10 Types of Inventory Management Systems

Inventory management helps us prevent overstocking or stockouts, handle our finances efficiently, and, ultimately, gain a sense of control over our stock and our business.

In this article, we’ll explore various types of inventory management software and methods, helping you choose the best approach for your business needs. We’ll also discuss how the right all-in-one POS system can transform your inventory management process. Let’s get into it!

What is Inventory Management?

Inventory management encompasses all the processes and tools a company uses to control its stocked goods. It can involve using POS system software to build a Key Performance Indicator (KPI) dashboard, harnessing reporting and analytics tools, or even creating an inventory spreadsheet. 

No matter your strategy, proper inventory management ensures that the right products are in the right place at the right time, striking a balance between supply and demand. 

10 Types of Inventory Systems

The following is a breakdown of 10 popular types of inventory management, including when to use them and the pros and cons of each. 

1. Perpetual Inventory System

Sure, we’re biased, but we think perpetual inventory systems are the strongest, most efficient tools for inventory management in the modern market. Here’s why: perpetual inventory systems continuously update inventory records as transactions occur, making them ideal for businesses that need accurate, up-to-date stock levels (and who doesn’t need that?). 

KORONA POS is an all-in-one point of sale system with award-winning perpetual inventory tools. You can manage your inventory like a pro right at the point of sale and trust that your information is accurate and up to speed at all times.

2. Just-in-Time (JIT) Inventory Management

JIT inventory management is a system where businesses only order or produce inventory when it’s needed, reducing storage costs and waste. This method originated in the manufacturing industry and is commonly used by companies that rely on highly efficient supply chains. 

3. Materials Requirement Planning (MRP)

MRP, or Material Requirements Planning, is a computer-based inventory management system that uses sales forecasts and demand planning to schedule production and manage inventory.  MRP helps manufacturers ensure that the right amount of raw materials and components are available when needed.

4. Economic Order Quantity (EOQ)

EOQ is a formula for determining the ideal number of items a company should order to minimize inventory costs, such as holding costs, shortage costs, and ordering costs. When used correctly, the formula can help businesses maximize value in the replenishment and ordering process.

5. ABC Analysis

ABC analysis categorizes inventory into three groups based on value and usage frequency:

• A: High-value, low-sales frequency
• B: Moderate value, moderate frequency
• C: Low-value, high-sales frequency

6. First-In, First-Out (FIFO)

First-in, First-Out (FIFO) is an inventory management method that prioritizes selling or using the oldest stock before adding newer inventory. It helps businesses ensure that perishable or time-sensitive products are used first to reduce waste and maintain freshness.

7. Last-In, First-Out (LIFO)

Last-In, First-Out (LIFO) is an inventory management method where the most recently acquired stock is sold or used first. This approach is often used in industries where inventory costs fluctuate because it can reduce taxable income during periods of rising prices.

8. Vendor-Managed Inventory (VMI)

Vendor-managed inventory (VMI) is a system in which the supplier is responsible for monitoring and replenishing stock at the customer’s location. Instead of the retailer or distributor placing orders, the supplier uses sales data, demand forecasts, and agreed-upon inventory levels to ensure optimal stock.

9. Consignment Inventory

Consignment inventory is a supply chain arrangement where the supplier retains ownership of goods until they are sold by the retailer. The retailer only pays for the products once they are sold, reducing upfront inventory costs.

10. Batch Tracking

Batch tracking is an inventory management system that groups products based on common characteristics, such as production date, expiration date, or lot number. It enables businesses to track inventory from production to sale.

Benefits of an Inventory Management System

Whether you’re a small business or a multinational corporation, implementing an inventory management system streamlines operations, reduces waste, and makes decision-making much easier. This is especially true when inventory management software integrates with POS systems for real-time updates and endless perks.

Benefit 1: Increased Efficiency and Accuracy

First, inventory management systems reduce human error by automating the whole range of processes related to stock tracking and order management. Barcode or RFID scanning, automated data entry, and real-time inventory updates eliminate manual counting mistakes (and save you loads of time).

