Inventory management tools: how to pick the best ones for your business

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Calling all business owners, decision-makers, and supply chain and logistics managers! 

Stop scrolling and listen up because we’re about to make your life super easy by helping you choose the best inventory management software!

When you manage inventory for a living, catering to customers with diverse demands is all in a day’s work. That means keeping track of an ever-changing inventory, juggling stock levels across multiple locations and suppliers, and ensuring products reach consumers’ eager hands in the blink of an eye. And that’s no mean feat. 

As the old saying (that we’ve ever so slightly tweaked and repurposed) goes, “With great responsibility comes the need for ingenious solutions.” That’s where inventory management software systems come in.

We’ll start from the very beginning to help you gain a comprehensive understanding of your inventory management needs – all with minimal B2B fluff and business jargon. Just easy-to-digest info to help you make an informed decision about the tools and features you need to manage inventory like a pro.

In this handy guide, we’ll cover:

  • What inventory management software does
  • The benefits for your business
  • Whether you really need inventory tracking software
  • Essential inventory features
  • Common inventory terms
  • Considerations for purchasing inventory management software
  • How to implement new inventory systems
  • Inventory management tools FAQs

What does inventory management software do?

Inventory management software streamlines and automates the process of tracking, organizing, and optimizing inventory, ensuring your business has the right products in the right place at the right time.

By automating mundane tasks, providing custom reporting, and ensuring optimal stock levels, the best inventory management systems free up more of your time to focus on what matters most – growing your business and delighting your customers.

OK, but…how?

The list of possible inventory features and functions is almost endless, and we’ll delve into some of the most essential in the next section. But for now, here’s a brief overview of some of the amazing things that the best inventory management software can do:

  • Centralized inventory tracking – No more scattered spreadsheets or yawning your way through a laborious physical inventory count.
  • Asset management – Track stock levels across multiple locations, whether products are stationary or on the move.
  • Automated inventory updates – Inventory tools sync sales systems, accounting software, and warehouse processes to reduce the chance of errors and delays.
  • Demand forecasting – Learning to predict the future based on previous sales history can be rocket fuel for your sales and marketing teams.
  • Order management – Deliver a seamless omnichannel customer experience where every element of your supply chain runs like clockwork.
  • Automated admin – Have your accounting system generate invoices and purchase orders, etc. for you.
  • Inventory optimization – Achieve the perfect balance between supply and demand.
  • Supplier management – Track supplier performance, negotiate better deals, and ensure timely deliveries.
  • Warehouse management – Organize products, optimize storage, and minimize picking and packing errors.
  • Analytics and reporting – Identify trends, spot opportunities, and address issues proactively.
  • Sales channel integration – Sync inventory data across multiple channels for seamless supply chain and asset tracking.

What are the primary benefits of inventory software?

Woman using inventory software on office laptop

Inventory management software was originally developed to optimize inventory levels across multiple warehouses by determining the optimal volume for each product based on demand. So, the primary benefit is that it helps eliminate understocking issues and problems involving excess inventory and slow-moving stock. It also provides an at-a-glance inventory summary for anyone with order management system access.

But that’s only part of it. Effective inventory management results in several other benefits too:

Enhanced efficiency

So long, tedious tasks!

Automation allows you to bid farewell to time-consuming manual processes that are prone to human error. With streamlined operations and increased accuracy, you have more time for the things that truly matter – like growing your business, perfecting your sourdough recipe, finally tackling that overgrown tree in the back yard, or just sitting back and to relax for a while. After all, you’ve earned it!

Improved inventory visibility

See it all, control it all!

You need eyes everywhere when it comes to inventory management, and pinpoint inventory tracking provides a birds-eye view of stock across all locations, warehouses, and selling channels. No more inventory mysteries, just crystal-clear visibility.

Cost savings

Keep your cash flow healthy and your accountant beaming with joy.

