How to Create an Inventory Management System? | Point-by-point Guide by Tech and Business Experts

Having undigitized or under digitized inventory can be a drag on your company’s financial performance. Want to transform it into a profit booster, even though the chances of succeeding when adopting new software is one in seven at best? 

You’re in the right place – we know how to chart a vector toward success. Our tech and business experts outline how to draw up a digital inventory management system (IMS) that is destined to thrive.

IMS killer features to ace inventory operations

Building an inventory management system can uplift your technical capabilities with a raft of not-to-miss opportunities.

• Real-time inventory tracking. Access to the relevant information about inventory levels and items in real-time allows you to prevent stockouts and overstocking, and enables shrewd moves, such as adopting demand-driven pricing.
• Extensive integration capabilities. Linking your IMS with your software ecosystem grants a bird’s eye view of your inventory operations, such as ordering, storing, receiving and their relation to your business processes.
• User-friendly interface and accessibility. By operating a leading-edge intuitive IMS, you can empower even less tech-savvy employees with easy-to-use data analysis capabilities.
• Enhanced reporting. No more need to wreck your brain over Excel formulas or outdated inventory management software. Data visualization tools and automated real-time reporting shuffle off the burden of recurrent time-consuming reporting. 

What kind of IMS should you opt for? Let’s take a look at the possibilities. 

A module within an all-in-one solution or standalone inventory-specific software?

There are usually two types of IMS-related requests that come from business owners. They are either looking for special inventory management software that requires integration with other corporate systems, or for an all-inclusive solution, such as ERP, that covers accounting, production, inventory operations, etc.

Adopting an IMS-specific app is an easier step to take than switching to full-fledged multicomponent corporate software. However, if shifting from jerry-built legacy solutions and embracing overall digitalization is your prior focus, implementing an all-in-one software can be a more effective strategy.  

When it comes to “how to code an inventory management system”, there is no notable difference from a technical standpoint. Whether you choose to adopt a single solution and implement modules one by one, including inventory, or bank on specialized software, the core technical task is integrating IMS with whatever it is – other modules or software. 

— Dzmitry Shchyhlinski, Head of Backend Development, Solution Architect, *instinctools

How to make the grade with creating an inventory system

Working according to a comprehensive strategy is a surefire way to help ensure success in any undertaking, and IMS adoption is no exception. Instinctools’ business analyst and solution architect outline the action plan from inception to triumph. 

Discovery phase

To build an inventory management app, start with idea evaluation and validation. At this stage, your tech ally covers a range of tasks.

• Gathering business and user requirements and compiling them in a comprehensive solution scope.
• Outlining IMS architecture with tech stack and mandatory integrations based on the collected architecture significant requirements (ASRs).
• Project planning to shape your IMS vision into a detailed project roadmap, and provide clear success criteria, transparent overview of roles and responsibilities (RACI), communication plan, and more.
• Capturing UI/UX concepts and preparing initial wireframes and mock-ups to chart a path toward full-blown intuitive design.

Engineering and deployment

The dedicated team’s activities at this stage encompass: 

• Backend development to provide your solution with a scalable and secure data access layer.
• Frontend development to craft a sleek graphical user interface (GUI).
• Ongoing QA with continuous functional and non-functional software tests to move through the IMS development process without any hurdles and release a bug-free system. 
• System migration in line with your transition plan to prepare accurate data and ensure seamless adoption of new software.
• Staff training featuring hands-on guidance to minimize employees’ resistance to change.
• User acceptance testing (UAT) to validate if the IMS handles all the necessary tasks and is convenient for end users.
• Deployment as a final step in launching your inventory management software in the real-world environment and giving end users full access to the system.

Post-deployment

Keeping your inventory management software up and running is crucial. Tech companies provide multi-level support:

• Preventive support by nipping issues in the bud and enabling your IMS longevity.
• Ad-hoc troubleshooting to wipe out any glitches ASAP and prevent downtime.
• IMS evolution when your partner keeps a close eye on trailblazing IMS trends and adopts those that click with your business needs.

Crafting a five-star software requires care, precision, and a laser focus on the essentials. Among the myriad of tasks that have to be done to draw up a digital inventory management system, there stand three pivotal activities: setting up a project roadmap, planning for integrations, and orchestrating system migration. 

1. Planning your IMS

When creating an inventory management system, this universal principle remains valid:

“Whatever you water will grow”

As inventory is highly interlinked with other company’s systems, insufficient planning can have a crippling effect on the processes’ visibility, business scalability, software maintenance cost, to name a few.

That’s why you have to plan wisely.

Establish your objectives and priorities

Strategy, not technology itself, fuels thriving, high-ROI projects. Therefore, start with the problem your IMS should solve.

McKinsey backs this insight with statistics — companies lose up to 55% of the potential financial benefit they could have received by neglecting target setting and planning stages.

It’s also crucial to incorporate both short-term goals and long-haul perspectives into your project strategy from the start to hedge against any weak points that could derail your software in the future.

For example, if you aim to operate in different countries, you’ll need regional scalability sooner or later and should take it into account when choosing a tech stack. We suggest a decentralized IMS solution that allows storing inventory data on servers in different legal zones while providing employees across countries with unmatched data accessibility.

— Anton Korzhenevskiy, Senior Business Analyst, *instinctools 

Setting the right objectives includes feature prioritization along with identifying software and hardware integrations to save you from getting a hastily-built inventory management application that lacks basic functionality and connections within your software ecosystem. For instance, you can use the MoSCoW method to identify must-have, should-have, and could-have integrations and features to balance the development scope with your budget. 

