If you’re new to the world of ecommerce, you’ll be hearing a lot about managing inventory. But, assuming you haven’t had previous business experience, what is inventory, exactly? Inventory is simply the property a business has in its possession, such as suppliers’ products intended for resale, or if a manufacturer, raw supplies, machinery and other production essentials.
If products are made or purchased for sale or resale, a business needs to know how much of a product is available at any given time, for production or to accurately fill customer orders, as well as know when to reorder to avoid shortfalls, back orders and potentially lost sales. This process is known as basic inventory management. Inventory management is the discipline dealing with the placement and movement of stocked goods.
In order to accomplish that, businesses need a well-designed, secure and reliable inventory system. We’ll cover that in more detail below, but for now, let’s look at a typical inventory process and the three types of inventory:
What are the 3 types of inventory? There are three basic types of inventory including:
- Last In, First Out (LIFO) assumes the last items to enter a storage or warehouse facility will be the last to leave.
- First In, First Out (FIFO) assumes that the first items entered in a warehouse or storage facility will also be the first to leave.
- Weighted Average Cost (WAC) is the item’s cost-per-unit obtained by calculating the total cost divided by the total number of units purchased during the year.
Which type of format is chosen will depend on the type of business it is needed for, customer profiles, business purchasing patterns and other factors.
What is inventory process? In the simplest terms, this is made up of the steps needed to effectively manage a business’s inventory, as explained further below:
The inventory management process consists of the following:
- Identify and organize products into categories that are relevant and easy to locate and manage.
- Tracking sales as well as purchase orders (POs) incoming as well as outgoing
- Is scalable – that is, able to grow from start-ups on a budget to grow with your business, rather than having to discard outdated or inadequate software for something able to handle more complex inventory needs over time
Automatically order replacement products as levels drop to a predetermined number
- Be easily installed and usable, including those employees lacking more than a basic technological background
Type and size of your business: obviously ecommerce (reseller) retailers will have much different inventory needs than a manufacturer selling their products to industrial or other consumers, so you will want software that’s both versatile and capable of handling different requirements.
What types of inventory management are available? These can include paper ledger pads, downloadable spreadsheets programs, as well as open source and subscription software.
Your inventory management system needs to be able to interface seamlessly with your fulfillment and shipping software, especially if you are coordinating product replacement shipments with outgoing customer orders.
A couple of inventory management system examples include QuickBooks and Odoo, both popular brands but as open source, can be technologically challenging.
There are several types of inventory management systems, ranging from the old standby spreadsheet systems such as Excel, which was designed for tracking inventory, among other things, but which has become less suitable for managing faster transactions, where products may move more rapidly in and out of warehouses, requiring a more nimble way of tracking.
Open source and similar types of software are fast-replacing spreadsheets with its ability to manage many products and transactions, but these usually require additional configuration by the user to meet their business’s individual needs.
Subscription software, as offered by Ordoro, is usually the best bet for most businesses, regardless of type, due to its versatility, ease of use, and scalability over time as the business grows.
The importance of inventory management can’t be overstated: without knowing how much and what types of products or raw materials are currently on hand, it’s impossible for any business to calculate production and output or to fill customer orders for finished, read-to-sell products. Furthermore, without knowing the exact amounts of existing stock levels in real-time, it would be difficult to know when and how much raw material or finished products from your suppliers to reorder. It’s critical, therefore, to decide upon a reliable and easily-used method of inventory control and management right from the outset, rather than leave such an important function to chance.
There are four main functions of inventory management:
- Ordering finished products or raw materials from suppliers or vendors
- Handling incoming items or materials, including tracking quantity and type
- Storing materials or products in an easily-accessible but safe environment, such as warehouses or other distribution centers
- Processing and/ or selling of ready-made products or turning raw materials into finished items for sale
What kind of inventory management software should you choose? While there’s plenty of warehouses, general inventory, and other types of inventory software on the market, most of it is geared toward larger businesses, such as Amazon, that order, store and distribute thousands of products daily. Inventory management software small business-related is what you should be looking for if you’re a startup or intend to stay small to medium-sized.
Ordoro’s full spectrum of everything about ecommerce management – from basic inventory management to sophisticated multicarrier and multichannel integration as well as total fulfillment and shipping features - can handle every aspect of your ecommerce business now and well into the future.
Unlike open source or similar downloadable, licensable programs, Ordoro gets you up and running quickly, so you can do what you do best: run your business.
Some software companies offer a free inventory management app, such as with WooCommerce, although these are often prone to glitches and other annoyances.
You can find inventory management software free of charge on most spreadsheets (Excel, for example) as well as some open source programs, such as Quick Books and Odoo, mentioned earlier. One caveat is that spreadsheets are pretty limited when you are dealing with hundreds of products moving in and out of inventory at a faster pace, as is often the case with an ecommerce business. That and there’s the ever-present chance of errors in inputting and changing data, as well as the tedium of copying and pasting.
Getting free inventory management can be done, but as previously mentioned, the larger the business, the less efficient are spreadsheets and other “free” products. Most startups are looking to save money by using inventory management system free of charge, especially one utilizing simple inventory software free of charge and free inventory software for small business.
While there’s free inventory management system Excel-focused and other downloadable spreadsheet programs, they can come with a hidden cost: lost time, efficiency, and the real possibility of human error in entering and changing large amounts of data. As an inventory management system Excel may not be such as a great deal after all, especially for a growing business.
Inventory management system open source is another way to take charge of inventory, although you should know that a lot of it requires some IT experience for the ability to successfully install and use it. Inventory management software open source is easily available both through PDFs and other downloads, for those on a tight budget. A number of them are focused more on the needs of larger businesses – particularly in manufacturing and warehouse management. These may offer far more sophisticated, unnecessary, and when the time to update, more expensive features that your business may not need.
When looking for the best inventory management software, keep in mind that most “free” software is usually just a “trial” version of the real deal, and it’s unlikely that you’ll be accessing the full suite of applications otherwise available in the paid version.
Inventory management software that’s open source, such as QuickBooks or Odoo can be a challenge to master, although learning to use it is easier for those who have had previous accounting software experience. Odoo Inventory is a suite of business management software, including billing, warehouse management, and inventory management. Like most other forms of open sourced ecommerce software, it requires a bit of technical knowledge to set up correctly, and there is a learning curve, as with QuickBooks.
For those business owners lacking an IT department or technical background, this can pose a real challenge to install, maintain and update as needed, possibly resulting in excessive downtime to perform these essential technical functions. Any type of open source software that’s licensable can be changed by anyone knowing PHP; however; this can result in unauthorized deliberate or accidental changes that could leave your needed features and business compromised, causing loss of data and delays until the problems are fixed.
Thousands of satisfied users agree with us that Ordoro offers the best inventory management software for small businesses as well as the best inventory management system for small business from managing inventory to fulfillment, shipping, and beyond. Ordoro helps unite your whole inventory by plugging in all market channels with online stores and suppliers into Ordoro’s app for multichannel connection. You can add select warehouses including Fulfillment by Amazon or other dropshippers, sourcing from wherever you ship your orders. Ordoro offers 30 days of FREE onboarding as well as lifetime customer support. Contact Ordoro today to schedule a demo and learn more about managing all of your ecommerce business to take it to the highest levels.