Inventory management software consists of business applications that track, manage and organize product sales, material purchases and other production processes. Gone are the days of tracking inventory with pencil and paper. Businesses can now use systems based on barcodes or radio-frequency identification (RFID) to see when shipments come in, where raw materials are located, and when their products have shipped. By using inventory management software, businesses reduce the time and efforts previously put into basic tracking, and instead focus on analyzing, finding and reducing inefficiencies in their model.
IBM reports that 54% of Chief Supply Chain Officers will be optimizing their inventory management to help control and reduce costs. Without accurate accounting of how much inventory a business has, where that inventory is located and what will be needed to complete incoming and future orders, no company can run efficiently enough to turn a profit and generate growth. Shockingly, inventory inefficiency is common for many businesses. According to an analysis inManagement Science, numbers were inaccurate for 65 percent of the nearly 370,000 inventory records observed across 37 retail stores.
Inaccurate inventory records create a higher lead time (the time between the initiation and execution of a process), which means a slower response to demand, market changes and stock outs. This, in turn, can create customer disapproval when products aren’t available as needed. For small businesses, the margin for error is too small not to meet required demand (only about 50 percent of small businesses survive past four years). Plus, a shorter lead time has become an important source of competitive advantage. U.S.-based consulting firm Granite Bay says that by reducing the lead times of global manufacturers by 50-80%, they have seen increased market shares and profitability.
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