Choose between out-of-the-box and custom solution

Only four cases call for a fully custom, from-scratch IMS:

• Operating in a highly specific industry, such as aerospace manufacturing
• Crafting unique products 
• Requiring integration with a legacy system
• Covering non-standard business processes 

Otherwise, your business workflows can be standardized and handled with customized off-the-shelf inventory management software. Our business analyst notes:

There are plenty of industry-focused, out-of-the-box IMSs for various business domains. Let’s take healthcare as an example. 

Aside from tracking the consumption of inventory items such as medicines and blood for transfusion, such systems need workflows to monitor the use and disposal of disposable syringes and sterilization of reusable surgical instruments. There are specialized ready-made IMS solutions to cover these needs, such as SpaceTRAX, Cardinal Health, and AlinIQ Inventory Manager, among others. 

— Anton Korzhenevskiy, Senior Business Analyst, *instinctools

There is also a nuance about integration with a legacy system and non-standard business processes.

As we notice across our clientele, maintaining legacy systems and holding on to  inadequate business processes are the top two tech hurdles that keep businesses from taking inventory value to the next level. 

In the short term, building a custom IMS that can interoperate with your legacy system and cover non-standard processes is a more affordable and fast option. However, these workarounds hold back the system’s scalability when a company grows.

In such cases, we suggest a more forward-looking approach when, along with creating an inventory system that covers the client’s needs here and there, we plan business processes’ transformation and standardization to free the client from legacy constraints in the future. 

— Dzmitry Shchyhlinski, Head of Backend Development, Solution Architect, *instinctools

If you bank on a platform-based solution, remember that it’s not a cure-all either, and you can’t go live with it right away. As ready-made systems are designed to cover the needs of a wide range of customers, they require adjustments to your business processes. 

2. Covering integrations

Inventory requires multi-channel integration with your corporate software ecosystem. Our experts mention the most widespread IMS integrations that can maximize business value of the system.

Point of sales (POS): 

• Updating stock in line with customer demand
• Automating order generation and reordering
• Implementing dynamic pricing strategies for goods and delivery service
• Tracking payments

Enterprise resource planning (ERP):

• Achieving 360-degree visibility of inventory-responsible staff and inventory-related tasks 
• Syncing manufacturing operations with the product components’ and employees’ availability
• Simplifying compliance checks due to detailed audit trails 

Customer relationship management (CRM):

• Up-to-the-minute visibility into stock levels and detailed product information
• Real-time order status tracking
• Flexible pricing opportunities

Business intelligence (BI):

• Inventory processes visualization 
• Simplified big data analysis of stock levels and their movement
• Automated planning for product replenishment according to the analytics-based rules
• Accelerated reporting

Warehouse management system (WMS):

• Boosting warehouse space efficiency by optimizing item movement between shelves and warehouses
• Reducing order picking time
• Tracking proper storage conditions for items that require regular maintenance
• Decreasing the number of lost orders

Accounting: 

• Gaining full transparency of the order-to-cash cycle
• Automating bookkeeping management
• Delineating the balance sheet of different products, materials, etc.

Shipping and logistics:

• Establishing efficient goods shipment and receipt
• Improving tracking and storing of freight
• Optimizing and speeding up delivery

3. System migration

Transitioning to the new solution is one of the final moves you have to make to build an inventory management system. It encompasses two activities, migrating data and switching from your legacy or pre-inventory software to the advanced one. 

If an IMS is the heart, then data is the blood. Data quality directly impacts your inventory management system’s overall performance and transparency.

IBM research proves that complete inventory visibility remains a pipe dream for 56% of businesses because of inaccurate data. 

To draw up a digital inventory management system that will become a pearl of great price, you should ensure no junk gets into it. Therefore, before transitioning to the new system, review your inventory data to ensure data format standardization across your software ecosystem and the absence of data discrepancies. 

An overall IMS implementation strategy entails a transition plan that facilitates a smooth and bump-free shift to the new IMS without missing a beat in the company’s operations. 

Small businesses can switch to the new system right away, but medium and large companies that can’t put business continuity at risk should move gradually, department by department. We usually suggest running old and new systems simultaneously in the first few months to prevent data loss while employees are getting used to the software and updated flow.

— Anton Korzhenevskiy, Senior Business Analyst, *instinctools

Technologies that bolster your IMS

While automation, detailed analytics, and other features are considered the linchpins of any inventory system, there are leading-edge technologies that can shore up and broaden your capabilities.

• IoT  

Adopting Internet of Things (IoT) technology unlocks stock scanning functionality (barcode, RF, RFID scanners, etc.). IoT devices are one of the go-to options to automate and speed up warehouse-related operations, such as spotting low-stock items and replenishment. 

• NFC 

Near-field communication can be an alternative to IoT-based scanning operations. This technology enables staff to operate without WMS-specific hardware, such as scanners — employees can cover the tasks with their mobile devices and corporate inventory management application. 

• Generative AI 

If you want to optimize inventory, warehouse management, and last-mile delivery, weaving generative AI into your software is worth its while. For instance, it unravels capabilities such as intelligent analysis of demand patterns in different areas you operate and optimizing local inventory levels to cut down overstocks and stockouts. 

Take an on-target step towards inventory creation

An inventory management system strengthened with top-tech capabilities is a tidbit. However, it isn’t that easy to bite off. Wise planning, covering numerous integrations, and running final system migration can seem to be mind-boggling steps to take, but having a battle-tested tech partner by your side streamlines the path to beyond-the-reach inventory functionality and the margin uplift.

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