Buying ‘just enough’ stock reduces carrying costs and boosts profitability. No more tying up cash in excess inventory or losing sales due to product unavailability. When you strike the perfect balance, you can prepare to watch your profits soar!

Enhanced decision-making

Channel your inner Sherlock Holmes and crack the code to business success!

Accurate and timely financial information is the lifeblood of any successful business, offering invaluable insight into the company’s overall health and performance. So, forget about fortune-telling ‘guestimates’. With historical data and trend analysis at your fingertips, you can make smart and confident order management decisions every time.

Improved customer satisfaction

Product availability + timely error-free deliveries = happy customers.

Product availability coupled with timely, error-free delivery is the secret recipe for customer happiness. All you’ll need to do is pop the kettle on, load up your review sites, and kick back while you watch those 5-star ratings roll in!

Increased productivity

Who doesn’t love to do more with less effort?

Manually processing purchase orders, invoices, and inventory counts? Pah! No thanks! With customizable automation options for all those boring admin duties, paperwork duty becomes minimal leaving staff with more time to spend on the warehouse floor or building supplier relations.

Business growth

Get ready to take on the world!

The best inventory management software scales alongside your business as it grows. Scalable inventory management solutions are designed to effortlessly handle increasing demand as your ecommerce enterprise flourishes by offering flexible configuration options that allow you to tailor the system to match your unique requirements.

Do you really need an inventory management system?

Warehouse worker checking stock levels

If you want to succeed, yes. And there’s no sugarcoating that, we’re afraid. Even for small businesses, investing in advanced inventory systems is critical.

Why? Because in the cutthroat world of modern ecommerce, ‘staying ahead of the game’ isn’t just a catchphrase – it’s an essential survival strategy. And without efficient inventory management software, you’re missing one of the most powerful weapons in your arsenal. For example:

  • Real-time inventory tracking provides accurate and precise data to help you stay nimble and avoid costly mistakes associated with stockouts and overstocking.
  • Efficient inventory systems lead to accurate order processing and timely deliveries, boosting customer satisfaction and loyalty.
  • Inventory management platforms free up a whole heap of time for you and your team to focus on more strategic tasks and business growth.

“We benefit from automated order fulfillment, automated invoicing, and automated inventory forecasting. These features combined make inventory management software an essential tool for efficient operations.” – José Moya, Outreach Manager at Capicua Full Stack Creative Hub.

Different inventory management software for different business sizes

When it comes to inventory management software, one size definitely doesn’t fit all.

Ecommerce businesses are a bit like snowflakes. Plentiful and similar in many ways. Yet, each one is unique and has a slightly different shape, size, and design to the next.

Thankfully, the world of inventory management software is versatile enough to cater to a diverse range of requirements. Let’s take a look at how your inventory tracking needs may vary based on the size of your business.

Small businesses

Small businesses typically have limited resources and simpler inventory needs. They require inventory management software that is user-friendly, cost-effective, and easy to set up and maintain. Key features will likely include:

  • Easy implementation
  • Centralized inventory tracking
  • Basic order management capabilities
  • Low stock alerts

Medium-sized enterprises

Medium-sized enterprises that have already grown beyond the infancy stage require more robust inventory management solutions. They need software that can handle larger volumes of data, integrate with other business systems, and create custom reports. Key inventory features typically include:

  • Scalability
  • Integration capabilities
  • Advanced reporting and analytics
  • Multi-location support
  • Accurate demand forecasting

Large corporations

The larger the business, the more complex supply chain management becomes – especially when operating across multiple warehouses. Big companies require inventory systems with sophisticated automation, capable of handling high transaction volumes across various sales channels and integrating seamlessly with ecommerce platforms and accounting systems. Therefore, essential inventory features include:

  • High-volume processing
  • Advanced warehouse management
  • Multi-platform sales integration
  • Customization options
  • Collaboration and access control

The inventory management solution features you really need

Manager greeting warehouse worker

It’s essential to focus on key features that align with your current operational needs and your long-term goals. Remember, you’ll need inventory software that can grow alongside your business, not just track inventory in the here and now.

