What is Inventory Tracking and How Do I Use it?

what is inventory tracking

You likely have standing inventory you’re trying to sell, but you may also have safety stock, dead stock, in transit inventory, decoupling inventory, and even inventory you’re bulk shipping to account for. Inventory tracking software can help, but you still need to perform audits and train your staff to always track inventory movement. The warehouse management system based on RFID can improve efficiency, increase inventory visibility and ensure the rapid self-recording of receiving and delivery. Inventory management is where all the elements of the supply chain converge.

what is inventory tracking

Any products that are damaged and unable to be sold should be reflected in your inventory levels data. If you don’t deduct damaged goods, you may end up thinking that you’re fully stocked, when in reality those items are not fit for sale. It’s easy for startups and small business owners to jump into sourcing products and selling without an inventory management plan. However, if left too long, inventory management shortfalls quickly become headaches that cost you both customers and profits. By putting these seven essential elements in place, you’ll be on the road to learning how to manage inventory and—best of all—set up for profits from day one. The goal of forecasting is to have just enough inventory on hand to cover predicted sales for a prescribed period of time, such as 15, 30 or 60 days.

Inventory Tracking

Please consult your accountant to identify the best practice for your business. The cost of losing a customer’s trust is high, and you don’t want to incur it. Accepting a customer’s order of an item that is out of stock or accepting an order of fifty items when you have 45 may lead to losing that customer.

What are the inventory tracking models?

What are the three most common inventory control models? Three of the most popular inventory control models are Economic Order Quantity (EOQ), Inventory Production Quantity, and ABC Analysis.

You should start using warehouse management software if you haven’t been already. Order fulfillment speed is also increased and your staff will waste less time searching for missing items or sifting through an overwhelming amount of inventory. https://www.bookstime.com/articles/inventory-tracking Bigger businesses can devote more resources to warehouse management and inventory control. Nevertheless, tools such as inventory tracking software can help these small firms keep on top of warehousing, fulfillment, and more.

Inventory Tracking System

You can check real-time inventory levels at each fulfillment center at any time and set automatic reorder levels, so you are notified when stock is running low. It can be very hard — and expensive — to scale your warehousing and inventory tracking. Once you start selling thousands of orders each month, you will be turning over inventory quickly and likely expand into new locations and stores.

It also takes a large time investment to integrate the software and provide an initial inventory count. However, it offers many long-term benefits to a business and eliminates the need for full, physical inventory counts every month. Running an order fulfillment process without the right software is difficult and time consuming.

Inventory Tracking Guide

This type of inventory management and tracking is known as perpetual inventory and lets you access data on the fly. If your ecommerce company produces, purchases, or sells merchandise, it’s imperative to track your inventory throughout the various stages of your supply chain. The following are a few frequently asked questions to help you determine which inventory tracking method might be the right fit for you and your business. Extensiv Order Manager is the ideal solution for accurate and efficient inventory tracking, by maintaining real-time stock counts and automating ongoing processes to elevate your brand at every level. There’s no doubt inventory tracking becomes increasingly complicated as you add more sales channels and warehousing options (in-house, FBA, 3PL).

  • With this method, a company receives goods as close as possible to when they are actually needed.
  • You can mitigate this by performing advanced inventory cycle counts or using a perpetual inventory tracking system.
  • By allowing real-time tracking of the movement of inventory items, a company can optimize production processes to find the right stock balances concerning its order position.
  • Spreadsheets aren’t an effective inventory management tool because they have to be updated manually, which is time consuming and means the data is almost always out of date.
  • Even after a customer has completed checkout and their order has left your warehouse, there’s no guarantee that product is gone for good.
  • Other advantages of inventory tracking software include quicker auditing, enhanced mobility, cycle counts, and more accurate reporting.
  • However, it’s important to know the distinctions as you grow and begin delegating supply chain and inventory tasks to staff or outside contractors.

