The Ultimate 5 Reasons Why You Need Inventory Management System

March 9, 2016
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The Ultimate 5 Reasons Why You Need Inventory Management System

Inventory management is more critical than ever in today’s fast-paced retail landscape. The costs of poor inventory management are evident: nearly 81% of consumers have encountered an “out-of-stock” situation in the past year, leading to lost sales for retailers and frustration for shoppers. Globally, businesses have incurred staggering losses of $1.75 trillion due to mismanaged inventory, according to a report from the supply chain website Supply Chain 24/7. Don’t let your business be a part of this statistic.

If you’re still relying on outdated spreadsheets or not managing your inventory at all, your business might already be suffering. As a growing enterprise, managing inventory can be a painful and challenging task.
This article is your guiding light for those struggling to keep track of inventory and optimize their warehousing and storage facilities. We’ll look into the significance & reasons for inventory management system in e-commerce, but before we do that, let’s define what inventory management is.

What is Inventory Management?

Inventory management encompasses processes to oversee and organize goods or materials within your facility. As a vital element of supply chain management, it supervises the flow of products from manufacturers to warehouses and from these facilities to the point of sale. It entails a retailer’s efforts to maintain a balanced merchandise assortment while efficiently managing orders, logistics, returns, and associated costs. So, the need for inventory management comes into the scenario.

The Cost of Mismanaged Inventory

The financial repercussions of failing to master inventory management are staggering. In the fast-paced world of retail, where margins can be razor-thin, any slip in inventory control can lead to dire consequences. Recent studies and industry reports emphasize the cost of mismanaged inventory:

Excess Inventory: On the flip side, carrying too much inventory ties up valuable capital and storage space. Excess inventory can lead to financial losses through storage costs and, in some cases, obsolescence.
Inefficiency: Mismanaged inventory often results in inefficient operations. The time spent searching for misplaced items, dealing with stockouts, and conducting manual inventory recounts can be better used for growth and strategy.
Lost Sales: When products are not available when customers want them, you lose out on sales. In many cases, these lost sales are challenging to recover. Customers may turn to competitors, and your brand’s reputation may suffer.

Why do we need inventory Management?

In today’s competitive landscape, understanding your inventory is paramount to achieving efficient operations at an affordable cost. How these 5 reasons for keeping inventory management helps cut costs, keeping your accounts and finances in check. From a customer’s perspective, it enables you to provide exceptional service through quick deliveries and affordable shipping, thus exceeding customer expectations. Here’s justify the need for having inventory help you realize these benefits:

Benefits of Inventory Management

Reason 1: Tracking Inventory

Effective inventory management allows you to keep a close watch on your stock. It provides a centralized view of inventory levels across multiple sales channels, revealing how much is in stock and where it’s located. This is particularly important if your business operates from multiple warehouses or distribution centers. Here’s why it’s crucial:

Benefits of Tracking Inventory:
• Accurate Reordering: Real-time stock tracking helps in the timely reordering of products. It prevents overordering, which ties up capital, and underordering, which results in stockouts.
• Optimal Allocation: Efficient inventory management enables you to allocate stock to specific sales channels. For instance, you can direct products to the locations where they are most in demand, reducing shipping time and costs.
• Warehouse Management: Knowing what you have and where it’s stored streamlines warehouse operations. This enhances order fulfillment efficiency, reduces errors, and minimizes the time required to locate and ship products.

Reason 2: Cost Control

Inventory reports are your window into the financial health of your business. They provide insights into which products are performing well and which are merely taking up valuable shelf space. Effective cost control is essential for a sustainable and profitable business:

Benefits of Cost Control:
Minimizing Stockouts: Inadequate inventory levels lead to stockouts, missed sales, and customer dissatisfaction. Inventory management helps maintain the proper stock levels to meet customer demand while avoiding overstocking.
Preventing Overstock: You can prevent overstocking by understanding which items are not selling as expected. This results in reduced storage costs, less capital tied up, and minimized risks of inventory obsolescence.
Strategic Pricing: Data from inventory reports can inform pricing strategies. You can make data-driven decisions on markdowns, discounts, and promotions to maximize profits.