Benefit 2: Reduced Costs and Waste

By optimizing inventory levels, businesses can minimize holding costs, prevent overstocking, and reduce product spoilage. Features like demand forecasting and automated replenishment help maintain the right stock balance, so businesses only purchase what they’ll sell.

Benefit 3: Customer Satisfaction

When businesses track inventory properly, they ensure customers receive their orders on time and reduce the risk of backorders or stockouts. This improves customer trust and retention, which leads to increased sales and brand loyalty. 

Features to Look For When Choosing Inventory Management Software

When choosing an inventory management system, look for solutions that offer real-time tracking, automated stock alerts, integration with POS systems, and robust reporting tools.

Here are the four essential features we recommend you look for when choosing inventory management software: 

Feature 1: Real-Time Inventory Tracking 

A sound inventory management system provides real-time tracking, allowing businesses to monitor stock levels instantly and accurately.  KORONA POS is celebrated for its in-depth, real-time inventory tracking capabilities and tools, like automated counting and updated analytics features.

Feature 2: Automated Replenishment

Businesses can set reorder points to avoid stockouts with automated replenishment. A system like KORONA POS generates purchase orders based on historical data and demand forecasting and sets inventory boundaries, eliminating the guesswork in the ordering process.

Feature 3: Multi-Channel Integration

For businesses operating across various sales channels or locations, multi-channel integration ensures inventory is synchronized across online stores, physical retail locations, and warehouses. This feature lets you manage all your inventory from one system, making life easy. 

Feature 4: Comprehensive Reporting and Analytics

Inventory management software should offer detailed reporting and analytics to give users insights into how their stock is performing, trends, and profitability. KORONA POS offers an incredibly diverse array of reporting and analytics tools accessible straight from the POS, helping users make data-driven decisions about their stock. 

Best Type of Inventory Management for Retail

For retail businesses, the perpetual inventory system is by far the best choice as it provides real-time stock updates and improves inventory accuracy. Compared with manual or periodic inventory management styles, perpetual systems save businesses immense time and risk. 

• Features:
  • Real-time tracking of stock movements
  • Seamless integration with POS systems
  • Automated stock alerts and replenishment
  • Improved demand forecasting
  • Pricing optimization tools

• Why It’s Ideal for Retail:
  • Prevents stock discrepancies and ensures accurate inventory records
  • Enhances customer experience with faster fulfillment
  • Reduces costs associated with stockouts and overstocking
  • Suited to diverse, high-stakes retail environments, from bakeries to liquor stores

If you’re looking for the right perpetual inventory system, you should know that many of the inventory management types we listed above are accessible to users within KORONA POS. We think KORONA is one of the best perpetual inventory management tools on the market because you can do it all in real-time from one place.

Best Inventory Management System Software

Inventory management system software differs depending on the business type or industry to which each solution is tailored. The best inventory management software is automated, anticipates your business’s needs, and facilitates processes across your operation, saving you time and resources. 

Here are our four favorite inventory management software on the market. 

1. KORONA POS: Best Overall Retail Inventory Solution

2. Lavu POS: Best for Restaurants 

3. Shopify POS: Best for eCommerce

4. Sortly: Best for Small Businesses

5. Ordoro: Best for Order Fulfillment

Cost of Inventory Management Software

Subscription-based models range from $50 to $500 per month, depending on the level of automation and analytics.

Meanwhile, enterprise solutions may have higher costs, but they provide advanced features like multi-location tracking and demand forecasting.

💡 Considering your unique financial needs and investing in the right inventory system can lead to cost savings and improved efficiency over time.

Frequently Asked Questions (FAQ)

KORONA POS: Your Retail Inventory Management System

KORONA POS offers a robust, all-in-one inventory management solution tailored for retailers. With features like automated inventory management, real-time reporting, and seamless vendor management, it helps businesses streamline operations, reduce waste, and improve profitability. 

Whether you’re managing a small boutique or a multi-location enterprise, Korona POS ensures accuracy and efficiency. Its cloud-based system provides instant access to inventory data, allowing for more intelligent decision-making.