Automated Inventory Management and Procurement Management

Running short on inventory is stressful, especially in the uncertain supply chain landscape of 2024. Managing levels of critical goods doesn’t just keep companies running smoothly — it can also improve cash management and boost customer satisfaction.

Many businesses believe that traditional inventory management is the best way to accomplish this, but it isn't the only option. Managing inventory levels through procurement automation can accomplish the same goals without the burden of hard counts or the expense of tracking systems.

Automating procurement makes scaling to new locations and markets easier. It also helps streamline ordering workflows and procurement logistics. By eliminating the inefficiencies of manual systems, businesses decrease the burden on procurement teams, optimize capital management, and improve the bottom line.

Let’s explore the challenges of inventory management as well as the factors that make investing in the right type of procurement management so worth it.

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What is an automated inventory management system?

An automated inventory management system is a technology-based solution that uses inventory management software and hardware to monitor and control a company's product and supply inventory levels. It keeps track of real-time changes, reflecting shifts caused by orders, sales, returns, and damages.

By integrating inventory data across a business's operations, this type of management system ensures accuracy in stock records and reduces human error. It minimizes manual, repetitive tasks such as data entry, reordering, and inventory checking, allowing teams to focus on other data management and procurement strategy tasks. Managing inventory through a centralized system increases a company’s operational efficiency.

An automated software system opens the door to real-time data analysis so businesses can forecast demand more accurately and make better replenishment and product management decisions. This helps boost customer satisfaction, ensuring high-quality products are available when needed. By using automation, businesses can forge a path to scalability as they add locations or expand into new markets.

How automated inventory management is changing the way businesses operate

Automated inventory management touches every step of the procurement process, improving outdated and time-consuming manual workflows for resource and inventory control. By integrating technology into core business processes, companies can achieve unprecedented levels of efficiency and accuracy.

Here are some key components of business management where inventory automation plays a pivotal role:

Supply chain efficiency: Automation streamlines the entire supply chain, from procurement to distribution, minimizing delays and reducing manual errors. It ensures a smooth flow of goods through real-time tracking and automated reorders.

Cost management: Businesses can significantly lower operational costs by reducing the risk of overstocking or stockouts and maintaining optimal inventory levels. Automated systems also analyze historical data and trends to identify procurement savings opportunities.

Demand forecasting accuracy: Advanced algorithms in automated systems can analyze past sales data to accurately predict future demand. This enables companies to proactively adjust stock levels to avoid excess inventory or shortages.

Order fulfillment: From picking and packing to shipping, automation also accelerates the order management process. It speeds up deliveries and capitalizes upon reliable service to enhance customer satisfaction.

Data analytics: With comprehensive data at their fingertips, businesses can use automated systems to make informed decisions about product lines, marketing strategies, and expansion plans. Automated inventory programs offer valuable insights into sales patterns, customer preferences, and market trends.

Compliance and reporting: An automated system that can generate necessary reports and ensure compliance with industry standards makes keeping up with regulatory requirements simpler.

Automated inventory management solutions help businesses plan, execute, and control procurement across different departments, teams, and locations. Leveraging technology for optimization in these key areas helps companies stay ahead of changing demand and market trends.

The consequences of poor inventory management

Software has made it easier than ever to keep stock levels stable — but it only works if companies are willing to integrate technology into the inventory management process. While many companies start out using manual inventory management tools like spreadsheets or hard counts, persisting with manual tracking methods as your business expands can lead to adverse outcomes.

When levels are not accurately monitored and adjusted to reflect real-time inventory, businesses face increased risks of overstocking or stock shortages, leading to lost sales, dissatisfied customers, and a tarnished brand reputation. In today's fast-paced market, where consumer expectations are higher than ever, adapting to more sophisticated control systems will benefit a company's operational efficiency and profitability.

Increased stocking costs: Overstocking, inventory churn, redundant buying across locations, and emergency orders with associated rush fees and increased per-unit costs can result in resource management challenges and decreased cash flow.

