Inventory Management System

Introduction to Inventory Management System

As an entrepreneur, you have learned the basics of inventory management plugins – now let’s take a look at the processes that are used to manage inventions. Every entrepreneur needs to know the exact inventory management system that matches the needs of their business.

What is an inventory management system?

Inventory management system is nothing but a process used to track the positions of stocks. As we know, to run any e-commerce business, It takes a lot of effort and hard-work. Monitoring e-commerce store stocks, known as inventory management systems.

All companies can manage their available stock in their own way. In other words, the management of stock depends entirely on the size and category of the company.

Example of Inventory Management System :

Vishal and Akshay, both started their own e-commerce business, where they sell mobile covers. At the beginning of their business, they can manage their stock manually. But according to time, manufacturing of mobile covers are increasing and this leads to rise in stock.

Now, Vishal and Akshay find it difficult to manage mobile covers manually. So they decided to use some advanced procedures that help them check the status of the stock. There is lots of softwares, that is used to evaluate the stock – quantity of stock, update of stock etc., and so on.

Why Entrepreneur used Inventory Management System :

There are approximately infinite reasons why an entrepreneur needs a system of inventory management. Let’s take a look on some of the major reason for the same :

1. Evaluate Differences between Overstock & Out-of-stock

Inventory management is all about evaluation. When an entrepreneur invests lots of money in manufacturing called overstock, it can create a deficit in the budget.

2. Control Costs of Operations

Inventory management system is one of the best ways that saves your money and allows you to fulfill the needs of customers. As an entrepreneur, if you know the quantity of stock available in your warehouse then it is easier for you to manufacture only those goods that seem to be out-of-stock.

3. Increased Efficiency

Some entrepreneurs are thinking about how it will increase business efficiency. Before the inventory management system, entrepreneurs can pay their employees remuneration according to their work shift.

With the help of this, you can check the work done by your employee and then provide them a relevant salary.

4. Delivery Dates

If an e-commerce business fails to deliver the product on time to its customer, it will quickly develop the business’s poor reputation or goodwill.

This situation can occur when an entrepreneur does not know the exact time of the order. Inventory management systems provide software that helps customers record orders and all transactions made over their time.

5. Make Reordering Easier

Inventory management systems have software that can record past transactions made by customers. Sometimes, the same customer may apply for a different product order and if they need to re-register on the site to purchase another product, it can negatively impact the company’s profile.

Inventory Accounting

Inventory represents the current assets of the company that are used to sell as a finished goods within a short period of time.

Physical goods are counted and all are examined before recording it on a balance sheet of a company. Inventory management is a complex task for each and every individual e-commerce company.

Advanced inventory management systems help entrepreneurs maintain sophisticated accounts that include value of finished as well as intermediate goods.

Inventory accounts can contains four categories :

1. Raw Materials

Raw materials are the products that are purchased by the companies in order to run their manufacturing process.

In other words, the goods produce the finished goods – known as raw materials.

These materials have to undergo significant work before they can be converted into a good ready made for sale by the company.

2. Work-In-Process

Work-in-process represents the process of converting raw product into finished product. For example, when a user can make a cup of Tea – milk and water are the raw materials.

3. Finished Goods

Finished goods are the goods that are ready to sell in the market. After manufacturing, each and every raw material is ready for the final supply and these products are available to the company’s customers.

4. Merchandise

Merchandise represents finished goods that a company purchases from a supplier for future resale. In other words, goods resell in the market for a second time.

Inventory Management Methods

There are many methods available to manage the inventories totally depend upon the size of the business.

Inventory management methods include just-in-time (JIT), material requirement planning (MRP), economic order quantity (EOQ) and inventory sales (DSI).

1. Just-In-Time Management

This method of inventory management was first oriented in Japan in the years of 1960s to 1970s. This method allows companies to save significant amounts of money and reduce waste, only need to sell and sell products.

2. Materials Requirement Planning

Keep content depends on the requirements planning (MRP) inventory management method sales forecast, meaning that manufacturers have a list of requirements of precision and periodically record the exact sales to meet the needs of suppliers.

3. Economic Order Quantity

The Economic Order Quantity (EOQ) model is used in inventory management by calculating the number of units that a company needs to use in order to reduce the total cost of its inventory, with its inventory per batch order, assuming constant consumer demand. Inventory costs in the model include holding and setup costs.

4. Days Sales of Inventory

Inventory sales day (DSI) is a financial ratio that indicates the average time of days that a company takes to turn in its inventory, including goods that are in progress in sales.

Indicating the liquidity of inventory, this figure shows how long the current stock of inventory of a company will last.


Goods management has to do with keeping accurate records of goods that are ready for shipment. This often means having enough stock of goods for inventory totals, as well as reducing the most recent shipment of finished goods to buyers.

When a company has a return policy, there is usually a sub-category in the finished goods list for any returned merchandise that is reclassified or second-class quality. Highly trained inventory management and high quality software will help make inventory management successful.

WordPress solution provided by many online websites in order to manage e-commerce store inventories.

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