Companies like yours understand the importance of using advanced technology to manage inventory effectively. You know the warehouse is where the magic happens — particularly when warehouse systems remain efficient, functional, and well maintained. One way to tackle warehouse management efficiency is with automation. A custom, automated inventory management system helps drive success in several key areas, including:
- Simpler processes that make it easier to run your business.
- Improved accuracy to help avoid wasted time and higher costs.
- Better inventory forecasting to increase your profit and keep customers happy.
These types of improvements grow more critical by the day. While online sales have settled back into pre-pandemic trajectories after the surge in 2020, US ecommerce sales are forecasted to grow by 9.3% in 2023 to reach $1.137 trillion.* According to a CBRE report, as much as 330 million square feet of additional warehouse space could be needed by 2025 to meet the rising demands of ecommerce.† This growth also means more product returns. The reverse logistics market is increasing at a similar rate to ecommerce growth, projected at 9.4% compound annual growth from 2023 to 2030,‡ even as warehouses remain understaffed by 10–25%.**
For many warehouse operators, automation powered by inventory management software can be the answer. Let’s gain a better understanding of the features and benefits of creating an inventory system with automation — using a low-code platform like Claris FileMaker — to unlock what’s possible for your business.
What are automated inventory management systems?
Automated inventory systems are sophisticated tools that use technology to optimize stock-level management for retailers or wholesalers. By providing continuous, real-time inventory visibility, these integrated systems help you ensure stock levels are where they should be, reducing the risks of running low on in-demand items or overstocking unnecessarily.
Automated inventory systems reduce or eliminate time-consuming manual processes, improve data accuracy, and streamline operations. Integrating the insights from these systems with the other tools and services you use to run your business can create a complete picture of your business operations, available to everyone who needs it. Quick access to the data you need helps you deliver great customer service and make better business decisions.
Six key features to look for in an automated inventory management software.
Regarding inventory management and inventory control, sellers know there’s work to do. When asked about their biggest day-to-day challenge, 43% of retailers ranked inventory management as their top concern.†† Small businesses may have even more work to do: Nearly half say they don’t have an inventory management process at all.
So, where do you start? A great first step is to look at your inventory management processes and systems, then determine which areas need updating. Consider these six primary categories of inventory management:
1. Inventory tracking.
An inventory management system must track all products, parts, and items that a company has in stock to provide a comprehensive overview of inventory data. Companies should seek a system to assist with purchasing and receiving, tracking inventory movement, and assisting with reordering. Good inventory management practices are necessary for any type of software or system to work as intended.
2. Inventory accuracy.
Generally, accuracy relates to item count (items counted equals number expected) and dollar amount (the expected dollar amount matches the cost of the available items). An example of accurate inventory is when an employee searches for something and they find it in the right place with the correct description in the expected amount.
3. Inventory forecasting.
Inventory forecasting can be tricky. Overestimate and you end up with too much product. If you underestimate, your inventory levels are too low. Without the right inventory, your revenue, order fulfillment, and customer satisfaction can take a big hit. One study found that overstocks and stockout experiences cost US and Canadian retailers $349 in lost sales in 2022.‡‡
4. Barcode scanning.
In addition to the legacy barcode scanner gun, modern barcode systems can scan from a mobile device, making it easy for employees in various roles to access the system and instantly call up real-time data about an item, including quantities and locations, or register movement, like receiving or shipping.
5. Setting reorder alerts or points.
Proactive inventory management enables you to stay ahead of demand by setting a reorder point that will trigger an automatic reorder of in-demand items or send an alert for an employee to follow up and place the order. The process of calculating future inventory and demand forecasting requires solid data about your business and the industry climate. Leverage a system that factors in historic sales numbers, upcoming promotions, and other variables to be as accurate as possible.
6. Reporting.
Accurate and timely reporting of stock levels is a key factor in effective inventory management, and the more this process can be automated and streamlined, the more time your employees can spend finding fresh insights in the inventory data instead of collecting it. Custom apps can make reporting more effective by connecting siloed departments for stronger collaboration, forecasting, and decision-making.
Determine what type of automated inventory tracking system to use.
To improve inventory management, organizations typically use systems based on inventory management software — ranging from basic, manual systems to complex, high-priced software that provides real-time data.
What works best for small business owners?
Small business owners typically rely on time-consuming manual processes and systems. They often use spreadsheets to keep track of their order management process and capture how they sell products. However, maintaining data integrity is difficult when numbers are input manually, and the potential for human error is high.
You can solve these issues by implementing an intuitive inventory tracking system that’s simpler in scope. Look for an option that’s easy to implement but customizable to solve your company’s unique issues.
What works best for larger organizations?
Larger organizations require a more robust system, such as software with barcode or RFID technology, instant feedback, automatic ordering, automated correspondence, and advanced reporting and analytics. Companies can choose from on-premise options that run on a server or cloud-based software packages.
How to create an automated inventory management system.
1. Determine your goals.
First, get clear on what you want to achieve with your automated inventory management system. Do you need to reassess your forecasting metrics, optimize your stock for availability, or automate repetitive processes across the board? Automated systems can fulfill all of these functions, and it’s important to prioritize what matters most to your business.
