Digital Inventory Management System: Benefits, Challenges & Solutions

Keeping track of your inventory is essential for preparing for customer demand and creating informed decisions for your business. Paper-and-pencil inventory systems may still work, but advanced technologies offer more accurate results that save time and reduce costs. With these systems, you can lighten your workload and streamline your operations. Keep reading to learn more about digital inventory management systems and why it's important to implement one. 

What Exactly IS Digital Inventory Management?

Well, it might not be as daunting as it seems! Digital inventory management systems are actually simple but powerful software solutions that make it easy to keep track of your inventory while improving efficiency and reducing workload. This technology allows businesses to gain a clear view of product movement from the production phase to the final sale. These systems record information automatically, simplifying decision-making about stock replenishment, inventory allocation, and tracking in various distribution centers. 

Additionally, this software empowers businesses to sell products across different platforms and provide consistent and reliable customer experiences. You can reduce inventory carrying costs, the risk of accumulating dead stock, and opportunities to overspend with this system because you can identify how much inventory you need to meet the current demand. 

There are several types of systems you can choose from:

• Cloud-based: These systems provide a centralized solution for managing inventory and allow businesses to monitor sales data, track stock levels, automate the reordering processes, and sync inventory across various sales channels. A significant advantage of these systems is the reduced need for manual data backups on storage devices. Cloud-based systems update information in real time and store everything remotely in the cloud. 
  
  
• Barcode-based: You can use barcode-based systems to track when products are received, moved, or sold. Each product has a unique barcode, offering real-time visibility for monitoring stock levels and order fulfillment. This empowers businesses to streamline many internal processes and make data-informed decisions. These systems are excellent for growing businesses needing to decide on new product storage, product movement, and stock levels. 
  
  
• Warehouse management: Although these systems often focus on managing a warehouse's physical operations, they often include inventory management capabilities. Warehouse management systems (WMS) specialize in optimizing storage space, controlling the picking and packing processes, tracking stock movements within a warehouse, and maintaining accurate inventory levels. These systems reduce time, decrease the cost of operations, and increase accuracy. 
  
  
• AI-powered: AI-powered systems leverage advanced technology to optimize management processes. This technology can analyze historical data, external factors, and trends to forecast demand. There are many ways to enhance your business with AI, and these systems can also help prevent excess inventory and automate purchase orders.
  
  
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The Benefits of a Digital Inventory Management System

Improving your supply chain resilience and creating better customer experiences is essential for staying competitive in your industry and growing your business. Disruptions and uncertainties can cause significant problems for businesses. Combating these issues is the best way to reduce costs, increase profits, decrease errors, and become a more powerful player in the market. Digital inventory management systems offer comprehensive solutions and many benefits for combatting these problems. Consider the following benefits of this technology. 

1. Lowering Operating Costs

A significant advantage of a digital inventory management system is the ability to lower operating and carrying costs. Optimizing storage and inventory to meet demand is essential for effective operations. Accurate data insights empower businesses to find the balance between these two to reduce the risks of overspending or accumulating dead stock and prevent spending on excess storage space. Additionally, these systems can detail which goods are slow-selling and increasing in cost. Leveraging this data empowers you to avoid overspending on labor, insurance, warehousing, rent, and depreciation costs you could encounter from unsold goods. 

2. Obtaining Data in Real Time

Data is vital for providing a foundation for decisions and ensuring you can do what's best for your business. However, the more accurate and readily available the information, the faster you can make decisions and feel confident in their outcomes. Digital inventory management systems provide real-time data to detail what's in transit, how much is available for fulfillment, and when it's time to reorder. 

This is helpful for understanding your product flow and discovering the best times to run a promotion or discontinue an item to avoid losing profit. Furthermore, some systems offer automated inventory reorder points to inform you when you're running low on a product to improve and speed up the reordering process. 

3. Whole Business Visibility

Choosing the right system can impact many aspects of your business. With this technology, you can find whole business visibility, which can provide insight into accounting, procurement, customer relationships management, and finance. Accessing this information can ensure you always know what's going on within your business and allow you to create new strategies based on areas that need improvement or are excelling. 

4. Reducing Errors

Small errors can lead to costly consequences for many businesses and hinder customer satisfaction. Rather than relying on manual workers to track your inventory, a digital inventory management system can ensure there are no discrepancies between the products in a warehouse and what you have recorded. Real-time data features create higher accuracy across the supply chains and reduce the risks of inaccurate accounting due to miscalculations, mistyping duplicate entries, or miscounting. 

5. Making the Reordering Process Faster

Some systems can deliver notifications to alert you when you're low on a product. Demand and supply control the market, and you can meet customer demands more efficiently with real-time data about your stock. Along with forecasting predictions, you can ensure you don't run low on a popular good, allowing you to prevent cost increases and ensure you remain a competitive player in the market.

6. Creating More Efficient Supply Chains

You can improve your supply chains by using a digital inventory system to make processes faster and smoother. These systems allow you to establish processes for multiple operational stages to deliver the best possible customer experience. Automated processes such as forecasting, real-time visibility, and replenishment make optimizing inventory levels and making more informed decisions possible. This can empower you to streamline order fulfillment and enhance collaboration with suppliers. These systems can also provide insight into powerful supply chain metrics you should follow to improve your business's performance. 

7. Enhancing Forecasting Capabilities

Advanced technology can provide information about your current inventory levels and analyze historical trends to enhance forecasting. You can significantly increase your forecasting accuracy by evaluating these patterns and understanding the natural ebbs and flows of demand. These predictions make it easier to adjust your stock to prepare for heavy demand or prevent financial losses from ordering goods that are in low demand and could sit on your shelves or deteriorate in value. This can improve your customer experience and ensure you don't experience stockouts or excessive inventory. 