Card systems have fallen out of use in favor of faster and more accurate methods that use modern technology. Merchant A knows that they have 1,021 black baseball caps and 478 blue baseball caps in their California warehouse, and 719 black baseball caps and 323 blue baseball caps in their New York warehouse right now. Inventory tracking means monitoring which SKUs a business has in its possession, the location of the inventory, and the quantities available. The ability to track inventory levels in real-time is an important part of the supply chain and critical for ecommerce brands that wish to truly scale successfully. Safety stock inventory management is extra inventory that is ordered and set aside in case the company doesn’t have enough for replenishment.

Inventory Management Red Flags

Just-in-time (JIT) inventory was introduced with the advent of lean methodologies within manufacturing and has carried into other methods such as Six Sigma. The stock purchase is related to the order position within the company, and materials are not purchased until orders are received. This drastically reduces inventory cost, holding costs, and handling of both raw materials and components and WIP.

What is the benefit of tracking inventory?

By accurately tracking inventory levels, you can avoid lost sales and dissatisfied customers. It also helps you optimize production and purchasing decisions, reducing costs and improving operational productivity. Other than this, inventory management facilitates strategic planning and forecasting.

And helping to keep the cycle of inventory tracking and management as seamless as possible. Most ecommerce platforms will allow you to filter orders over a specific timeframe, then export all data to a CSV file. You’ll need to periodically enter and adjust information in all the tabs for optimal inventory tracking. But the formulas will pull data between tabs, helping to automate the actual tracking process as much as possible. Krista Fabregas is a seasoned eCommerce and online content pro sharing more than 20 years of hands-on know-how with those looking to launch and grow tech-forward businesses.

Inventory tracking and supply chain management

A growing business likely means increasing demand and higher overhead costs. Inventory can be costly, especially when you account for warehousing, damaged items and replacements, spoilage and quality control. Inventory management is the fundamental building block to longevity, helping businesses to minimize costs, improve cash flow and boost profitability.

  • Some experts also have a fifth category that encompasses all unknown reasons for inventory loss; it makes up six percent of all inventory shrinkage.
  • Promptly receiving inventory shipments is another key element of learning how to manage inventory.
  • We’ve put together a comprehensive guide to better track inventory control (see what is inventory) and understand how to calculate ending inventory.
  • It would be far too difficult to maintain and search records about item and personnel movement quickly or efficiently with manual record keeping on paper, or even in a spreadsheet.
  • This can be done by an individual or done by many people in a factory setting.

If one of these is out of balance, the company can experience a loss of business or run out of operating capital. For SMEs especially, lacking in large-scale capital to fall back on in case of troubles, improper inventory tracking can have disastrous consequences. Generally, inventory tracking is critical to inform your business decisions. Keeping track of what you have and where it is, predicting trends through reports and staying updated with seasonal adjustment saves on cost and time. Is it even playing its purpose if your inventory tracking system only allows a specific number of items to be added?

Decide How To Track Inventory Data

This accounting method takes inventory at the beginning of a period, adds new inventory purchases during the period and deducts ending inventory to derive the cost of goods sold (COGS). Inventory tracking is an indispensable part of your ecommerce operations, and has the potential to make or break your success in the long-term. But when you partner with a capable and qualified inventory management system, there’s really nothing your company can’t achieve — and Extensiv Order Manager is definitely that kind of system. Once your business is on a steady trajectory and growing year-over-year, it’s common for your inbound and outbound logistics to take up more of your time and attention, as well.

what is inventory tracking

Luckily, you can avoid these roadblocks by incorporating simple inventory management procedures and tools into your operating plan. Proper inventory management depends on the type of business and what type of product it sells. There may not be one perfect type of inventory management, because there are pros and cons to each. But taking advantage of the most fitting type of inventory management style can go a long way. This model is used in inventory management by calculating the number of units a company should add to its inventory with each batch order to reduce the total costs of its inventory while assuming constant consumer demand.