Types of Inventory Management Systems - Explained

Revel Blog | Revel Systems | April 22, 2021 |

inventory management system

What are the Different Types of Inventory Systems?

Inventory systems are a critical part of successful supply chain management. With so many different types of inventory systems available, you must choose the right inventory control system for your products.

When it comes to the types of inventory management, there is no one-size-fits-all solution. Therefore, it’s essential to find out as much information as possible about the types of inventory systems available and align their features with your business goals.

Using this information, you can decide which type of inventory management system will move your organization forward.

Once you’ve decided which stock controls you’ll implement, how you’ll track costs and fulfill orders, and what steps you want to take to manage product reordering, you’ll be able to find an inventory management system to meet your needs.

Types of Inventory Management

You’re probably wondering, ‘what types of inventory management systems are the best?’

The most popular types of inventory management are:

Inventory Spreadsheets

Although spreadsheets are becoming less and less popular than cloud-based solutions and ERPS, they have formulas, tools, and features that can make them interactive and efficient. 

Google Sheets and Microsoft Excel are great for handling simple inventory management for small businesses.

Although spreadsheets are far from perfect at tracking inventory, they provide many useful features for new businesses that require quick inventory management solutions. 

Thus, the drawback to a lighter-weight, unspecialized spreadsheet system is the greater need for manually enforced controls; you must adhere to strict management practices and meticulous organization to achieve your goals.

Cloud-Based Solutions

Unlike spreadsheets or systems on a local computer, cloud-based inventory management software is hosted on the internet. This means that all data is stored on virtual servers rather than in a physical data center.

Cloud-based inventory management systems eliminate frustrations, errors, and the kind of delays that frequently occur when using spreadsheets. 

This is one of the reasons why cloud-based platforms are seeing widespread global adoption.

Although spreadsheets are great at running functions and macros, cloud-based inventory management systems are designed to be scalable and meet expanding business requirements.

This includes all aspects of fulfillment, ordering, warehousing, production, stock, and more.

Enterprise Resource Planning (ERP) Systems

ERP inventory management refers to an integrated approach to business operation and planning. Using ERP inventory management systems, businesses can manage all their logistics, finances, operations, and inventory in one place.

According to Statista, worldwide spending on Cloud Enterprise Resource Planning software will reach $28.8 billion in 2028. 

Generally, ERP systems are designed for larger businesses with complex sale order processes and inventories. Smaller businesses may find ERP inventory management systems cost prohibitive in comparison to standard Cloud inventory systems.

Additionally, some of the capabilities and functionality provided by ERPs will not be necessary for managing the inventory of a smaller business.

Inventory Management Systems: Tips for Success

Use Data Analytics to Improve Inventory Management

Having access to analytics and real-time inventory data gives accurate sales forecasts and product statistics instantly. 

This data can be used to scale your inventory up or down or predict market demand, which can bolster profits significantly.

Predictive data analytics offer several benefits, including:

  • Increasing cash flow by decreasing inventory investment
  • Improving customer service by providing accurate product availability
  • Predicting the right inventory quantities in line with demand
  • Improving profit margins by limiting the scrapping of old stock or discounting

Once you have accurate sales forecasts, you can enhance your marketing to target specific customer segments. This can be achieved via targeted advertising campaigns, ensuring that the right people learn about your business at the right time.

Use Sophisticated Planning Tools to Forecast Effectively

One of the most crucial aspects of efficient inventory management is having the ability to forecast accurately. Doing so allows businesses to make informed ordering decisions and predictions.

For instance, what products sell out quickly? What items do you sell the most of? Will running a promotion increase product demand? Accurate forecasting has a significant impact on profitability and gives you an inside edge over your competition.

There are two main inventory forecasting models:

Quantitative forecasting

This process uses past sales data to predict future demand. Therefore, the more data available, the more accurate the prediction will be.

Qualitative forecasting

Qualitative forecasting uses expert knowledge to predict demand according to market factors and potential demand.

This method can take a while to finesse as it’s more of an art than a science. However, quantitative forecasting is easy to perform as long as you have the right inventory management system in place.

Discover the Revel Systems Difference

Revel Systems' comprehensive POS hardware will provide data that impacts your forecasts, helping you plan more efficiently and boost profits.

Our software offers one of the best types of inventory management on the market today, enabling you to track your inventory in real-time. 

Revel automatically updates inventory count, sends stock alerts, and generates purchase orders, giving you complete control over your inventory.

Contact us for a free demo today.