8. Developing Omnichannel Tracking

Creating an omnichannel strategy is essential for businesses looking to expand and reach more customers quickly while staying competitive. If one of your business goals is to sell across many different platforms, you must be able to track your inventory across each sales channel. Doing so will create more seamless processes and ensure you provide a consistent experience for every customer. 

Why It's Important to Implement This System

Digital solutions offer several advantages over traditional processes. Traditional practices require spreadsheets or paper-and-pencil processes to document when a customer places an order, items ship from your facilities, or you order new inventory. Although this system may still work, it is time-consuming and prone to errors. Virtual inventory practices reduce the risk of these human errors and improve accuracy, allowing you to streamline accurate information and boost productivity. 

Traditional inventory management systems often face issues with slow supply chain communication, demand forecasting, and poor inventory visibility. These systems hinder communication between teams and third-party logistics by offering fewer capabilities for tracking inventory between outbound and inbound logistics operations. Sometimes, managing inventory throughout your network may be impossible while expanding logistics operations with traditional methods. Furthermore, the lack of communication can increase risks of inaccuracies and lower satisfaction for customers, while digital solutions can improve both aspects.

Pencil-and-paper strategies also lack forecasting capabilities, a vital element in inventory management. Proper forecasting can give competitive advantages and prevent financial losses from purchasing products that will only sit on your shelves. Traditional management lacks the ability to gain the information that suppliers, logistics experts, and retailers need to make informed decisions. Alternatively, digital solutions connect manufacturing with sales, empowering you to predict optimal quantities to compete on the market. 

Lastly, proper inventory management requires visibility. When expanding your supply chain, it's essential to have a system that allows you to monitor inventory in real-time. This information allows you to know how many units of each good you have at any location. Traditional management lacks this visibility, and the risk of human error can lead to inaccurate counts, leaving you without a proper understanding of your supplies. Digital systems make it easy to monitor this information, empowering you to grow faster while creating lighter and more efficient workloads. 

Best Practices for Digital Inventory Management Software

Digital solutions are sweeping the supply chain, and making this shift can help you grow your business and remain competitive. When you're looking to bring digital technology to your inventory, following the best practices for the most efficient results is essential. Follow these best practices for making your inventory digital:

• Implement the right system: Implementing a digital system is the first step in enhancing your inventory management, but finding a suitable system for your operations is crucial. There are several solutions on the market, so comparing the features and benefits of each will inform your decision. Determine what features are essential for your business and ensure your software solution can meet your needs. 
  
  
• Choose features that automate processes: Along with finding the initial software, you may need to evaluate inventory apps or features to enhance your inventory management processes further. These applications can manage operations across multiple channels from start to finish, giving you complete visibility and improved forecasting. Features such as reorder notifications can highlight when your stock falls below a threshold, allowing you to respond better to customer demands. 
  
  
• Find a warehouse management system (WMS): Warehouse management systems make it simple to boost productivity within your warehouse and create additional visibility into operations. The right WMS can quickly fulfill product allocations, automate warehouse operations, provide customizable reporting, accurately forecast inventory, and more. 
  
  
• Discover the best digital inventory partner: Rather than finding multiple partners to support various issues, finding a digital inventory partner with comprehensive solutions can reduce workloads and save costs. Find a partner that offers reliable warehousing, fulfillment, and inventory management systems to create an all-encompassing system that benefits your business. Housing all of your information in one location can make it easier to access and reflect on trends while relying on accurate information.
  
  
• Review results and compare growth: After integrating a new system, you should ensure it's providing the boost you need. Compare information such as dead stock counts, profit increases, and lower labor costs to determine if you've made a worthwhile switch. When you notice reduced errors and fewer costs without affecting revenue, you can feel confident that you've optimized your inventory successfully.

System Challenges and Solutions

Although traditional inventory management methods are no longer sufficient, there are some challenges to consider with digital solutions. Choosing an effective system and reliable partner can reduce these risks and ensure you have a proper response if one arises. Check out these digital challenges and how you can overcome them:

• Stock counting sessions: Advanced tools offer automated processes to simplify work processes with fewer errors. However, some systems may not detect when a product is damaged. Additionally, employees could manipulate computers to cover theft, making it challenging to detect these problems. To prevent this issue, companies should audit their inventories physically alongside their digital solutions. 
  
  
• Security attacks: Criminals looking for a company's financial or sales data may be interested in your system to sabotage operations. It is essential to install robust antivirus tools and always keep firewalls up-to-date to prevent these cyber attacks and avoid disruptions in the supply chain.
  
  
• Data loss: Computerized systems need electricity and hard drives to function. In the event of a computer failure or power outage, you could experience data loss. However, using a cloud-based solution can prevent data loss and reduce the need for backups. Businesses operating without a cloud-based solution should back up their data frequently to prevent significant losses. 

Enhance Your Inventory Management With Osa Commerce

At Osa Commerce, we tackle data chaos that can disrupt the supply chain. With Osa, you can simplify these issues and find adaptable solutions to remain one step ahead of competitors. Your business can utilize our solutions for enhanced visibility, ensuring data accuracy, transparency, and forecasting. You can also integrate information across channels and touchpoints for an all-in-one solution to manage and enhance your business. 

Our team relies on experience and knowledge to empower businesses to reach their goals. We make it easy to solve unique supply chain problems and find customizable options that suit your business. Accountability and transparency are at the heart of everything we do, so you can feel confident that you're improving your business. Empower your business, book a demo with Osa Commerce to see your challenges solved!