So, before you fall into the fatal ‘buy cheap, buy twice’ trap, it’s worth taking some time to consider where you’re headed in terms of scalability and expansion. For example, you’re needs may be more complex than you think if you’re planning to:

  • Expand into new markets
  • Add new product lines
  • Enter into partnerships with suppliers

Whatever your current scenario and future plans, please beware of the trappings of free inventory management software. You see, while free inventory management systems may have some shiny features, we’re yet to come across one that’s robust and scalable enough to power any business to its full potential long-term.

Basic features and functionality

Don’t stress out just yet about whittling down a specific list of requirements. We’ll guide you through that in just a moment. Plus, many core features are universally valuable across businesses of all types and sizes. Here are a few examples.

However, a quick word to the wise before we dive in… Remember that while the following functions are common in any good inventory management system, the depth and complexity of each feature may vary based on the specific software. So doing ample research to make sure the system you choose has the right level of functionality is essential.

  • Real-time asset tracking
  • Warehouse management
  • Picking, packing, and shipping tools
  • Purchase order management
  • Qr or barcode scanning
  • Multiple sales channels
  • Mobile device accessibility
  • User permissions and access control

Costing Inventory

Accurate costing helps businesses to determine the true value of inventory items based on the cost of goods sold. This, in turn, makes it easier to forecast revenue by ensuring products are priced competitively while still being profitable.

Costing out inventory items is also essential for compliance with tax reporting and financial statement compliance. There are three IRS-approved costing methods:

FIFO (First In, First Out)

FIFO costing operates on the principle of fairness and chronology. It treats your inventory flows like a queue, assuming that the first items added to your inventory counts are the first ones sold. FIFO is especially useful for perishable goods or products with expiration dates, as it minimizes the risk of holding onto obsolete inventory.

LIFO (Last In, First Out

LIFO costing is an alternative inventory costing method that flips the script from FIFO. Picture your inventory as a stack, where the newest items in your inventory counts are placed on top. Instead of selling older inventory first, LIFO assumes that the most recently acquired items are the first ones to be sold.

Average weighted cost

Particularly beneficial for businesses dealing with large quantities of identical items or items with constant price fluctuations, the average weighted cost doesn’t distinguish between individual units. Instead, it simplifies the inventory costing process by providing a single average cost per unit and assigning it to every item.

Streamlined finance tracking

Business woman studying finances

It can be exhilarating to be a decision-maker at work and call some of the shots that steer the ship. But not all adrenaline rushes are the giddy kind. The stakes are high when making critical decisions.

Every decision business owners and managers make – no matter how big or small – can impact the company’s potential for growth, profitability, and long-term sustainability. To make sound choices, it’s therefore essential to have access to accurate and up-to-date financial information.

By combining inventory and financial data, businesses can make more informed financial decisions, reduce manual errors, and improve overall economic efficiency by automatically generating:

  • Cost updates
  • Purchase orders
  • Expense allocation
  • Real-time financial insights
  • Compliant inventory records

3 essential inventory features for ecommerce

The inventory systems needed to succeed in ecommerce differ from those used by brick-and-mortar stores. In the fast-paced realm of ecommerce, traditional inventory management systems just don’t cut the mustard.

You need real-time inventory visibility across every warehouse, sales platform, and accounting system so that website inventory levels can update correctly – and instantly – after each purchase.

With that in mind, these are our top feature picks for powerful inventory control in ecommerce.

Barcode scanners

It’s time to wave goodbye to the days of monotonous manual data entry and say hello to lightning-fast inventory tracking using mobile apps. Here’s why barcode scanning is essential for your ecommerce business:

  • Swift inventory processing – By utilizing barcode scanners on mobile devices, teams can scan products, track inventory levels, and update stock records in a fraction of the time it would take with old-school manual data entry.
  • Error reduction – Human errors are the arch-nemesis of inventory management. Barcode scanning dramatically minimizes mistakes caused by sloppy manual recording, ensuring increased accuracy across the board.
  • Effortless order fulfillment – Picking and packing becomes a silky smooth process because you’ll know you have the correct item 100% of the time.

