Inventory Management Software Development: 6 Steps to First-Rate Planning and Forecasting

From paper spreadsheets to Excel to complex inventory management systems — the field of goods stock tracking, reordering, and forecasting has changed drastically over the years. As e-commerce continues to grow with thousands and hundreds of goods on the market, efficient and easy-to-use inventory tracking software becomes a necessity that is hard to deny. Today, we'll explore how to create an inventory system, define its benefits for business, and look at some wonderful examples of such software.

Key Takeaways

• Inventory management software helps businesses gain real-time data on stock levels, use automated replenishment, optimize their supply chain, improve inventory planning, demand forecasting, and more.
• The development steps for inventory management software include requirements analysis, planning and design, development and testing, data migration and deployment, and finally, maintenance, training, and support.
• AI-driven inventory systems can learn and adapt to reflect changing business conditions. AI allows to analyze databases and detect patterns within them quickly. It empowers predictive analysis and facilitates goods reordering and keeping optimal stock levels. 
• The global inventory management software market is projected to reach $2.31 billion in 2024. AI and ML implementation remain the top trends in inventory tracking software development.
• If you are looking for a custom software development services provider, consider NEKLO as your reliable partner. We develop custom inventory management systems that exactly meet your needs.

What Is Inventory Management Software?

The inventory management system is software designed to track goods supply and maintain optimal stock levels. It is particularly useful for e-commerce but can also be used in various domains like manufacturing and logistics. And for a good reason: inventory management systems have been created to tackle a large number of goods and surrounding activities.

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It is worth mentioning that inventory management is not the same as inventory control, and you can guess why. Inventory management means working with existing goods and reordering, planning, returns, and forecasting demand. Inventory control works with goods already in the warehouse or storage facility. As a rule, inventory management systems also deal with inventory control, but it is worth checking beforehand.

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Inventory tracking software types include:

• Perpetual system: gives you real-time stock updates, allowing you to make data-driven decisions immediately. Such systems are advanced and usually include AI integration, but they are also costly.
• Periodic system: shows occasional stock counts and has periodic updates. It is cheaper and simpler, but it also has limited capabilities.

The other classification defines inventory management system methods as:

• Just-in-Time: aims to increase efficiency and cut wastage. This method requires suppliers to deliver products only when there is demand, cutting inventory holding costs and boosting turnover. 
• Economic Order Quantity: a method that calculates the optimal inventory quantity precisely, considering the costs of inventory ordering, holding, and overall demand.
• Materials Requirement Planning: this implies using software for inventory-level planning and management. The key analytics data include current inventory levels, demand, and production capacity.
• Days Sales of Inventory: measures the average number of days it takes for a company to sell its entire inventory during a specific period. It helps understand how efficiently businesses manage their inventory and can indicate the liquidity of their inventory. 

The type you choose depends on your budget, business size, and the features you need.

Benefits of Inventory Management Software

Even basic inventory management software can benefit e-commerce business owners. It boosts revenue growth through stock optimization, enables comprehensive goods management, provides real-time updates on supply levels, and offers extensive reporting. Effective inventory management system can reduce inventory costs by 10%.

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The additional benefits include:

• Reduced wastage: reduce the number of expired items or items that you return to the vendor/manufacturer. The research shows that 8% of stock perishes or is discarded, leading to the loss of 3.6% of annual profits.
• Stock syncing: keep all data in one place from different warehouses and selling channels.
• Fast and transparent order fulfillment: track suppliers' performance and delivery dates, mitigate supply chain risk, and monitor suppliers’ documents.‍
• Automated reordering: replenish your stock in time by setting automated reorders,  preventing stock-outs and overstockings.‍
• Automation of time-consuming inventory counts: cut your staff time designated to inventory counts and redirect it to the more demanding tasks. ‍
• Error reduction: reduce human errors with the help of automated data collection and analysis. Human error was determined to be the leading issue for 46% of warehouses.‍
• Prevent late reordering and inaccurate demand planning: track real-time updates and receive notifications about low inventory levels. ‍
• Central data hub: rebuild unorganized storage space, connect the data from all warehouses and selling channels, and thus prevent estimation mistakes and uninformed decisions.

Inventory Management Systems Features

A good inventory management system should have extensive integration capability, a user-friendly interface, robust reporting and data visualization tools, and flawless data collection and analysis processes. Consider the desired features for your future custom software before looking for software development services for inventory management systems. Let's look at the main ones.

