What Are Inventory Systems?

by Anam Ahmed ; Updated November 14, 2018

When people think of inventory systems, it’s common to relate it to the retail industry.
While retail stores require effective inventory management to operate successfully,
inventory systems are also heavily used in many other types of businesses, including
manufacturing, utilities, health care, government, education and more.
Regardless of where a system is used, the inventory management definition is the
same: to ensure that the right amount of inventory of the right quality is available at the
right place at the right time. If your small business is looking to use an inventory system
to manage your organization’s inventory-related tasks, such as shipping, purchasing,
receiving, storage, turnover, tracking and recording, be sure to conduct research into
the different types of inventory systems available to find the one that best suits your
business.
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 An inventory system is a technology solution used to integrate all information
regarding stock levels and stock movement for an organization.

Types of Inventory Systems

While there are several different kinds of inventory systems available, they can be
categorized into two main types: perpetual inventory systems and periodic inventory
systems. As suggested by their names, the main difference between the two types of
inventory systems is how often inventory is tracked.
Perpetual inventory systems update records continually. They frequently track when
materials are received, sold or moved from one place to another. The key benefit of
using a perpetual inventory system is that they provide up-to-date records that always
reflect stock levels. However, these kinds of systems require specialized equipment and
software, which come with a high cost of implementation. If your small business has
multiple locations or warehouses, that is something to keep in mind because the
number of locations also drives up the cost.
Periodic inventory systems don’t track materials on a continuous basis like perpetual
systems. Instead, this kind of system provides the beginning and ending inventory
levels during a certain specified period of time. Periodic inventory systems rely on a
physical count of the materials at the start and end of the time period. As a result,
inaccuracies can be introduced by staff since the count is done manually. In addition,
regular business activities generally need to be paused during the count, which can
result in a loss of revenue for the company. Businesses also need to spend additional
amounts in labor costs for the inventory count, which is why this kind of system is better
suited for smaller businesses with limited inventory.

Benefits of Using Inventory Management Systems

Above all, inventory management systems provide a single source of truth for the
business, ensuring they are aware of item locations, vendor and supplier information,
product specifications and total count of materials. In addition, one of the main benefits
of using inventory systems is efficient stock operations. Businesses are able to save on
the time and effort required to manage their stock effectively, with up-to-date information
at their fingertips.
Other benefits include centralized storage information, better reporting and forecasting,
reduction in dead stock and optimized labor costs. In addition, inventory systems enable
businesses to have better, more transparent relationships with suppliers, vendors and
partners.
Inventory Management Software Features
There are a number of leading inventory systems on the market, each bringing unique
and helpful features to aid businesses in stock management. Zoho Inventory is a
system that works for both small and large businesses, with an out-of-the box feature
that automatically replenishes inventory that is out of stock. Great for small- and
medium-sized businesses, Logiwa is an inventory system for those that operate in the
retail and e-commerce space. Features include unlimited integrations and APIs that
make it easier for businesses to complete B2C order fulfillment.
TradeGecko is a cloud-based solution that is best suited for multichannel distributors
that need to manage products, orders, analytics and insights all in one place. Similarly,
Brightpearl is another inventory system that is best suited for businesses that operate in
multiple channels and need to see an overall picture of their inventory status.
References

 Camcode: 4 Types of Inventory Control Systems: Perpetual vs. Periodic

Inventory Control and the Inventory Management Systems That Support Them
 Camcode: What Is an Inventory Management System? Definition of Inventory
Management Systems, Benefits, Best Practices & More
 FinancesOnline: What Is Inventory Management Software?
 Zoho: Home
 TradeGecko: Home
 Brightpearl: Home
 Logiwa: Home

About the Author

Anam Ahmed is a Toronto-based writer and editor with over a decade of experience
helping small businesses and entrepreneurs reach new heights. She has experience
ghostwriting and editing business books, especially those in the "For Dummies" series,
in addition to writing and editing web content for the brand. Anam works as a marketing
strategist and copywriter, collaborating with everyone from Fortune 500 companies to
start-ups, lifestyle bloggers to professional athletes. As a small business owner herself,
she is well-versed in what it takes to run and market a small business. Anam earned an
M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more
at www.anamahmed.ca.
Photo Credits

 notepad and pen image by Erika from Fotolia.com