“Implementing barcode scanning technology and automated inventory tracking tools can greatly improve inventory accuracy. By reducing manual input, we have minimized the risk of errors and increased efficiency.” – Ryan Mckenzie, Co-Founder & CMO at Tru Earth.

Software integrations

Your inventory management software needs to be the ultimate team player, acting as a conductor to an efficient and productive orchestra where each instrument plays in perfect harmony. Here are just a few reasons why successful integration will be music to your ears:

  • Centralized control – Connecting your inventory management software, shipping platforms, accounting system, and individual sales channels into one unified hub eliminates the need to jump between different mobile apps.
  • Real-time updates – When data flows effortlessly between systems providing real-time updates on inventory levels, purchase order status, and financial records, you can respond swiftly to changes in demand. No more waiting in the wings – you’ll have the latest information right at your fingertips!
  • Linnworks integrations – Surely you didn’t think you’d make it all the way through this guide without a teensy bit of self-promotion? The ability to connect seamlessly with popular online marketplaces (like Amazon, eBay, and Etsy) and ecommerce platforms (like Shopify, WooCommerce, and Magento) make us the best inventory management software for ecommerce operators (in our own humble opinion).

“If you want to leverage AI and automation for the future of your business, then integration capabilities are paramount. Without integrations, we create “data silos,” which are databases that aren’t connected to your larger operation. The more silos you have, the less you can do with your data.” – Mark Varnas, Principal SQL Server DBA/ Consultant at Red9

Multichannel Sales

Sales team strategy meeting

Expanding your reach by selling on multiple sales channels is like giving your business a turbo boost! Here’s why diving into multichannel selling is essential if your ecommerce business is to take flight:

  • Diverse market reach – Casting as wide a net as possible reels in a diverse bunch of potential customers. The more eyes there are on your brand, the more market visibility and growth you’re likely to achieve.
  • Risk mitigation – Relying on a single sales channel is like putting all your eggs in one basket, whereas multichannel selling spreads the risk. If one channel experiences a dip in sales, the others pick up the slack.
  • Leveraging platform strengths – Each channel has its unique strengths. For example, marketplaces like Amazon offer a vast customer base, while your own website allows for more personalized branding and customer experiences.

“I can bulk list new products to various selling channels, ensuring that popular product ranges are available on eBay, Amazon, Shopify, Fruugo, and Wish in a timely manner. As orders come through, stock levels automatically update which means we don’t have to hold stock back or manually make updates to avoid overstocking. This eliminates any errors and delays, and provides an accurate picture of how stock is performing across all our channels.” – Mark Crowhurst, founder at Mcslots.

Some Common Inventory Terms

We know part of what makes inventory control so intimidating is all the tech speak and jargon that comes with it. Not to mention all those confusing acronyms (ugh, sooo many acronyms!). They can be the bane of many inventory management issues, we know. But don’t fret it – you’re not alone!

At Linnworks, we understand that you’re an inventory manager, not a software or technical guru. And the thought of wrapping your head around all the scary terminology and ‘new stuff’ is often enough to push upgraded inventory systems back down to the bottom of your to-do list. So, we’ve made a sneaky cheat sheet to help you get down with the lingo:

  • SKU (Stock Keeping Unit) – A unique barcode used to identify and track each product.
  • BOM (Bill of Materials) – A comprehensive list of all components and raw materials required to produce a finished product.
  • EOQ (Economic Order Quantity) – The optimal order quantity to minimize ordering and holding costs.
  • DSI (Days Sales of Inventory) – The average number of days it takes to sell the entire inventory.  
  • ERP (Enterprise Resource Planning) – Cloud-based inventory systems that combine core business processes like finance, HR, manufacturing, supply chain, services, procurement, etc.
  • MRP (Materials Requirement Planning) – A planning system to help product-based manufacturers balance inventory across the entire supply chain.