• Barcode and QR code scanning is helpful for fast and accurate inventory updates. You can simplify stock-taking, product identification, order processing and improve data precision. Recording the exact location of each item facilitates easy retrieval and accurate inventory counts.
• Inventory planning and demand forecasting tools allow you to analyze market trends, visualize your stock levels/demand/sales velocity, and receive recommendations on optimal stock amounts.
• Automated reordering generates purchase orders or restocking requests when inventory levels reach predefined thresholds. This ensures that stock levels are maintained optimally, preventing stockouts and overstock situations.
• Customer and supplier management helps you track your suppliers, purchase orders, and supplier performance. The feature allows you to gain valuable insights about users' behavior and preferences and introduce customer segmentation based on certain criteria.
• Reporting and analytics enable the creation of activity, audit, and transaction history reports, receiving low stock alerts, evaluating customer purchase history, and more. Additionally, advanced analytics help you track costs associated with different suppliers and identify cost-saving opportunities.
• Product assembly includes kitting/bundling and allows you to combine different inventory items into one product. It works like this: you decide what items would be in the kit (the main item and its supplementary products) and put them under one SKU that can be organized in a warehouse. Product assembly facilitates item tracking, increases sales, and allows you to get rid of excess stock.
• Inventory database management is used for automated and manual data entry, setting up user roles and access control, managing security settings, and backing up and recovering inventory data.
• Inventory alerts are real-time automated signals for inventory-related events. They can be set up to indicate low stock levels and discrepancies, close expiration dates, shipment status, reorder points, and other important business aspects.
• Product catalog management enables seamless navigation among the inventory data, product filtering, inventory item import and editing, setting prices, product descriptions, categorizations, and tagging.
• Supplier management facilitates vendor performance tracking, supplier information management, and communication between suppliers and businesses. It centralizes supplier-related information such as certifications and accreditations.
• Inventory optimization allows you to track lead time estimation, improve inventory allocation, introduce faster goods movement through warehouse layout optimization, and maintain safety stock amounts. 

AI in Inventory Management Software Development

AI adoption is rapidly accelerating within supply chain and manufacturing sectors, with widespread implementation anticipated among these companies by 2025. In fact, over one-third of executives surveyed in 2022 projected substantial AI integration across their organizations.

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AI's benefits include cost reduction, enhanced customer satisfaction, more precise data analysis, increased scalability, adaptability, and reduced errors. That is why we highly recommend implementing AI capabilities during inventory management software development. What else can AI offer?

Increased forecasting accuracy

Maintaining optimal stock levels has always been a daunting task. It is the delicate balance between running out of stock, having overstock with demand, and just taking storage space (and sometimes expiring goods!). AI is a strong pillar supporting this balance, thus cutting costs through rational and data-based decisions. It can predict demand and automatically reorder goods in reasonable quantities and at suitable times.

Better inventory allocation

With all the data about the product, such as its size, weight, expiration date, and demand, AI helps to find the best place for its storage, physically organizing the warehouse. If there are multiple warehouses where your products are stored, AI capabilities also manage reorders and allocate goods to required storage places. AI implementation to supply chain management improves logistics costs by 15%, and inventory levels by 35%.

Data-driven inventory segmentation

AI can find new correlations between the products based on their demand, profitability, value, return rates, etc. It helps businesses prioritize the management of certain products, as different categories require different management strategies — you cannot handle perishable goods the way you handle clothes, electronics or furniture. Additionally, they all have different storage conditions to ensure the product is safe and won't spoil in the warehouse.

Enhanced risk management

AI-powered analytics and reporting allow making more informed decisions, reducing the risks of running out of stock when the product is in high demand, tracking expiration dates, and ensuring safe product storage. Additionally, AI can track documents and enhance regulatory compliance, avoiding fees and finding disruptions in the supply chain. In 2022, 26% of companies used AI automation capabilities for real-time inventory management.

Do You Need Custom Inventory Management Software Development?

For many businesses, building a custom inventory management solution is unnecessary due to limited stock, small business size, and limited budget. Out-of-the-box solutions often cover basic company needs and have affordable plans. But in what cases these solutions are not the answer?

