All the raw materials and products that an enterprise retains for reselling or future production purposes are called inventory. However, why inventory should be digital become more important when it comes to its management.
Management of Inventory is very critical for customer satisfaction and cost efficiency that’s why businesses use this process to manage and optimize stock levels.
Effective management is critical for the success of a business, as it can impact key business metrics such as cash flow, profit margins, the satisfaction of customers, and operational efficiency.
However, traditional systems can be time-consuming, error-prone, and lack the agility needed to keep up with the demands of modern businesses.
At this point, digital inventory management becomes inevitable. It is a software-based solution that enables businesses to manage their inventory in real-time using digital tools such as barcode scanners, RFID, and cloud computing.
1. Traditional Inventory Management Systems
The traditional inventory system has been used for decades to help businesses keep track of their inventory. These systems are highly labor-intensive and typically rely on manual methods such as paper records, a computer spreadsheet, and physical counting to manage inventory levels.
When computer systems were introduced in the 1960s and 1970s, businesses turned to automation for many of their inventory management processes. However, these early systems were often complex and expensive and were limited in their capabilities. Here are some key points:
1.1. Limitations of Traditional Systems
While traditional stock systems have served businesses well for many years, they have several limitations that can impact their effectiveness. Some limitations are:
- Limited visibility into inventory levels and demand forecasting
- Lack of real-time updates and reporting
- Limited scalability for growing businesses
- Inability to integrate with other business systems
1.2. Examples of Traditional Inventory Management
- Pen and paper records
- Spreadsheets such as Microsoft Excel
- Manual stock counts and audits
- Standalone management software
Despite their limitations, many businesses continue to use traditional inventory arrangements due to their familiarity and ease of use. However, with the advent of alternative and more efficient digital technologies, businesses are transitioning to digital solutions.
The emergence of e-commerce companies forced warehouse management to be digitalized as they maintain a very vast amount of inventory through multiple channels. Traditional systems face difficulties in coordinating with these channels in managing inventory and supplying products.
2. Digital Inventory Management Systems
Digital inventory management software is a system that uses technology to help businesses manage and optimize their management processes. They leverage cloud-based computing, mobile devices, robotics, and other technologies.
They provide real-time visibility into inventory levels, sales, and demand, as well as automate inventory-related tasks such as replenishment, order processing, and tracking.
2.1. Advantages of Digital Inventory Management Systems
In contrast to a traditional system, the digital inventory system has many advantages.
2.1.1. Tracking Inventory
One of the most significant advantages of the digital inventory management process over the traditional one is tracking inventory in real-time. This provides businesses with an up-to-date view of their inventory levels, which helps them make better decisions around inventory control, purchasing, and order fulfillment.
Real-time data ensure products are available all the time whenever there is a customer demand thereby minimizing the possibility of out-of-stock inventory.
2.1.2. Accurate Supply Chain
Another advantage of digital inventory systems is improved accuracy of supply chain management. Possible manual mistakes are significantly reduced by the automation of inventory management.
They also provide better inventory visibility, which can help businesses avoid discrepancies between their inventory records and actual stock. A digital inventory system can help businesses reduce the cost of carrying inventory by providing better accuracy and reducing the risk of overstocking.
2.1.3. Demand Forecasting
A digital inventory system also enables better demand forecasting. By leveraging historical sales data and trends, these systems can help businesses predict demand and optimize stock.
They can also help enterprises to identify slow-moving inventory and adjust purchasing accordingly. By providing better demand anticipation, digital tools identify patterns and help businesses reduce inventory costs and improve inventory turnover.
2.1.4. Reduce Operational Costs
Additionally, digitalization can help businesses reduce operational costs by automating inventory-related tasks. By automating tasks of order processing, replenishment, and tracking, these systems can reduce the time and effort to manage inventory.
2.1.5. Save Time and Money
They can also reduce the risk of errors associated with manual processes, which can save businesses time and money and increase productivity and efficiency.
There are many examples of digital inventory systems available in the market. One popular example is QuickBooks Enterprise, which offers a range of management features, including real-time tracking, forecasting of demand, and automatic reordering.
Another is Fishbowl, which offers a range of features, including barcode scanning, inventory tracking, and order processing. Others are Zoho Inventory, TradeGecko, and Unleashed.
2.1.6. Enhances Competition
A digital inventory system is more competitive as compared to earlier systems. Real-time inventory tracking, improved accuracy, better forecasting, reduced inventory costs, enhanced customer service, and increased productivity and efficiency, are features that help businesses stay competitive.
With many examples available in the market, businesses have a range of options to choose from when selecting a digital inventory system that meets their needs.
3. Why Should Inventory be Digital?
Digitalization of the whole management offers many benefits to businesses, and some of the most significant benefits include real-time inventory tracking, improved accuracy, better demand anticipation, reduced inventory costs, enhanced customer service, and increased productivity and efficiency.
3.1. Real-Time Tracking
One of the most significant benefits of digital systems is tracking inventory in real-time. This provides businesses with an up-to-date view of their stocks, which helps them make better decisions around inventory control, purchasing, and order fulfillment.
By providing real-time data, these systems can help businesses reduce the risk of stockouts, minimize the need for safety stock, and improve customer satisfaction. It ensures the availability of products when customers need them.
3.2. Improved Accuracy
A digital inventory system also provides improved accuracy, automating inventory-related tasks, and minimizing the risk of errors associated with manual processes.
The automated system offers better inventory visibility, which can help businesses avoid discrepancies between their inventory records and actual inventory levels. This reduces inventory costs as well as the risk of overstocking.
3.3. Better Demand Forecasting
It is another significant benefit of digital systems. By leveraging historical sales data and trends, these systems can help businesses predict demand and optimize stock levels.