What to consider when looking at inventory software

Choosing the right inventory management software can be a game-changer for both small businesses and well-established industry players. But in either case, selecting an advanced inventory system doesn’t come without risk.

When you get it right, it’s like finding that elusive missing piece to your inventory control jigsaw puzzle. Conversely, when you get it wrong, it’s like being left with an Allen key when what you needed all along was a screwdriver.

So, before you get too trigger-happy on any of those shiny ‘pay now’ buttons, take the time to give your decision some extra consideration. Here are some key factors to ponder before making your final selection.

Cost & Pricing

Let’s be real. We all love a good deal, and learning to budget like a pro is the superhero skill of money management.

As we mentioned earlier, free inventory management software is unlikely to measure up in the long term. So, here are some top tips on what to consider when evaluating paid inventory management systems:

  • Affordability – Ensure the software aligns with your budget and offers true value – and be sure to watch out for hidden costs like add-ons and excessive user fees.
  • Scalability – As your business takes off, will the software grow with you like a trusty sidekick, or will you outgrow it like a pair of kid’s shoes?
  • Free trials and demos – The software equivalent of a free taste test at the candy store, taking advantage of free trials and demos will help you get a feel for what the software can do before committing.

Software Vendors

It’s time to don your dear stalker, trench coat, and trusty monocle and start playing detective! 

It’s essential to ask potential software vendors the right questions so you can uncover the true potential of each system and choose the best inventory management software for your business. Some examples to ensure effective vendor management include:

  • Onboarding – What setup and onboarding services are available? How will your employees be trained on the new inventory systems? And how long will it take?
  • Ongoing support – You want a vendor that will have your back when you’re in a tight spot, not one that will take your money and then vanish like a magician’s rabbit when you need their help.
  • System integration – Is the software compatible with your current tools and sales channels, or will it create more chaos than calm?
  • User-friendly interface – Can you easily navigate the system without feeling stuck in a maze of confusing options?
  • Data protection – Does the vendor have top-notch security measures to safeguard your valuable data from cyber villains?
  • Reporting tools – What types of reports, analytics, and insights can they provide?
  • Automation – Are all the options you need for low stock alerts, purchase orders, etc., covered?

Your business needs

Salon owner doing inventory

Asking some tough internal questions is just as important as grilling potential vendors. 

Sure, vendor sales teams can help fill in blanks (and no doubt slink in some upsells about how their ecommerce inventory processes fit the bill at the same time!). But remember, the ball is in your court. Only you can say for sure what your needs and requirements are for improved inventory control.

Still trying to figure out where to start? Here are some example questions for discussion at your next inventory forecasting meeting.

  • What are your inventory management goals? Is your investment in managing inventory about increasing efficiency, reducing costs, or handling rapid growth?
  • What inventory management challenges do you currently face? Identifying your primary pain points will help you find the right software solution to save the day.
  • What integration features do you need for the new inventory software to align smoothly with your current sales platforms, accounting software, etc?
  • Where do you see your business going in the next few years, and what features do you consider make-or-break factors in ensuring that happens?

The business case for new inventory management software

Finding ways to constantly improve inventory management is essential. But, how do you know when it’s the right time to make the move? After all, upgrading your inventory management software is a big decision.

Have you been tasked with building a business case for investing in new inventory management software but need clarification about where to begin? We’ve got you! Here are the steps to work through.