• First, if your business has multichannel sales, goes international, and deals with thousands of goods, the custom comprehensive inventory tracking system can better handle data loads and analytics and support many integrations.
• Second, you have unique processes and the need for custom features that are unavailable in standard solutions.
• Third, you want custom UI/UX to match team workflows and improve efficiency, but ready-made solutions lack customization opportunities.
• Fourth, you require advanced analytics, custom reporting, top-notch demand forecasting tools, and enhanced security.
• Finally, you expect long-term savings by avoiding unnecessary features and paying only for what is needed. With a custom solution, you don't need to make regular payments for the license/subscription.

As an inventory management software development company, NEKLO builds quality applications within the time and budget set. Discuss your project with us!

How to Create an Inventory Management System?

Suppose you select an inventory management application tailored to your business needs. Let's explore the stages involved in creating custom software. Note: You can hire a dedicated development team to bring your vision to life.

Step 1: Pre-development. Requirements analysis and planning

Inventory management software development starts with auditing current clients' inventory workflows, analyzing business requirements, refining and writing them down, and creating a development plan. Then, together with the client we define project requirements and scope:

• Functional and non-functional requirements
• Integrations
• User roles
• The scale of inventory operations
•  Additional custom modules
• Architecture significant requirements
• Developing success criteria

Step 2: Planning and design

At this step of inventory management software development, we design software architecture, make preliminary time-cost estimations, and define the tech stack and implementation approach. We create high-level architecture design, do UX/UI prototyping, consider associated risks and the ways to mitigate them.

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The tech stack for inventory management software usually includes:

• Hosting: DigitalOcean, GoDaddy, AWS, Cloudflare, on-premises
• Frontend: HTML 5, Angular, CSS, Vue.js, React
• Backend: NodeJs, Laravel, Django, Java, Microsoft.net, Symfony, C++
• Database: MySQL, MongoDB, Firebase, Microsoft SQL, PostgreSQL

Step 3: Development

At this stage, our team sets up the development environment, builds the core modules such as product management, inventory tracking, order management, supplier management, etc., and implements user authentication and authorization.

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The average team composition includes 1 Project Manager, 1 DevOps Engineer, 1 Senior Backend Developer, 1 Frontend Developer, 1 UI/IX Designer, 1 QA, and can vary through the development process.

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The development step includes the following activities:

• Backend development for data processing and consolidation from inventory tracking devices and users.
• Frontend development for creating an appealing user interface.
• Development of mobile applications (if required).
• Custom features development, like forecasting, sales, and reporting modules.
• Integrations with external systems.

The key integrations for inventory management systems include:

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1. Business management software: Customer relationship management system, warehouse management system, enterprise resource planning platform.
2. Physical devices: radio frequency identification (RFID), QR code scanners, barcode scanners, and card readers.
3. Third-party software: logistics software integrations, accounting systems, POS, payment providers, carriers, marketplaces, 3rd party logistics.

Step: 4 Testing

Testing is crucial to ensure software functionality, reliability, and performance meet the business requirements. It includes manual and automated testing, functional and non-functional testing, and acceptance testing. After addressing all critical issues, we obtain formal sign-off from stakeholders, indicating that the system meets the required standards and is ready for deployment.

Step 5: Data migration and deployment

Data migration includes developing migration scenarios, scripts for migration and data mappings, and data refining. Then, our development team extracts data from the previous systems, including legacy software or spreadsheets, and loads it into a new database.

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At this step, NEKLO also conducts testing to ensure seamless data migration and checks the new database's security and data integrity.

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The deployment procedure includes configuring the system's infrastructure, implementing security mechanisms, and implementing backup, disaster, and recovery procedures. Then, the pilot version is launched, and our team monitors the inventory system's functioning in real life. That is where some adjustments in features and functionality can be made before the final deployment.

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After the inventory management software development process is completed, we ensure everything is working properly, the product is ready for full-scale use.

Step 6 Maintenance and support

At the final stage our development team issues patches and updates, launches user training, conducts technical maintenance, and implements new features as the business grows. We can also develop training materials, guides, FAQs, and videos and conduct workshops for different user roles. Maintenance includes fixing bugs and adapting hardware or software environments. The goal is to ensure that the system works correctly and securely.

How Much Does Inventory Management Software Development Cost?