They can also help enterprises to identify slow-moving inventory and adjust purchasing accordingly. Better forecasting reduces inventory costs and improves inventory turnover.
3.4. Reduce Inventory Costs
Digital stock management also helps reduce inventory carrying costs by providing businesses with better control over their stock levels. Labor costs, warehouse management, and depreciation costs are some of the hidden costs in traditional systems.
The inventory management technology makes sure to remove these unwanted costs and optimize stock levels, which reduces the need for safety stock and minimizes the risk of overstocking. This can help businesses reduce their inventory holding cost also.
3.5. Enhanced Customer Service
Real-time tracking and better inventory visibility can help enterprises ensure that products are available when customers need them as well as increase customer satisfaction.
The eCommerce platform is the real benefactor of digitalization as it can meet the demand of customers as soon as possible with amplified supply chains.
3.6. Increase Productivity and Efficiency
Productivity and efficiency are the by-products of these digitizing processes. Automation of tasks such as order processing, replenishment, and tracking, can significantly minimize the time and effort required to manage inventory, which can increase productivity and efficiency.
Reduction of the risk of errors helps businesses to have exponential growth and save time and money.
Medium-sized businesses and small business gain insights into their raw materials levels as well as product output which in turn improves their productivity and efficiency.
These businesses are often difficult to compete with because of their competitive prices, they have to manage inventory data more efficiently.
3.7. Cross-Channel Communication
Cross-channel communication is particularly important in digital systems, as it involves multiple channels of communication that need to be synchronized in real-time to ensure accurate and up-to-date inventory information.
E-mail, phone, website, mobile app, etc. are some channels of cross-channel communication.
Some examples of how cross-channel communication can be used to set up proper inventory management to track inventory:
3.7.1. Online Ordering
There are various platforms where people can order online like websites or mobile applications software. Once an order is placed, the inventory system should immediately update the available stock levels to avoid overselling. The supply chain must be linked to inventory data for effective coordination.
3.7.2. Customer Service
When customers have questions or concerns about inventory availability, they may choose to communicate with the company through various channels, such as email, phone, chat, or social media.
3.7.3. In-Store Pick-up
Retail stores are adopting new practices by providing a facility for customers to order from the website and pick up the product from the store itself. In this case, the inventory management system should ensure that the inventory data are up to date to deliver better customer service.
4. Digitalization of Inventory Systems
Implementing digital systems can be a complex and challenging process for businesses. However, with the right approach and best practices, businesses can successfully implement digital systems and enjoy the many benefits it offers.
4.1. Steps for Implementation
4.1.1. Evaluate Current Inventory Management Processes
The first step of digitalization is to evaluate the current inventory management processes to identify areas for improvement. This may include identifying any manual or paper-based processes that are time-consuming or error-prone.
4.1.2. Rationalise Aims for Inventory Management
This may include improving accuracy, reducing costs, increasing productivity, or improving customer service.
4.1.3. Picking an Effective Digital Inventory Management Software
After defining aims for inventory management, picking an effective software is a prerequisite to start the management process. This digital inventory management software may include evaluating various software solutions based on their functionality, ease of use, and cost which can act as a digital inventory partner.
Mobile-based applications have now overtaken the digital inventory management ecosystem. Even the traditional inventory operators find their ease of access.
4.1.4. Data Migration and Integration
The selection of software is not the end. The real task is to transfer all the existing physical data to a new digital platform. This may involve integrating the new system with other business systems such as accounting, sales, or purchasing.
After the migration is complete, automatic data entry is a must, especially for small and medium-sized businesses, to avoid overselling and underselling of products.
4.1.5. Training and Testing
It is essential to provide training to staff on the new digital platform. This may include providing training on the system’s functionality, features, and best practices. Testing is done usually to ensure that the digital system works according to the needs of the business and does not digress from its goal.
4.1.6. Rollout and Support
After training and testing, the new system can be rolled out to the business for effective management operation. At the same time, a support system is also established to make the new system in tandem with business practices.
4.2. Challenges in Implementation
4.2.1. Resistance to Change
One of the most significant challenges in implementing a digital system is resistant to change. Staff may be hesitant to adopt modern technology, leading to a slow uptake of the new system.
4.2.2. Poor Data Quality
In digital inventory systems, if the data is not accurate or of poor quality, the new system may not function as intended, leading to errors and other issues.
4.2.3. Integration with Existing Systems
Integrating the new automated inventory management with existing systems such as accounting or purchasing can be complex and time-consuming.
4.3. Best Practices for Implementing a Digital System
4.3.1. Get Buy-in from Staff
To overcome resistance to change, it is essential to get buy-in from staff. It simply means that staff should be encouraged and made feel part of the process of recruiting people.
Providing ongoing training and support can help ensure that staff is using the new system effectively and efficiently.
4.3.2. Conduct a Pilot Test
Conducting a pilot test can help identify any issues or challenges before rolling out the new system to the entire business.
4.3.3. Set Achievable Goals
Setting achievable goals can help ensure that the new system delivers tangible benefits to the business.
Implementing a digital inventory management system can be complex and challenging, but with the right mindset and adopting effective strategies, businesses can successfully implement a new system and enjoy the many benefits it offers.
5. Takeaway
In this digital age, inventory management in a fast-paced business environment is a critical process that can make or break a business. Digital systems answer the crucial why inventory should be digital and offer a range of benefits.
Switching to an automotive system can be a significant investment, but it can also provide businesses with a solid return on investment by reducing costs, improving productivity, and increasing profitability.
Looking to the future, the use of emerging technologies such as artificial intelligence, machine learning, robotics, and the Internet of Things is likely to play a significant role in reaping the benefits of digital transformation.
