Back in those days when technology hadn’t seeped into our lives, most business owners had to carry huge chunks of paper to manage their inventory. It often led them to buy more than what was required affecting their profits and putting a dent in their operating budget. The operational cycle of inventory management in that era was flawed, costly, and inaccurate.
However, in today’s digital age, things have changed for the better. The organizations are transitioning to modernized tools and software to manage their stocks, and in the process are also getting to understand how inventory management software works?
That being said, if you’re still managing your inventory on paper and skeptical about the usage of these inventory management software, give this blog post a read and you will be surprised to know how inventory management softwares like Giddh streamline your business and make inventory management process simpler.
Before we dive into the depths of inventory management software, let’s first define the terms – inventory and inventory management and understand why you need to manage your inventory.
What is Inventory and Inventory Management?
In layman’s terms, an inventory is anything that you or your organization is managing with the intention to sell it to the end-user later. It can be a raw material that gets converted into a product later or could be a furnished product which is broken into its constituents and then sold out to the consumer.
What is an inventory management?
Inventory management is all about how you track and control your stocks right from the buying stage to selling it to your end-customer. It’s a complete cycle that starts from the purchasing and finishes once the product is out for sale. Ideally, inventory management is all about – knowing the right quantity of an item you require at a given location at a given point of time.
What is Inventory Management Software?
The whole premise of having a dedicated inventory management software in your business operational cycle is to ensure that you’re able to track and control your entire line of stocks more efficiently. If you have a cloud-based inventory management software like Giddh by your side, it gets easier for you to focus on growing and earning and letting the software manage your inventory.
We’ll share more details about Giddh and its features towards the end of this blog post. For now, let us understand – why do we need to manage the inventory?
Why is inventory management important?
As inventory is the primary asset of every business, you must have clear goals set to manage your inventory. Managing the inventory from the beginning can help your business thrive in tough times and safeguard you from stepping towards failure. The right management helps you create a balance between the amount of inventory that comes in and goes out under stipulated deadlines. It helps you avoid out-of-stock situations, manage multiple locations, and create accurate records allowing you to achieve maximum profitability. In short, managing the inventory can either make or break your business big time.
How Inventory Management Software Works
The working of every inventory management software varies based on your business requirements. If you have a small firm with limited products, your inventory management software will work differently from someone who holds a wide range of outlets and has multiple chains to manage.
That being said, there are specific techniques that all businesses utilize to manage their inventories. To get the maximum profit, you can mix up the techniques and develop the most comprehensive strategic plan for your organization.
The techniques are:
- ABC Inventory Management
- Just in Time [JIT]
- Dropshipping and Cross-Docking
- Bulk Shipments
Let’s discuss some of these in detail to get a better understanding of the concept:
- ABC Inventory Management
In this technique, you categorize your entire stock into three different tiers namely – Tier A, Tier B, and Tier C depending on how large they impact your net profitability. This ABC methodology is more or less similar to the Pareto principle (or the 80/20 Rule) according to which – in case of large events, the 80% impact comes from 20% factors.
In terms of inventory management, the same rule states that – the value of 80% inventory comes from 20% of the products. According to the rule:
- Tier A – These products are the most valuable. This category could include products that are either too expensive or give you the highest profit
- Tier B – This category of products falls between the value of Tier A and Tier C products.
- Tier C – These items have the least value but are quite high in terms of volume. It usually involves small transactions that play importance in the company’s net profit, but individually aren’t that significant.
The significant benefit of ABC analysis is that – you can easily determine which stocks you need in your inventory at all times, and which products you can understock. It also saves your time and you’re able to better manage your inventory by prioritizing which stock items need more of your attention.
- Just in Time [JIT]
In this technique, you keep only limited stock available in the inventory and replenish it based on your requirements to minimize cost and risk involved with keeping a large stock at hand. The process is streamlined to optimize efficiency, quality, and profitability, yet many believe it to be a risky technique. It’s primarily because the objective of this technique is to use goods in the production stage only when required and in the quantity, they are required.
Its primary components include:
- Eliminating waste/excess
- Pull methodology used during production
- Optimizing the integration and entire team focused towards a certain goal
- Keeping things simple to maximize efficiency
- Kaizen – a Japanese concept indicating that no team/organization is perfect and must be improved upon
- Visibility and customization
- Dropshipping and Cross-Docking
The concept of Dropshipping revolves around the fact that the entire inventory received as the stock gets balanced by the inventory sold. You don’t physically possess any inventory at all, but whenever an order gets placed, you reach out to your supplier (having that inventory) with the details and the supplier directly ships the item to the intended customer. The entire inventory is outsourced making things simpler for you.