Reason 3: Improved Delivery

In the e-commerce world, customer expectations are soaring. Timely delivery is a critical component of a positive shopping experience. Inventory management ensures that products are available when, where, and how customers want them:

Benefits of Improved Delivery:
• Accurate Delivery Timelines: Inventory management helps you know when vendors are shipping products and when they will arrive. This information allows you to manage customer expectations by delivering products as promised.
• Enhanced Customer Satisfaction: Delivering on customer expectations through timely and accurate deliveries fosters customer loyalty and repeat business.
• Preventing Stockouts: Stockouts due to poor inventory management can result in delayed deliveries. Late deliveries can harm your brand reputation and lead to dissatisfied customers.

Reason 4: Planning and Forecasting

Inventory management software is a robust tool for improving demand forecasting. By analyzing data trends from well-performing stocks, you can make data-driven decisions that reduce holding and handling costs, improve revenues, and free up cash flows:

Benefits of Planning and Forecasting:
• Data-Driven Growth: Data from inventory management can inform expansion plans, product diversification, and strategic decisions, ultimately driving business growth.
• Enhanced Replenishment: Inventory management systems can automate the replenishment process. This ensures that you restock products when they are most needed, reducing the risk of stockouts.
• Optimized Inventory Levels: Accurate forecasting allows you to maintain optimal inventory levels. You can meet changing customer demand while minimalizing the costs associated with carrying excess stock.

Reason 5: Reduced Inventory Management Time

Time is a precious resource in any business. Inefficient inventory management consumes valuable hours that could be better spent on core business activities. A robust inventory management system can significantly reduce the time required for managing inventory:

Benefits of Time Reduction:
• Efficient Workflow: Inventory management software streamlines processes, from tracking stock levels to managing orders. This leads to efficient workflow and reduced manual effort.
• Preventing Errors: Automated processes reduce the risk of human errors. Accurate data management ensures that orders are processed correctly, reducing returns and customer complaints.
• Reallocation of Resources: The time saved on inventory management can be allocated to growth-focused activities like marketing, product development, and customer service.

In Summary

Today, effective inventory management is indispensable for the survival and success of any organization. Without control over your inventory, you risk losing control of your profits. Avoid the perils of excess or inadequate inventory – invest in a robust inventory management solution.
Ready to take your inventory management to the next level? Discover the power of Vin eRetail, an inventory management software, from Vinculum and streamline your warehouse operations for success. Get started today.


Q.What is the most important part of inventory management?

Ans. One of the most critical aspects of inventory management is optimizing, managing, and controlling the stock, thereby improving business efficiency.

Q. What are the top benefits of inventory management?

Ans. Inventory management helps businesses determine which and how much stock to order at what time. It keeps track of inventory from the time goods are bought to sold. To ensure that there is always sufficient stock to fulfill customer orders and to provide proper notice of a shortage, inventory management identifies and responds to trends.

Q. What are the common challenges in inventory management?

Ans. Common challenges in inventory management include inaccurate demand forecasting, overstocking or stockouts, inefficient warehouse management, lack of visibility into inventory levels, and ineffective supplier management.


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Quick tricks for growth:

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Taylor Bishop
5 years ago

I wanted to thank you for explaining why inventory management is beneficial. It’s good to know it can help improve delivery and also manage customer expectations. This seems really important especially if meeting customer’s expectations can help customers learn that you are reliable.

cilt south india
5 years ago

Thank you for sharing this valuable information. Inventory management is very important for all types of business including small, medium, large business.

Dylan Peterson
4 years ago

It’s cool that an inventory management system will allow you to keep track of your inventory and stock in a centralized way. My boss has been looking for a better way to keep track of the items that are held in our warehouse, and this seems like a great way for him to do that. I’ll share this inform

Kate Hansen
4 years ago

It was helpful when you mentioned that it can control your costs! My husband was thinking of getting inventory management for his business and wanted to know the benefits. I’ll make sure to pass this information along to him so he can look into getting inventory management for his service.

Akash Jain
4 years ago
Reply to  Kate Hansen

That’s great! And, you can always connect to us in case you decide to buy one.