How Can Inventory Management Software Help Reduce Costs?

How inventory management software can help reduce costs | Crowe LLP

Businesses place a lot of emphasis on efficient inventory planning systems that can account for variations in stock fluctuations since inventory operations may make or break a company’s bottom line. Maintaining a sufficient inventory enables businesses to plan output flexibly. With a planned inventory, you can receive bulk orders at lower pricing. As a result, businesses need to keep an inventory planning system and track their inventory in real time.

Retailers must keep an inventory of finished goods to sell to customers when orders are received, and production and manufacturing units must keep an inventory of raw materials and items that are still being produced. To prevent cases of stockouts, the inventory must be optimally stocked. If the demand for products is adequately met, it could be beneficial to the business; on the other hand, loading the inventory with too many items that take a long time to sell increases the costs associated with storing, heating, and cooling the inventory.

Better Forecasting

Many of your inventory decisions, whether using a push or pull inventory planning system, depend on your client demand predictions. Unfortunately, predicting demand is a guessing game. If your estimates are even slightly off, it could result in significant overstocking or understocking, which could be very expensive for your company.

But with inventory management software, forecasting becomes much simpler—and far more precise. More accurately than a human, your software solution can estimate demand using data from previous sales and cutting-edge algorithms. Furthermore, if your projections are more accurate (or too few), you are less likely to place excessive orders.

Product shortages result in understocking of inventory, which can lead to a loss of revenues because clients might go to a competitor instead (and possibly never come back). On the other hand, the financial repercussions of overstocking include increased costs for storage of the extra goods and also the locking up of working capital. Additionally, there is always the risk that you won’t be able to sell your excess inventory, which would result in a further loss for your company.

By ensuring that your forecasting is as precise as possible, inventory planning software can assist you in lowering these costs.

Less Product Spoilage

Using inventory management software, you can keep track of every item in your inventory in real time. First in, first out (FIFO), last in, first out (LIFO), or first expired, first out (FIFO) are just a few examples of fulfillment strategies that can be strictly enforced in this manner (FIFO).

With a FIFO method, your warehouse personnel may utilize your inventory planning software to find the oldest goods on your shelves and sell those first, ensuring your product stays fresh (and is, therefore, more sellable). This lowers the likelihood that your goods will ultimately result in a loss.

By implementing a FIFO mechanism, you may ensure that the most recent goods on your shelf get bought first. Only the oldest products would be at risk of going out of date. Since older products are (theoretically) worth less than your newest offerings, this minimizes loss for your company.

Inventory management software can also help you save money if your company uses a FEFO system and has perishable inventory by ensuring that the items with the earliest expiration dates are sold or used first. This, for instance, lessens the financial losses your company suffers from purchasing goods that expire before being sold in restaurants.

Automatic Reordering

Using inventory planning software, you can establish guidelines for the amount of stock you want on hand. Your software will then be able to monitor your stock levels in real time, account for lead times when ordering new products, and determine when to place replenishment orders.

Have several store outlets and distribution centers (such as a web store, a physical location, and social media)? The software can monitor inventory levels across your company’s locations and channels. The software can automatically initiate replenishment when stock levels drop at any location, either by reminding you to move merchandise between locations or by placing a fresh order for supply.

Ultimately, this helps you save money by preventing shortages of goods or overstocking. Additionally, inventory planning software can automatically determine your economic order quantity (EOQ), ensuring that your company strikes the best balance between ordering and storage costs.


Inventory planning software can assist you in avoiding the increased storage expenses associated with overstocking. 

By applying the economic order quantity (EOQ) formula to your company, inventory management software can reduce storage expenses. This formula considers storage costs and helps you decide when to acquire additional products to avoid paying for storage beyond what is necessary.

Enhanced Warehouse Organization

Inventory planning software helps you organize your warehouse so you (and your employees) always know where to find each product. This way, you can track your stuff in real-time.

This aids in your financial gain by lowering losses and enhancing order fulfillment.

Many businesses end up losing their merchandise at their warehouse because it is not organized and stored properly. After all, when you throw your items into whatever place is available when the shipment arrives, it’s easy to forget where you put them. Utilizing inventory planning software can help you organize your storage area so that your staff knows exactly where each item belongs, lowering the costs associated with misplaced inventory or products that spoil while left on a shelf that isn’t being used.

Your personnel can pull the appropriate items when filling customer orders from well-organized warehouses. Customers are more likely to return goods when they receive a different product than the one they ordered, costing   extra in logistics transactions. Additionally, it can hurt their perception of your company, which might result in further lower sales.  Fortunately, inventory management software aids you in maintaining order in your warehouse so that your fulfillment staff can access the appropriate items (and spend less time finding them).

About the Company

Kronoscope by Fountain9 enables retailers & F&B businesses to satisfy client demand at the correct time. Their demand planning software, Kronoscope, can precisely estimate demand for each SKU item and calculate the quantities that must be stocked to meet demand satisfactorily. 

Kronoscope also prevents overstocking by proactively identifying SKUs that are at risk of getting piled up at various levels in the supply chain. It can identify SKUs ideal for liquidation by proactively monitoring SKUs that are piling up (getting overstocked) at any level in the supply chain, helping to avoid wasted procurement and replenishment time, unnecessary expenses, and opportunity costs. Businesses can meet customer expectations and generate more substantial money with the help of this software.

Leave a Reply