2. Determine what technology to use.
The best technology for your use case depends on the size of your business, your general inventory levels, and your employees’ degree of comfort with technology. A growing small business might be ready to implement barcode scanning, while a larger enterprise could benefit from an RFID system. You’ll need to weigh the pros and cons in terms of cost, functionality, and time to implement.
3. Lay out a reasonable timeline.
Technology procurement and adoption take time, and it’s important to consider that in your digital transformation roadmap. Break your plan out into individual phases and create a blueprint for minimizing any friction during the changeover. While building new custom systems takes time, most users build their first custom app with FileMaker in less than four weeks.
4. Train your employees.
Many applications and systems help keep track of inventory data without a large investment of manpower, but it is important for the people who use your new system to learn how to get the most from it. Set aside time for in-person training, provide access to materials like webinars and documentation for people to learn at their own pace, and foster a culture of learning where asking questions is encouraged.
5. Implement the new system.
Once you’ve laid the groundwork, it’s time to implement the new automated inventory management system. Activate your roadmap, keeping all stakeholders updated with progress. Develop benchmarks that are important to your specific processes so you can track progress on the metrics that matter to your business — like carrying costs, backorder rates, order fulfillment accuracy, and receiving time — and adjust as needed as you go.
The top five benefits of automated inventory management.
Overall, an automated inventory tracking system can help you reduce inaccuracies and improve the production cycle. Inventory tracking apps — like those created with FileMaker — make it easy to track inventory visually and intuitively across multiple locations. Apps often have easy customization and integration, and provide the ability to work seamlessly among PC, tablet, and mobile (as well as on premise or the cloud).
More specifically, you can benefit from:
Improved efficiency.
By automating repetitive tasks, like counting and scanning, and integrating new apps with existing systems, you can streamline operations, reduce redundancy, and ensure smoother workflows, improving efficiencies that drive growth.
Reduced costs and risk.
Automating helps reduce vulnerabilities to risks caused by human error and the costs that come with stock imbalances. Excess stock can eat into profits by taking up warehouse space, while too little stock can mean missed sales opportunities. Optimized stock levels minimize risks and carrying costs.
Ability to scale quickly.
Customized inventory management solutions, like those built with FileMaker, offer scalability. As a business grows, these tailored systems can adapt, ensuring that inventory processes evolve in tandem with business needs.
Increased accuracy.
Using an automated database creates files that are more accurate and consistent than manual spreadsheets, while enabling you to redirect your resources to high-value tasks that can make a greater impact on your business.
Improved data-driven decision-making.
With a holistic view of your overall inventory, you can make better decisions about immediate concerns like reordering specific items, as well as long-term objectives, such as refining your overall business direction. Data increases your ability to scale quickly and add more products for your customers.
Watch how Shock Therapy transformed its warehouse operations using FileMaker: “Now when I walk into the shop, I see everybody on their iPads, and they know exactly what to do…We’re able to work in an agile format…and over time, we’ve been able to streamline the whole business.”
Key takeaway — an automated inventory management system is within your reach.
The need for warehouse efficiency is greater than ever before, especially with supply chain disruptions. Operators must be able to work fast, execute with accuracy, and make informed predictions to keep up with customer demand.
Thankfully, it’s also easier than ever to achieve these goals with no pro coding necessary — with the right approach.
By assessing your current processes, determining what type of inventory management system you need, implementing best practices, and developing an effective tracking system with automation, you’ll have what you need to make warehouse magic and boost your bottom line.
Learn more about how FileMaker drives change in warehouse and manufacturing on our inventory management page, where you can also download our inventory management ebook or start a free 45-day FileMaker trial.
* https://www.insiderintelligence.com/content/us-ecommerce-forecast-2023
†† https://www.veeqo.com/inventory-management
Frequently Asked Questions
What are the four types of inventory management systems?
The four types of inventory management systems, in ascending order of complexity and automation, are (1) periodic inventory management, (2) perpetual inventory management, (3) barcode inventory systems, and (4) radio frequency identification (RFID) systems. Periodic inventory management is a manual system of inventory counting used mostly by low-volume businesses that requires people to count and record stock on a regular basis. Perpetual inventory management keeps track of inventory constantly using inventory management software. Barcode and RFID systems automate the process further. Barcode systems require people to scan each product as it is sold or moved, while RFID systems, used by large-scale businesses, can read radio tags on products from a distance as they move through distribution centers and warehouses.
What are the most common challenges with automated inventory management systems?
While software and systems can improve many processes tremendously, no technology can overcome basic problems of organizations, such as poor warehouse layout, unlabeled goods, or untrained workers. These shortcomings make it difficult to react to fluctuations in demand and create operational gaps and inefficiencies. It’s also important to invest the time and resources necessary to make sure employees develop a sense of comfort and competency using any new systems.
What is the primary goal of a company using automated inventory management?
The primary goal of using automated inventory management is to efficiently monitor and manage inventory, streamline operations, improve business processes, and increase capacity for data-driven decision-making. Automated inventory management helps businesses respond better to customer demands while reducing stress on their own teams, increasing overall productivity.