The costs may vary depending on the project's complexity and developed features. An inventory management system of medium complexity may cost from $90,000 to $250,000 or more. The introduction of AI, ML, and BI tools can significantly increase the cost of development, but it reduces operational costs for your biz in the long run.

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The final price depends on the needed functionality, technology stack, interface design, deadlines, the number of integrations, and the need for custom features, data migration, post-release support, and staff training. Please note that costs can vary considerably depending on the development team's location.

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The development time directly depends on the same criteria and can last from several months to over a year. The team of professional developers has a high chance of delivering the solution on time and within the budget.

Examples of Inventory Management Software

Knowledge is power, but it’s time to look at some great real world inventory management software examples. We gathered information about well-known solutions so that you can better understand their functionality.

QuickBooks

QuickBooks is a robust cloud-based inventory and order management system designed to help businesses streamline their operations. It integrates seamlessly with QuickBooks Online, providing a comprehensive solution for managing inventory, orders, and customer relationships.

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Key features: real-time inventory tracking, batch and expiration date tracking, multichannel sales management, comprehensive reports on inventory levels, sales performance, and financial data.

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In the reviews users praise QuickBooks for seamless integration with accounting software and smooth integrations with more than 750 systems.

Oracle NetSuite

Oracle NetSuite is a comprehensive cloud-based Enterprise Resource Planning (ERP) system with robust inventory management capabilities. Designed for businesses of all sizes, NetSuite's inventory management system helps companies streamline their supply chain, improve order fulfillment, and optimize stock levels.

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Key features: real-time visibility into inventory levels across multiple locations and warehouses, automated order processing, support for barcode scanning and RFID technology, and demand planning and forecasting tools.

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Users highlight the software’s versatility, customization, and great integration with the accounting tools. NetSuite is used by more than 38,000 customers in 219 countries.

Ordoro

Ordoro is a comprehensive inventory management and order fulfillment platform for small to medium-sized e-commerce businesses. It provides tools to streamline inventory tracking, order management, and shipping processes, making it easier for companies to manage their operations efficiently.

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Key features: automatic stock level updates, low stock alerts, bulk order processing, integration with major shipping carriers, return management, and detailed reports on inventory levels, order statuses, and shipping performance.

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Ordoro users point out ease of use, scalability, and great technical support.

IMS Trends and Statistics

• The world inventory management software market was valued at $2.13 billion in 2023. It is projected to be worth $2.31 billion in 2024 and is expected to reach $4.84 billion by 2032.
• The key players in the Inventory Management Software Market are SAP, Oracle, Microsoft, Infor, Acumatica, and Zoho Inventory.
• In 2023, the manufacturing segment held the largest share by end-use for inventory management software, followed by e-commerce, retail, healthcare, transportation, and logistics.
• Top inventory management software trends are cloud-based hosting, AI and ML implementation, IoT sensors use, predictive analytics features implementation, omnichannel inventory management, and more.

The inventory management system market is expected to exhibit a CAGR of 6.4% through 2032. Key growth drivers include the growing adoption of e-commerce, an increasing focus on supply chain optimization, and a rising demand for real-time visibility and analytics.

FAQ

Now, when you’ve discovered loads of useful information about inventory management software and its effective development, some curious questions might be left uncovered. Here are some common queries about inventory tracking systems.

Is Excel an inventory management software?

Microsoft Excel can be used as inventory management software for startups and small businesses with limited goods and does not need extensive automation. It is a simple inventory system that is cost-effective, customizable, versatile and relies on manual data input. Yet, while Excel is better than paper spreadsheets, it has limited scalability, is error-prone, and does not suit medium-sized businesses.

What domains of inventory management software can be implemented?

Inventory tracking software development can be useful for several industries, including manufacturing, healthcare, warehousing and logistics, e-commerce, construction, education, agriculture, etc. Each sector requires customized tools according to particular business needs and specializations.

Conclusion

Inventory management software can significantly improve stock management, boost revenue growth, and improve inventory control, forecasting, and replenishment. The robust inventory tracking system market offers various solutions for every business need and size.

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If cookie-cutter solutions do not suit your vision on inventory management software, consider custom inventory tracking software development. Select a reliable partner who will smoothly guide you through all the eСommerce software development steps and deliver the exact solution you need. Take a look at our services, processes, principles and portfolio. We are ready to help and discuss all the details at a free consultation.