Inventory is the lifeblood of many businesses, whether retail, manufacturing, food service or other. It’s raw materials and finished goods that keep the business running.

Without proper inventory management, you risk stock surpluses or stockouts, which can kill profit and growth. Managing inventory means balancing supply and demand and minimising the risk of holding large stock levels. In this article, we’ll look at the key aspects of inventory management and how NetSuite’s cloud ERP software helps businesses overcome inventory challenges.

This article will examine the basics of inventory management and how advanced solutions, specifically NetSuite, a leading cloud (Enterprise Resource Planning) ERP system, can help businesses overcome these challenges and simplify their inventory processes with a NetSuite inventory management solution.

What is inventory management?

Inventory can be an asset or a liability. Inventory management controls the flow of goods within a business, ensuring stock levels are right for customer demand without overstocking or stockouts. Balancing stock levels is a juggling act; too much inventory ties up capital and increases holding costs; too little, and you’ll have stockouts and lost sales. Businesses, especially in fast-moving industries, need to forecast customer demand accurately to ensure they have the right products at the right time.

Effective inventory management helps businesses to:

• Maximize Efficiency: It ensures goods are available when needed without overstocking, reducing storage and handling costs.
• Prevent Stockouts: This helps businesses meet customer demand without running out of products, which keeps customers happy and loyal.
• Reduce Waste: Inventory management for perishable goods helps prevent waste and obsolescence by selling older stock first.
• Optimize Cash Flow: By optimising stock levels, businesses can free up cash that would otherwise be tied up in unsold inventory.
• Improve Decision-Making: Accurate inventory data can help businesses make better purchasing decisions, negotiate better with suppliers and respond faster to market demand.
• Enhance Customer Satisfaction: Effective inventory practices mean businesses can meet customer demand, avoid stockouts and optimise overall operations for better customer experiences.

Challenges in traditional inventory management

Inventory management might seem simple but implementing an effective system is far from it. Managing inventory with real-time data and best practices can help businesses overcome these challenges by providing up-to-date information on stock levels. Many businesses especially small and medium-sized businesses struggle with inventory management due to the following challenges:

1. Lack of Real-Time Visibility: Manual methods and spreadsheets provide old information, so businesses don’t know the actual state of their inventory in real-time.
2. Overstocking or Understocking: Inaccurate demand forecasting can lead to overstocking which ties up capital and results in excess inventory or understocking which results in lost sales.
3. Human Error: Manual data entry, a common practice in businesses without an automated inventory system, is prone to errors. Even small stock count or product information mistakes can cause big discrepancies. An automated process will improve business operations for inventory managers.
4. Multiple Locations: Businesses with more than one warehouse or store find it hard for tracking inventory across multiple locations with spreadsheets or manual methods.

Methods of inventory management

Businesses use several methods and techniques to manage inventory. Here’s an overview of some of the most common inventory management methods:

• FIFO (First In, First Out): In this method, the oldest inventory items (received first) are the first to be sold or used. FIFO is good for perishable goods to avoid waste. It also provides a more accurate stock value as older items are valued at a lower cost than newer items.
• LIFO (Last In, First Out): In this method, the most recent items received are the first to be sold or used. This method is less common but can be useful in industries where prices are rising and businesses want to reduce their taxable income by using higher-priced inventory first.
• Just In Time (JIT): JIT aims to minimise the amount of inventory held by ordering only what is needed to meet immediate demand. This reduces holding costs but requires reliable suppliers and accurate demand forecasting to avoid stockouts.
• ABC Analysis: This method categorises inventory into three groups: “A” items are high-value low, quantity products, “B” items are moderate value and quantity and “C” items are low-value high quantity. This helps businesses prioritise resources and attention on the most critical inventory items.
• Average Costing: This method updates the inventory value each time new stock is received, calculating a weighted average cost of goods. This provides a balanced valuation for inventory that fluctuates in price over time.
• Reduce Waste: Effective inventory management reduces waste by prioritising older stock for sale, preventing obsolete inventory from building up. This proactive approach minimises losses and ensures items are available for sale.

Using these methods helps businesses keep their stock levels in check and operations running smoothly.

While these methods work, they can be hard to implement without the right tools in place. That’s where ERP solutions, like NetSuite, come into play.

What is NetSuite inventory management software?

Traditional inventory management methods are fine for small operations but growing businesses need more. NetSuite, a full cloud ERP system, has a robust inventory management solution that handles warehouse operations across multiple locations, channels and markets. NetSuite helps manage inventory by providing tools that give real-time visibility and automated processes to keep stock levels in check.

