What is inventory management software? A plain-English guide
Imagine you could ask your stockroom a question and get a straight answer. How many do we have? Is more on order? When did we last count it? Why did it go down on Tuesday? Inventory management software is what lets you ask those questions and trust the answers.
That is the whole idea, and everything else in the category is a variation on it. This guide covers what the software actually does, who uses it, what it costs you in effort, and how to tell whether you need it.
What it does
At its simplest, inventory management software is a shared record of what you have, where it is and what has happened to it. It keeps that record up to date as goods come in, go out and get counted.
- 1BuyPurchase orders
- 2ReceiveDeliveries, in parts if needed
- 3StoreLocations and bins
- 4PickFill customer orders
- 5CountCheck and correct
Each step leaves a record, so the stock total is a result of events, not a number someone typed.
A number is
A spreadsheet
Typed in
Inventory software
Worked out from documents
A short delivery
A spreadsheet
Someone remembers
Inventory software
Stays open on the order
A mistake
A spreadsheet
Overwritten
Inventory software
Reversed, history kept
Who changed it
A spreadsheet
Unknown
Inventory software
Recorded with a date
| A spreadsheet | Inventory software | |
|---|---|---|
| A number is | Typed in | Worked out from documents |
| A short delivery | Someone remembers | Stays open on the order |
| A mistake | Overwritten | Reversed, history kept |
| Who changed it | Unknown | Recorded with a date |
What it replaces
For most small businesses, it replaces a spreadsheet, a notebook or somebody's memory. That sounds like a small step, and the difference shows in the details. A spreadsheet stores a number. The software stores the events behind the number, and works out the total from them.
- A notebook of what came in becomes a receipt tied to a purchase order.
- A guess at what is still due becomes an open order with a balance.
- A weekend stock count becomes a short count with a recorded adjustment.
- A sticky note on the shelf becomes a reservation.
Who uses it
Anyone who buys goods, holds them for a while and sells or uses them later. In practice that means shops, distributors, wholesalers, workshops, clinics, restaurants with a pantry, and anyone whose stock is more than a handful of items.
It is a poor fit for businesses that make things from raw materials and need production planning, for online-only sellers who need to sync with a storefront, and for operations with several warehouses that need stock by location. See IMS vs ERP: what is the difference? for where the line sits.
If you have ever said 'the sheet might be out of date,' you are the audience.
What it costs you in effort
The subscription is the visible price. The less visible one is your time. You will clean your item list, load it, set up suppliers, learn a few screens and change a few habits. For a small business with a few hundred items, that is usually days, not months, and the work of tidying the list pays off whether or not you keep the software.
- How many do we have?On hand and available
- Where is it?Location and bin
- Is more on the way?Open purchase orders
- When did we last count it?A date, not a guess
- Why did it change?A document behind every movement
If the answers live in someone's head, the stock record is only as good as their memory.
Signs you need it
- You have run out of something that the sheet said you had.
- Deliveries arrive in pieces and nobody knows what is still owed.
- You do not know how many of something you have without walking to the shelf.
- Counting takes days, and the numbers still disagree.
- More than one person updates the stock list.
- 1Your people and habitsCounting, receiving, writing things down
- 2The softwareRecords, documents and history
- 3Your item listCodes, units, suppliers, locations
- 4The shelfWhat is physically there
Software sits in the middle. It cannot be better than the item list below it or the habits above it.
What to look for
Look for software that handles your actual jobs: purchase orders with partial receiving, counts that post visible adjustments, a history you can read and an export you can take with you. Inventory management software: a buyer's checklist lists twenty questions that make vendors answer plainly.