What Is Inventory Tracking: Meaning, Technology, Scalability, And Benefits

Did you know? According to reports, 74% of businesses have experienced a shortage of critical parts at times of need.

If inventory is monitored accurately, using it can -

Reduce inventory cost (overstocking and under-stocking) by 10%

Prevents wasted resources or spoiled goods in case of perishables

Identify false anomalies in inventory stock levels.

Improve customer satisfaction by having the right products available when needed.

Now that you know the inventory tracking definition, let's see how it works in an organization set up to give you a better idea.

How Does Inventory Tracking Work?

The process of inventory tracking begins right from the procurement stage and continues till sales.

Here is a breakdown of how it works:

Receiving Stock

When new inventory arrives, it's inspected for quality and accuracy against purchase orders. Each item is then logged into the inventory management system. Tools like barcode scanners are used for checking.

Usage of Stock

Throughout the lifecycle, inventory is monitored to maintain accurate records of stock levels, locations, and movements. So, suppose a stock is sold, it gets deducted from the system. RFID tags attached on the product make the tracking easy.

Order Fulfillment

When a customer places an order, the system identifies the item's location, and the product is picked, packed, and shipped accordingly.

Benefits Of Real Time Inventory Tracking

Implementing a real-time inventory tracking technology can bring you benefits in terms of accuracy in decision-making. You can track progress in real time and make huge cost savings. Let us understand the benefits of real-time tracking in detail below:

Improved Accuracy

Real-time inventory tracking allows you to have the most updated information. This immediacy reduces errors associated with manual data entry and outdated records. Only data reflecting the actual stock situation is reflected.

Better Decision-Making

Access to up-to-date inventory data enables businesses to make informed demand forecasting and inventory management decisions. With real-time insights, companies can accurately determine -

Reorder level (when to reorder the stock)

EOQ (what is the ideal amount of stock to order)

safety stock levels (extra inventory kept on hand )

Lead times (how much time it takes for an order to be delivered)

Cost Savings

Tracking warehouse inventory can help businesses minimize their dead stock (stock laying unsold) and its carrying cost. By recognizing patterns of overstocking for the dead stock, companies can reduce the expenses related to lost sales and optimize cash flows.

Automation

Today, managing inventory manually is a gone option. Automation streamlines operations by providing immediate insights into inventory levels, reducing the need for manual checks, and allowing for quick responses to inventory needs.

Accessibility

Large businesses usually have multiple warehouses. Not every stick can be counted for manually. With the help of an inventory tracking system, this data can be accessed from anywhere.

Scalability

As businesses grow, their inventory management needs become more complex. Real-time inventory tracking systems are designed to adapt to growing business needs. Be it increased inventory volumes and diversified product lines, the system supports expansion without compromising operational efficiency.

Why Do Businesses Need Inventory Tracking?

Businesses need inventory tracking to monitor stock levels, improve customer satisfaction, manage supply chain operations smoothly and improve efficiency.

Improve Customer Satisfaction

If there is no track of how much inventory is available, the production will get delayed which will lead to delay in sales and delivery to customers making them unhappy. Real-time inventory tracking ensures products are available when customers need them, preventing stockouts and backorders

Operational Efficiency

Inventory tracking streamlines all operations in the supply chain. It thus helps businesses reduce the chances of running out of products or having too much. This balance saves money and keeps operations running smoothly.

Lower Storage Costs

By knowing exactly what you have in stock, you can avoid overstocking. This means you don't have to pay to store extra items that might not sell.

Improved Decision Making

Inventory tracking helps you understand which products are selling well and which are not. This information helps you make smarter decisions about what to order and how much to order.

Increased Profitability

With accurate inventory data, you can quickly and efficiently fulfill customer orders. This leads to happier customers and repeat business.

Challenges In Using Inventory Tracking Technology

Inventory tracking also comes with its own set of challenges. They are:

Errors in Data Entry

If you rely on manual inventory tracking, then there are chances of data discrepancies between the recorded inventory and the actual stock on hand. This can lead to stockouts, overstocking, and inaccurate order fulfillment.

Poor Demand Forecasting

Factors like seasonality, unexpected market fluctuations, and changing consumer preferences can make accurate demand forecasting challenging.

Technology is Expensive

Special machines or software for tracking inventory can be expensive to buy and keep running. This might be too costly for small businesses.

Employees Need Training

People need to learn how to use the new technology correctly. If they don't understand it well, they might make mistakes when tracking things

Security Risks

If the system isn't secure, someone could try to steal information about your inventory, which could cause problems for your business.

To avoid such errors, you must invest in reliable inventory management softwares like Ekklavya's eAIMS. It automates data entry, integrates barcode scanning, and provides forecasting tools and can help overcome these challenges.

What Technologies Are Used In Inventory Tracking?

Modern inventory tracking relies on a blend of technologies to enhance efficiency, accuracy, and speed. Some of these are:

Barcode Scanners - When a product is sold or moved, the barcode is scanned. This instantly updates the inventory records, letting everyone know how many of that item are left.

Internet of Things (IoT) devices - These are smart devices that can connect to the internet and share information. In inventory tracking, they might be sensors on shelves that detect when items are removed or added.

RFID -RFID uses radio waves to identify and track objects. They are used because they are great for tracking lots of items quickly, like in warehouses or retail stores. It can also track the location of individual items within a building.

Inventory Management Software - Inventory management software brings everything together. It takes the data from barcodes, RFID, and IoT devices and presents it in a clear, easy-to-understand way.

What Is Inventory Traceability?

So far we discussed inventory tracking meaning and its benefits and process. But what is inventory traceability?

While tracking and tracing might sound similar there is

Unlike inventory tracking monitors stock levels, Inventory traceability is about knowing the history of an item. It tracks where the item came from, where it has been, and what changes it has gone through.

Traceability is important in industries like food and medicine. It helps find the source of problems, such as spoiled food or faulty products. This protects customers and ensures companies follow safety laws.

How Do You Track Traceability?

To track traceability of goods, use techniques like QR codes and maintain records. Traceability can be found in industries like the pharmaceutical and food industry. Also, in electronics to prevent the sale of counterfeit or stolen electronics.