Cross-Docking too operates similarly to how Dropshipping works. In this technique, the products are delivered to a dedicated warehouse, are sorted and sent out for delivery via different trucks. Transferring the stocks from one vehicle to another ensures that there’s minimal or negligible warehousing. However, to ensure the methodology works without flaws, you need to have an extensive fleet and a good network of transport vehicles.
- Bulk Shipments
As a part of this technique, business organizations operate under the belief that buying and selling out the stock in bulk is a good investment. However, it works only if the organization is sure that its products will be sold out which also formulates as a big challenge/drawback in case the demand changes. So, it’s best to apply this technique only for those goods which have high customer demand.
In this technique, the consigner (in most cases, a wholesaler) transfers their stock items to a consignee (a retailer) in a way that the consignee never pays for the goods upfront. Rather, the payments are made by the consignee only for the goods which sell.
This technique benefits both the retailer and the wholesaler. Here’s a quick snippet of the same.
- Minimal time gets wasted while the stock gets restored
- They can return the unsold goods at zero costing
- They can offer a wide range of products to their customers without any tying up capital
For Suppliers (Wholesalers)
- They don’t have to worry about the marketing aspects of the product and can shift it to the retailer
- They can test out multiple products and make informed decisions
- Product analysis w.r.t sales get easier
Why should you prefer Giddh for your inventory needs?
Having understood what is inventory management and why is it important, it’s time to talk about – Giddh as an inventory management tool, why it stands apart from others, and how using it can benefit your business setup.
An organization, in general, manages a lot of transactions on a daily basis and thus needs to store a good amount of data for flexible operations. This holds for all business sizes and if you’re a proud e-commerce store owner with multiple outlets, you also need to keep your stocks in check, and doing so manually can be a cumbersome task.
Hence, if you’re trying to look up for an answer to – what are inventory management tools right for your business, it’s time to explore Giddh.
It’s a cloud-based software that can help you manage your business inventory day in, day out after understanding the intricacies of your business.
It’s a modern inventory management software that can transfer your entire product lineup on the cloud ensuring that you get a holistic and real-time overview of your stocks.
Its features include:
- Inventory Management – This feature automatically tracks your stock movements so that you can focus on other important tasks at hand like business expansion, etc.
- Inventory Reports – Giddh as an inventory management tool automatically updates the inventory count whenever an item is purchased or sold out and the same gets reflected in the inventory report available within the software. These reports make it easier for you to analyze the performance of each item and determine which product needs to be in stock at all times, and which items can be stocked later.
- Multi-support for different measuring units – In case, you’re someone who’s constantly struggling to find an inventory tool with support for different measuring units, Giddh has got you covered. As a user, you get the flexibility to create custom measuring units to streamline your inventory management. The custom defined units make it easier for you to buy stocks in one unit and sell it again in a different unit altogether.
- Inter-branch stock transfer – If you have a large business setup with multiple outlets spread across the city/country, managing the inventory and stock requirements can be a real pain. However, with Giddh by your side, you can quickly replenish your stocks within seconds by transferring them from one outlet to another.
- Bulk Inventory Import – Again considering that you’re running a large enterprise, the constant updating of the inventory list on a manual basis isn’t feasible and time-consuming. However, with Giddh, you need not indulge yourself in the manual effort of adding the items one-by-one. You can rather use its pre-defined and simple MS Excel template to bulk import, upload, and get your inventory ready for use in no time.
- Fully GST Compliant – Another contributing factor that sets Giddh apart from other inventory management tools is that it’s fully compliant with the GST system. Using Giddh, you can track your inventory, seamlessly manage the orders, quickly assign relevant HSN and SAC codes to the items in your stock, and share the GST-compliant invoice.
The right inventory management software can help you gain better visibility and exercise more control over the inventory. This holds irrespective of your business size – be it a single-channel operation or a multi-channel, global operation. Using the right tools and tactics, you can optimize your inventory and set yourself apart from your competitors. If the chosen software fits your business requirement, you can pave the way for your business to achieve greater heights and expand on the right track.