1. Identify pain points

Start by teasing out the pain points and inefficiencies in your current inventory management processes. Look for telltale signs like:

  • Frequent stockouts
  • Overstocking
  • Manual errors
  • Lack of real-time visibility
  • Inefficient order fulfillment
  • Difficulty in forecasting

2. Quantify the cost and risks

Estimate the financial impact of these pain points on your business, taking into account:

  • Lost sales opportunities
  • Excess inventory costs
  • Additional labor costs
  • Time delays
  • Missed opportunity costs

3. Assess your current inventory software limitations

Evaluate the shortcomings of your existing software and how they affect your business’s ability to scale and adapt. Look for red flags like:

  • Limited functionality
  • Inadequate integration
  • Inflexible customization
  • Outdated technology

4. Outline the potential benefits

There’s no room for uncertainty. The benefits must be crystal clear and compelling. To get the sign-off from the big bosses, you’ll need to be able to thoroughly explain all of these benefits and more:

  • Improved efficiency
  • Better inventory control
  • Enhanced customer satisfaction
  • Data-driven decisions
  • Seamless Scalability
  • Supply chain optimization
  • Enhanced shipping management
  • Integration capabilities

5. ROI analysis

To justify the investment, you’ll need to demonstrate the financial impact of the new inventory management software. That means calculating:

  • Initial investment costs (including licensing and implementation).
  • Savings and revenue gains
  • The payback period

6. Project implementation plan

A well-structured implementation plan that aligns with business goals will include detailed breakdowns of the following:

  • Timeline
  • Resource allocation
  • Risk mitigation

How do you implement an inventory management system?

Warehouse worker checking stock

Implementing an inventory management system may feel like a daunting task, but with the right approach and vendor support, there’s no reason it can’t all go off without a hitch.

The secret to success is collaborating effectively with your chosen vendor. Remember, you chose them for a reason, and they’re the experts in this game. They know the features and capabilities of their software like the back of their hand and are best placed to customize a solution that meets your precise requirements.

Here is the list of steps you’ll need to work through together.  

1. Gather and cleanse your data

Organizing your existing inventory data and ensuring it’s both accurate and up-to-date is crucial to preventing issues during the system integration process.

2. Plan your integration party

Working alongside your vendor to connect your new inventory control system with existing software like accounting systems and sales platforms is essential.

3. Train your teams

A well-trained team is the secret to smooth sailing. So make sure anyone who’ll be using your new inventory management solution is well prepared.

4. Take a test drive

Before going full throttle and implementing company-wide, run a pilot test on a smaller scale to make sure everything runs like clockwork.

5. Implement in phases

Don’t rush it! Implement the system in phases for better control and minimal chaos so you can fine-tune as you go. Baby steps all the way!

6. Monitor and evaluate

Once it’s all up and running, keep a close eye on the system’s performance. Gather feedback from your team and continually asses to see how well it’s helping you kick those goals.

7. Lean on your vendor

Don’t hesitate to call your vendor if you need a little backup. Software vendors worth their salt will have your back with guidance, support, and the occasional system update.

Discover effortless inventory management with Linnworks

Ready to put your inventory management fears to rest and invest in a system that will unlock your company’s true potential?

With Linnworks as your trusty inventory sidekick, you’ll navigate the process with ease, leaving manual tasks, data entry errors, and physical counting headaches mere specs on the horizon behind you. With the industry’s top inventory management software doing all the heavy lifting for you, your team will be supercharged, and you’ll have so much more time to focus on driving your business forward.

Still hesitant? Don’t be. The sooner you embark on your advanced inventory journey, the faster you reap the rewards. More streamlined operations, happier customers, and a bigger bank balance – it’s all within reach!

Don’t wait any longer before taking that giant stride toward optimum efficiency. Take our 3-minute interactive product tour today and contact our helpful team to get started on your journey to better inventory control and management. We promise you won’t regret it!

Linzi Trafford


Linzi Trafford is a SaaS-loving, self-professed grammar nerd. She’s written for industry leaders like Crunchbase and Spotify, tech-for-good firms like UpMetrics and Recite Me, and a whole heap in between. When not hammering away at her keyboard, you’ll find her hiking with her rescue dog, singing with her band, or getting stuck into a good old-fashioned whodunnit novel.