Automated Inventory Management

Automated inventory management is a process that involves controlling and optimising a company’s inventory stock using digital systems. These systems are known as inventory management software, and they’re often supported by additional tools such as barcode scanners and cloud-based accounting systems.

The inventory management process looks a little different when you implement an automated system.

Inventory management software works by creating a digital twin of the inventory held by a business – typically by recording all stock arrivals and tracking fulfilment using a barcode scanner. Alternatively, sales and inventory data can be synchronised with order management and point-of-sale systems.

In an automated environment, internal stock movements (from warehouse transfers to production assemblies) are managed by the inventory system. Purchasing and sales order management is also run on the software to further streamline your logistics workflows.

Cloud-based inventory automation

Cloud-based inventory software is a type of inventory management system that utilises the power of cloud computing. Everything you need to manage inventory is hosted online, so you can access it from any computer and you won’t have to install or download any files.

Automated inventory management systems are designed specifically for the task of managing products and operations; unlike, for instance, the inventory module in an accounting software tool.

There are numerous improvements you can make to a product business using an automated inventory management system. When choosing the right system for your needs, consider which of these benefits align best with your current business objectives.

10 key benefits of automated inventory management:

• Gain business-wide inventory visibility
• Establish optimal stock levels
• Improve supplier relationship management
• Enable sustainable sales growth
• Get better customer satisfaction rates
• Simplify your multichannel order management
• Make smarter business decisions based on data
• Easily add new warehouses and SKUs
• Streamline operations and minimise waste
• Reduce your staff and labour costs

Here’s a short explanation.

1. Gain business-wide inventory visibility

Upgrading from a periodic system to perpetual inventory management gives you complete clarity over where goods are without relying solely on stocktakes. With automated online software, you’ll be able to see what’s in each warehouse – and what’s allocated to sales orders – at any time, from any location.

2. Establish optimal stock levels

Achieving a balance between risking stockouts and overstocking can be tricky.

Automated inventory management systems help you predict sales demand based on historical data. Automatic low-stock alerts and reorder points also prevent stockouts without wasting money on excess safety stock. 

Staying in this optimal zone of stock is one of the biggest advantages of automated inventory management – especially as the number of product lines in your business grows. 

3. Improve supplier relationship management

Healthy supplier relationships are crucial to keeping costs low and staying ahead of any disruptions.

With an automated inventory management system, you can see who’s delivering on time and compare prices from different vendors. The supplier performance data it collects will be indispensable for negotiating future contracts.

4. Achieve sustainable revenue growth

An effective inventory system is often the key to maximising sales.

It can ensure that salespeople and channels are performing to their maximum potential. Knowing what’s in stock, and when the customer might get their goods, helps salespeople close. Automated inventory management systems make that information easy to find – even when you’re out on the road.

That means no more waiting for a spreadsheet to load or heading to the warehouse and manually checking the storeroom when you’re trying to close a sale.

5. Better customer satisfaction rates

Automated inventory management doesn’t just help in bringing new customers on board; by facilitating fast order fulfilment and giving customers all the information they want before they make a purchase, it can improve customer satisfaction rates as well.

6. Simplifies multichannel order management

Adding new sales channels is a great way to access new opportunities.

Multichannel order management is how you connect those sales channels. Automated inventory makes it easy to sell and manage products across online stores, point-of-sale, and B2B.

Unleashed, for instance, comes with managed two-way integrations with leading sales channels including Shopify, Amazon, and Lightspeed Retail — plus its own B2B eCommerce portal.

7. Make smarter business decisions

Learning from past mistakes and successes is pivotal to ensuring growth. Automated inventory management systems come with comprehensive business intelligence reporting tools to analyse which products, channels, salespeople, and regions are delivering ROI.

These reports are essential for enabling data-driven decisions that positively impact your company’s profit margins and growth.

8. Easily add new warehouses and SKUs

Adding a new stock location is a key milestone for a product business – but the extra complexity it brings can stretch your system to breaking point. With an automated inventory system in place, adding a new stock location, stock-keeping unit (SKU), or sales channel takes minutes, not days.

9. Streamline operations and minimise waste

Automated inventory control enables you to put the tasks that eat into your day-to-day on autopilot. This way, as the company grows, you can spend more time on high-value tasks. It’s a great way to deliver sustainable growth that doesn’t burn out employees and stakeholders.

10. Reduce staffing and labour costs

Improving efficiency means doing more with the resources you have. Automated inventory management software can help you scale your operations without employing a supply chain expert, or eating into their margins with an increased wage bill.

“Unleashed has been able to accommodate the growing number of transactions every month. We haven’t had to employ more staff, but our transactions have increased by 250% since we started using [automated inventory management software].” - Alex Campbell, Co-Founder, Good Buzz Beverage Company

Automated inventory management systems have many names: perpetual inventory systems, inventory management software, stock control software… the list goes on. They also come in many shapes and sizes, built to tackle each aspect of your operations.

The five main types of automated inventory management systems are:

• Inventory management software

• Purchase order management software

• Production management software

• Order management software

• Reporting and analytics software

In some cases – such as with Unleashed – you’ll find that all of these systems can be squeezed into a single product, allowing for seamless data sharing between different departments.

Here’s how they work.

Inventory management software

Cloud-based inventory management software shows you precise levels of stock for every finished product you sell and includes features to help you keep an eye on where everything is located across multiple warehouses. With cloud-based inventory software, this information is accessible from anywhere with an internet connection – and it’s always up to date.