Lost sales opportunities: Stockouts and shipping delays negatively impact an organization's ability to serve its customers. These issues can affect customer satisfaction and loyalty if not addressed.

Excessive obsolete inventory: When businesses overstock inventory, they are more likely to get burned by changing consumer trends, which leads to unnecessary markdowns and reduced profit margins.

Inefficient warehousing: Excessive warehouse management costs eat into budgets by increasing maintenance spend for temperature control, electricity, labor, and insurance. Keeping too much inventory also makes it more difficult to manage stock levels accurately.

Inventory loss: Damage and fraud are two significant sources of possible inventory issues. While most businesses budget for some amount of loss due to damages, manual tracking systems are more prone to errors and less secure than automated, centralized options. Centralization gives you visibility into every order to help prevent fraudulent activities from internal or third-party actors.

Slow market response: Manual inventory management doesn’t provide the data necessary to make agile choices in a quickly changing market. Automating the inventory process creates a competitive advantage that helps companies keep up with consumer trends.

Higher labor costs: Conducting manual stock counts and error corrections takes more time and effort than using an automated system. Manual processes demand additional people to manage stock levels, research discrepancies, create and process orders, deal with invoices, and issue manual payments.

Does your business really need automated inventory management?

While many businesses assume they need hard counts and inventory tracking to manage their supply levels, a strong procurement process can actually eliminate the need for counts. Centralized purchasing lets locations order based on individual needs while still capturing useful data within the procurement platform. It allows finance teams to keep budgetary control without granular processes.

7 Key features of procurement management that enable inventory management

Finding the right solution for inventory management makes implementation, onboarding, and ongoing use faster and easier. A well-aligned solution with the following key features ensures all stakeholders can get started quickly and that the software will be dynamic enough to meet different business models and needs.

Look for a platform with the following functionality to ensure the best experience:

Real-time tracking: Real-time reports enable businesses to monitor stock levels, orders, sales, and deliveries as they happen, ensuring data accuracy and timely decision-making. For businesses that don’t need hard inventory counts, centralized procurement systems can help manage order tracking, identify supply trends, and consolidate orders across locations for increased volume discounts.
Cloud-based accessibility: Managing inventory and supplies in the cloud means all stakeholders can access inventory and tracking data anywhere at any time. This enables improved vendor management and procurement visibility across multiple locations.
Integrations: Seamless integration with other business systems, such as accounting software and eCommerce platforms, enables streamlined operations and data consistency across the entire company.
Automatic reordering: In inventory-driven businesses, some systems can trigger automatic orders based on predefined minimum stock levels, ensuring you never run out of popular products. For companies buying supplies rather than inventory, quick reorders from previous vendors make it easy to replenish anything you need.
Reporting and data analytics: All top-tier systems offer comprehensive reporting tools for analyzing inventory and supply trends, product turnover, and other procurement key performance indicators (KPIs) to help stakeholders make informed decisions.
Multi-location support: This feature manages inventory items across several stores or locations within the same company, providing a unified view of an organization's stock levels.
Security features: Security-minded platform features like limited access and user-based spending permissions are vital to protect sensitive data from unauthorized access and ensure every purchase order and delivery meets procurement policies.

Selecting an automated inventory management system with these features can significantly enhance operational efficiency, reduce carrying costs, and improve customer satisfaction by ensuring products are always in stock when needed.

Use Order.co to make supplies management seamless

If your business needs to centralize procurement and manage supply ordering across locations, a traditional inventory management platform may not be the best solution. Most businesses don’t need granular counts and item-specific tracking — they just need to know supplies will be there when they need them.

A procurement management system like Order.co provides procurement centralization, catalog-based ordering, order approval, and delivery tracking without the headache of manually managing inventory counts. Rather than worrying about how many of each item the business has in inventory, every location can manage its supply levels independently, order what it needs, and keep business operations smooth.

If you’re ready to centralize and automate the procurement process to make supplies management easier, schedule a demo of Order.co.

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