Inventory Management System Definition, Features and Guide 2022

  • Share this:
Inventory Management System Definition, Features and Guide 2022

Inventory management is the essential process of every fulfilment process and the vital component of a supply chain. Knowing inventory management definitions, types, features, and benefits will boost your business to win in the market.

Inventory Management System Definition 

Inventory Management System (IMS) is software used to manage inventory in your supply chain. It manages the flow of goods from the time of purchase, stored in the warehouse, until the order shipping. 

IMS is an effective tool for businesses, especially retail businesses, to control inventory, streamline order processing, and increase business productivity. 


Related article: What is Inventory Management? Benefits & Challenges

Inventory Management System Methods 

Depending on the size and type of business, there are many different forms of Inventory Management System. The two most common methods are the Periodic Inventory Management System and the Perpetual Inventory Management System. 

The traditional Periodic Inventory Management System depends on the quantity of goods available in the warehouse. The goods will be manually checked periodically at a fixed interval, about 1 to 2 times per month. This method does not require high facilities, but updating the exact flow of goods isn't easy, especially for proliferating businesses. 

Perpetual Inventory Management System definition is tracking goods in each import - storage - export stage. It provides an overview of the slightest changes in inventory in real-time without manual operation. With a high-tech facility, Perpetual Inventory Management System brings greater efficiency to medium and large enterprises. 


Types of Inventory Management System 

Manual Inventory Management System 

The spreadsheet is probably the oldest and most popular inventory management tool. It's simple, easy to do and saves money, whether it's on paper or a spreadsheet platform like Excel. It is almost the beginning of many small and medium businesses. 

However, the disadvantage of this type is that it is very time-consuming. Your team may have to count and check each box of goods and enter every detail about the goods in a spreadsheet. It is a big challenge for businesses with extensive inventories or on growth. 

Besides, any mistake the staff makes will also lead to disruption in the process of inventory management and fulfilment of orders. 



Basic Inventory Management System 

You can choose a cloud-based or SaaS Inventory Management System as a solution for your business. These Inventory Management software will solve your inventory tracking problem at a basic level, increasing processing speed and reducing risk. 

However, some of the available Inventory Management software does not meet the business's needs, or it isn't easy to integrate with the existing system. Among the many options currently on the market, you must take your time choosing carefully. Or you would end up re-choosing in the future as your business grows more prominent than here and now. 

Custom Inventory Management System 

Custom Inventory Management System is designed according to your requirements, with the functionality and integration best suited for your business. Not many business owners consider this type of system first when they establish because it sounds expensive and less convenient. However, this is the best option when considering the company's long-term growth and scale. 

Inventory Management System Features 


1. Central database for all POS 

It doesn't matter how many POS (point of sale) you have; the important thing is that tracking must be done synchronously at the stores and recorded at the host system. The system will automatically update each item sold on the database as soon as possible. Any shortage of goods at the store will be reported as soon as possible to avoid stockouts and customer dissatisfaction. 

2. Real-time reporting and updates 

The quick real-time update is a massive advantage of the Perpetual Inventory Management System over the traditional manual method. 

This feature helps you control the number of available goods and sales in the most accurate way without waiting for staff to check the total stocks at the end of the day. 

3. Multi-channel sales support 

For e-commerce businesses, sales no longer only take place at offline stores but also on online channels, including self-owned stores or stores on e-commerce platforms. 

The Inventory Management System should work flexibly between these types of stores to give businesses the best overview of their sales performance. 

4. Analysis and making future forecasts 

Consumer demand constantly changes from time to time. The Inventory Management System should be able to analyze sales data to understand buying trends on each occasion. Besides, the ability to make forecasts in advance so that businesses can proactively purchase goods/materials before each occasion of high demand is a winning point. 

Inventory Management System Benefits 

1. Avoid out of stock 

Updating the flow of goods in real-time will help businesses avoid running out of stock at stores and always have enough goods and materials in stock for production. 

Especially during promotional events or high consumption demand, it is crucial to avoid disrupting the source of goods. 

2. Avoid shortage and damage of goods 

Inventory Management System allows recording the status of goods when imported from suppliers, as well as managing the process of goods being stored at the warehouse. It helps businesses avoid loss of goods and damage to product quality due to a lack of transparency. 

3. Cost reduction 

Inefficient Inventory Management can lead to increased warehousing costs due to the storage of slow-selling goods, increased operating costs due to overload, and increased labour costs. If your business faces the above problems, it's time to think about using the Inventory Management System today. 

4. Increase sales efficiency and revenue 

The Inventory Management System keeps you informed of purchased, stored, sold and returned merchandise at all times. This data will help your business optimize future sales strategies and boost revenue. 

5. Improve relationships with customers and suppliers 

Any mistake or interruption in the purchasing and sales process can weaken the relationship between your business and your partner. Having a well-functioning supply chain saves you time on development and other operations. 

How to choose the best Inventory Management System? 

Many partners are providing Inventory Management services today, with diverse sizes and features to meet different types of businesses. 

However, there are several conditions you should consider when choosing the right Inventory Management System for you: 

1. The needs of your business 

2. Ability to integrate into existing systems 

3. The ability to scale according to the growth of the business 

4. Development and operating costs 

5. Customization 


You now have an overview of inventory management system definition, as well as some key takeaways about its features and benefits. We hope you find the IMS solution that works best for your business . Don't hesitate to contact us for a more in-depth consultation today.   

Công Nguyễn

Công Nguyễn


Our mission is to bring the most valuable technology platforms to your business, through our Expert - Professional - Ownership people & team. Along with helping businesses achieve their goals, we’re heading toward the vision of joining the top 100 most trusted software development and outsourcing companies in 2030.