One particular area where lots of businesses find automated inventory management useful is stock taking. Perpetual inventory systems and barcode scanning tools reduce your reliance on stock takes for accurate figures, making the process less exhausting.

Purchase order management software

A purchase order management system is designed to make creating and sending purchase orders straightforward and quick.

By running a reorder report you can automatically generate all your required purchase orders – at exactly the correct quantities – with a single click. And once you receive goods into the warehouse, purchase order management software will automatically update your stock levels.

Some software also provides a platform to make your supply chain more competitive, letting you compare suppliers performance and pricing, source components in multiple currencies, and see the exact cost of each purchase.

Production management software

BOM management is an vital aspect of manufacturing. Automated production management software enables you to create ingredient lists for your goods and components in the form of bills of materials.

These systems also help you control inventory across every stage of the manufacturing and easily plan future production jobs.

You’ll also be able to automatically order the correct quantity of components or ingredients for a production run based on the amount requested by a sales order plus the details in the bill of materials – and the amount of inventory currently on hand.

Order management software

Order management software helps you receive and fulfil orders while maintaining accurate inventory data, providing an intuitive process to follow for creating quotes and orders – all while automatically updating stock levels and margins.

Some order management systems offer advanced features to help you grow profit and revenue. 

A B2B eCommerce Store, for example, grows wholesale orders by enabling customers to self-serve online. While seamless integrations with sales platforms like Amazon and Shopify can help you execute a successful multichannel strategy.

Reporting and analytics tools

Don’t overlook reporting tools as you assess automated inventory management software – they can help unlock your business’s true potential.

Business intelligence software, often a core aspect of inventory management software, helps you improve performance by tracking key metrics such as inventory turnover, supplier lead times, and cost of goods sold.

These reports will help you make smarter decisions for your business moving forward. They’ll also tell you which products are making you the most money – and which products may be costing you more than they’re worth.

The list of features you can get with cloud-based automated inventory management is almost limitless, but can broadly split across inventory, purchasing, production, sales and reporting.

Key inventory features to look for:

• Real-time inventory tracking
• Multiple warehouse inventory management
• Stock enquiries
• Demand planning
• Stock counts
• Barcode scanning
• Inventory optimisation

Key purchasing features to look for:

• Purchase order management
• Returns management
• Multiple currency support
• Average landed cost tracking
• Receipting partial orders
• Supplier performance monitoring
• Auto-generating correct min-max levels
• Automated reordering

Key production features to look for:

• Multi-level bills of materials (BOMs)
• Assemblies and disassemblies
• Batch tracking
• Serial number tracking
• Production planning
• Production scheduling
• Auto-assemblies

Key order management features to look for:

• eCommerce integrations
• POS integrations
• Unique customer pricing
• Customer management
• Mobile sales app
• B2B eCommerce store
• Quantity discounts
• Label printing

Key reporting and analytics features to look for:

• Cost of goods sold tracking
• Demand forecasting
• Sales reports
• Production reports
• Purchase order reports

Remember, you probably don’t need all the features listed here; they’re just a guideline.

When procuring new software, consider using the above to create your own list of features that are most aligned with the problems you wish to solve with an automated inventory management system.

Upgrading your inventory management system is no small task.

First, you need to consider your budget and the ROI of implementing new software.

If you’re already using a cloud accounting system such as QuickBooks Online or Xero, you need to find software that integrates with your existing solution.

If your systems are entirely offline, you can upgrade to an automated inventory management system or switch to spreadsheets. The right choice will depend on the complexity and size of your operations.

Smaller product businesses might be able to get by on spreadsheets for a while. But you’ll encounter issues as you deal with complicated orders, add new SKUs, and increase headcount.

At some point, you’ll need a system that supports your growth.

Learn more: 5 Best Inventory Management Software of 2024

You need an automated inventory management system that fits your unique business requirements, helps you achieve your goals, and delivers ROI. But finding one isn’t always that easy.

Here are three steps for implementing automated inventory management software.

1. Determine your needs

First, audit your business to understand what to look for in your new inventory system.

Your type of business plays a significant part in deciding the features and functionality you’ll need from your software. Manufacturers, for example, might want software that features Bill of Materials functionality.

Consider who will be using the automated software most. Some solutions are priced by the number of users, and this, along with any training required, will need to go into your budget considerations.

Finally, you’ll probably want software that integrates with your existing app stack.

Take a look at all the apps you currently pay for and decide where you could save time by integrating them with your inventory solution.

2. Research automated inventory management solutions

If you’ve already got cloud accounting software in place, then take a look at which apps they work with and go from there. The Xero Marketplace or QuickBooks App Store, for example, have lists of options alongside customer reviews

Your accountant may also be able to advise on which apps are best suited to your needs.

Browse independent review sites such as Capterra or Trustpilot to compare features and read testimonials until you have a list of potential software for your business.

Compare the price, functionality, customer support, brand reputation, and software reliability of your chosen options. Once you have chosen a winner, start a free trial to test whether the software is right for you. Be sure to let the employees that will be using the software most engage in the trial.

If you’re not satisfied with a system after trialling it, move on to the next solution on your list.

3. Work with experts and train your team

Once you’ve settled on an automated inventory management system, the software provider should offer guidance for getting started.

In most cases, you’ll be assigned an Account Manager to show you the ropes and offer support whenever needed. You may wish to invest in an additional support package or work with an implementation partner to make the process even smoother.

Once your product, customer, and supplier information has been added to your new system take your time to learn how each feature of the software you’ll be using works.

Finally, create a staff training protocol for ensuring that all employees can use the software safely and efficiently.