NetSuite enables businesses to automate inventory management, reduce human error and get real-time visibility into stock levels so it’s easier to keep stock levels in check. Let’s take a look at some of the key features and benefits of NetSuite’s inventory management:

• Inventory Control: Monitor stock levels and track goods through the supply chain.
• Inventory Tracking: Real-time stock tracking, see where items are and how much stock is available.
• Barcoding and RFID: Automate data entry, reduce human error and improve inventory records.
• Inventory Alerts: Automatically trigger alerts when stock levels are too high or too low to prevent excess inventory or stockouts.
• Cloud Infrastructure: Because NetSuite is cloud-based, businesses can access their inventory data anywhere, anytime.

Benefits of NetSuite inventory management

NetSuite’s inventory management software provides businesses with many benefits, such as improved efficiency, reduced costs, and enhanced decision-making. Managing inventory with NetSuite gives businesses real-time visibility and accurate data to make informed decisions and keep stock levels in check. Here are some of the key benefits:

1. Real-Time Visibility and Inventory Availability Across All Channels: One of NetSuite’s biggest advantages is seeing inventory in real time across all locations and channels. This gives businesses accurate stock levels to make informed decisions on purchasing, production and sales and ensure sufficient stock is available to prevent lost sales due to stockouts.
2. Automation of Key Processes: NetSuite automates many manual inventory management processes, such as reordering and data entry, reducing human error and saving time. This automation helps businesses run more efficiently and focus on strategic tasks rather than administrative ones.
3. Improved Forecasting and Demand Planning: NetSuite’s demand planning tools use historical data and market trends to help businesses forecast future inventory needs. This reduces the risk of overstocking or understocking and better cash flow and resource management.
4. Seamless Integration with Other Business Functions: NetSuite integrates inventory management with other key business functions, such as accounting, procurement and sales. This integration ensures all parts of the business work with the same data, reducing errors and improving overall efficiency.
5. Cost Savings: Keeping stock levels in check and reducing overstocking businesses can free up working capital that would otherwise be tied up in excess stock. This means big cost savings and improved profitability.
6. Scalability for Growing Businesses: As businesses grow and their inventory management gets more complex, NetSuite’s cloud-based solution can scale to meet their needs. Whether a business is adding new locations, launching new products or expanding into new markets, NetSuite has the flexibility and scalability for growth.
7. Enhanced Decision-Making: With real-time data and advanced analytics, NetSuite enables businesses to make data-driven decisions on inventory management. This means better purchasing decisions, improved supplier negotiations and a better response to market changes.

Challenges in implementing inventory management systems

Whilst the benefits of an advanced inventory management system like NetSuite are clear, implementing such a system is not easy. Managing inventory effectively can help mitigate these challenges by ensuring data migration and integration with existing systems is smooth. Here are some of the common challenges businesses face when implementing an inventory management system:

• Data Migration: Migrating data from an old system to a new one is a time-consuming and complex process. Make sure all data is accurate and there are no inconsistencies between the old and new systems.
• Change Management: Introducing a new system means changing how employees work. Without proper training and communication resistance to change can occur which can impact the success of the implementation.
• Integration with Existing Systems: Many businesses use multiple systems to manage different parts of their business. Integrating these systems with a new inventory management solution can be technically complex and require significant IT resources.
• Customisation: Whilst NetSuite has a comprehensive inventory management solution, some businesses may need additional customisation to meet their specific needs. Customisation can add complexity and cost to the implementation process.

NetSuite inventory management features

NetSuite has many features that simplify inventory management and help businesses stay on top of their stock across multiple locations, including warehouses and retail stores. These features help businesses manage inventory better, so stock levels are optimised and operations are streamlined. These features include:

• Automated Reordering: NetSuite calculates reorder points based on historical data so businesses don’t have to track inventory manually.
• Lot and Serial Number Tracking: This feature allows businesses to track individual products through supply chain logistics to trace any issues back to their source and maintain quality control.
• Demand Planning: NetSuite’s demand planning tools help businesses forecast future inventory needs based on historical trends so they can prevent stockouts or overstocking.
• Cycle Counting: This feature allows businesses to count smaller subsets of inventory more frequently to identify discrepancies before they become major issues.

Get advanced inventory management with Jacopo

Managing inventory with advanced solutions like NetSuite helps businesses reduce costs, make better decisions and have the right products in stock at the right time, thus improving customer satisfaction.

With real-time visibility, automation and seamless integration with other business functions, NetSuite inventory management software helps businesses streamline their inventory management processes so they always have the right products in stock at the right time. While implementing a new inventory management system is challenging, the benefits of a well-managed inventory far outweigh the initial hurdles.

We have helped many NetSuite customers obtain improved operational efficiency. Chat with us to how we can improve warehouse processes and other business systems.