Cloud technology is being adopted to boost inventory management essentials.
• The Internet of Things (IoT) is one of the most critical trends in inventory management.
• Artificial intelligence and machine learning are used to improve forecasting, detect inefficiencies and optimise daily operations.
• Investing in inventory managers is increasing as more and more companies are training staff to use new technologies effectively.
• Multi-warehousing strategies are being used to distribute stock closer to customers.
• Nowadays, inventory systems are adjusting stock levels depending on customer buyer behaviour in real-time.

How do you choose the right system for your business?

While choosing an inventory management system, identify the features your business needs first.

Consider your business size and complexity: If you run a small business, you prefer lightweight cloud-based solutions. For large enterprises, choose a robust system that will support managing multiple warehouses and high SKU volumes.

Check for scalability and flexibility: You must make sure that the system will grow with your business and allow you to add new products, warehouses or sales channels without disruption.

Assess all the integration options: Your inventory system must work smoothly with all the tools your business uses, like online stores, cash registers, accounting programs, and suppliers.

Consider the budget and total cost of ownership: Consider everything from subscription fees to implementation and maintenance charges to any hidden costs to ensure the system fits your financial plan.

Here are some popular examples:

Zoho Inventory: A cloud-based solution offering order management and multichannel selling.
NetSuite ERP: An enterprise-level platform that offers inventory, finance and supply chain management.
WebCommander: A comprehensive inventory and ecommerce management platform offering integration of stock, orders and customer data in real time.
Odoo inventory: An open-source system offering barcode scanning and multi-warehouse management.

Costs of implementing automation

When you implement automation in inventory management, it comes with both upfront and ongoing costs. Upfront costs include all the fees of software licenses, hardware like barcode scanners or IoT devices, and system setup or customisation fees.

On the other hand, ongoing costs include subscription fees, maintenance, training staff, and occasional upgrades. Even if the initial investment seems significant, considering the long-term savings from reduced labour, fewer errors, and improved efficiency, the cost will seem worthwhile.

How to implement an inventory management system?

Implementing a new inventory management system involves some common key steps:

1. Identify your business requirement first.
2. Based on the requirement and budget, select a system.
3. Plan the implementation by developing a timeline, allocating resources and training staff.
4. Transfer all the essential data into the new system.
5. Before fully rolling out, test all functionalities.
6. Once everything seems fine, launch the system.

When should you upgrade?

Consider upgrading your inventory system when your current system can no longer keep up with your business needs. For example, if you see frequent stock errors or have constant difficulty in managing multiple channels or warehouses, upgrading will be the right option.

Also, if you have difficulties in integration with other tools or face issues in reporting or have limited automation features, upgrading at the right time will ensure that your operations remain efficient and scalable without causing major disruptions.

Overall, automating inventory management is no longer just an option. It has become a necessity for businesses that want to stay competitive, efficient, and customer-focused. Definitely for the initial costs and setup, some planning is required, but there will be long-term rewards, from reduced errors to better customer satisfaction.

FAQ

1. What is the difference between manual and automated inventory management systems?

The key difference between these two is that the manual system relies on spreadsheets and paper records, requiring staff to physically count and track stock, but the automated system uses barcode scanners, software, RFID tags, and integrations to track inventory in real time.

2. What are the four types of inventory management systems?

The four main types are:

• Perpetual inventory system
• Periodic inventory system
• Barcode system
• RFID system

3. What automation can be used to manage inventory?

Automation tools like barcode scanning, RFID tagging, inventory management software, automated reordering, and integrations with ecommerce platforms and POS systems are used to manage inventory.

4. What is AI-based inventory management?

AI-based inventory management refers to a system where artificial intelligence is used to analyse sales trends, predict demand, optimise stock levels, and automate purchasing decisions.

5. What is the best inventory management system for small businesses?

It will actually depend on your business size, budget, and needs. Popular options for small businesses include Zoho Inventory. WebCommander can be a good choice as it offers affordable pricing, easy integrations, and user-friendly dashboards.