What is Real-time Inventory Tracking?

What are the three methods of tracking inventory?

There are three main methods companies use to track inventory levels. All three methods relate to inventory valuation and costs rather than the physical inventory tracking process itself. Companies must still use systems like barcoding or RFID to capture up-to-date inventory data regardless of the costing method employed.

FIFO (First-In, First-Out)

This inventory costing method assumes the oldest inventory items are sold or used first. The costs associated with the first items purchased are the first to be removed from inventory when sales occur. FIFO is the most widely used method as it corresponds with the normal physical flow of inventory as it provides an approximate cost of goods sold closer to the current market value.

LIFO (Last-In, First-Out)

Under LIFO, the newest inventory costs are recorded against the cost of goods sold first. This assumes the most recently produced/purchased items are the first to be sold. LIFO can result in lower taxable income when prices are rising, as older lower costs are applied to the cost of goods sold. However, it does not track the actual physical flow and can understate current asset values.

JIT (Just-In-Time)

JIT is an inventory strategy focused on receiving goods only as they are needed for production or sale. Minimal inventory is kept on hand by coordinating deliveries to arrive just before products run out. JIT reduces carrying costs and promotes highly efficient inventory turnover. However, it requires intense production scheduling and coordination with suppliers to avoid stockouts.

What are the benefits of real-time inventory management?

Real-time inventory tracking provides several key advantages:

• Eliminate stockouts and overstocking by knowing precisely what you have on hand
• Optimize inventory turnover ratios and reduce carrying costs
• Provide accurate inventory data to improve planning and forecasting
• Enable omnichannel selling by automatically sharing inventory across channels
• Speed up order fulfillment times and reduce costs associated with delays or errors.
• Gain visibility into inventory at multiple warehouses and sales outlets

Real-time inventory management challenges

Implementing a real-time inventory tracking system requires upfront capital investment in barcode equipment, RFID technology, mobile devices for scanning, and inventory management software.

You also need to integrate systems across your supply chain including e-commerce platforms, ERP, warehouse management software, and more to enable real-time inventory visibility. This integration can be complex. Before implementation, it is crucial to assess existing inventory data to identify any discrepancies or issues. Migrating existing inventory data accurately is essential to ensure a seamless transition to real-time tracking and maintain data integrity throughout the process.

Shifting from periodic manual inventory counting to a real-time system also requires retraining staff and overcoming resistance to changing long-standing processes and behaviors. Real-time tracking eliminates the need for periodic inventory counts by providing instant updates directly from the warehouse floor, improving accuracy and efficiency.

Supply Chain Optimization with Real-time Inventory Tracking

Real-time inventory tracking is a game-changer for supply chain optimization. By providing instant visibility into inventory levels across all distribution centers and multiple warehouses, businesses can make smarter, faster decisions to keep their supply chain running smoothly. With real time inventory data, companies can quickly spot and address any disruptions, such as unexpected demand spikes or supply delays, before they impact customer satisfaction.

This level of inventory tracking allows businesses to maintain optimal inventory levels, reducing the risk of both stockouts and excess inventory. Real time inventory tracking also streamlines the movement of goods throughout the supply chain, minimizing lead times and ensuring that products are always available where and when they’re needed. For businesses managing inventory across several locations, real time inventory systems make it easy to balance stock, transfer products between sites, and fulfill orders efficiently. Ultimately, leveraging real time inventory data leads to a more agile, resilient supply chain and a better experience for customers.

Sales Channel Integration and Real-time Inventory

Integrating all your sales channels with a real time inventory management system is essential for modern businesses. Whether you’re selling through online marketplaces, retail stores, or other platforms, real time inventory tracking ensures that your inventory data is always up to date—no matter where a sale happens. This seamless integration prevents costly stockouts and overstocking by automatically updating inventory levels across every sales channel the moment a transaction occurs.

With real time inventory management, you can optimize inventory levels for each sales channel based on real time data, taking into account unique demand patterns, seasonality, and customer preferences. This not only helps you meet customer expectations but also reduces operational costs by minimizing excess inventory and manual processes. By connecting all your sales channels to a unified real time inventory system, you gain a competitive advantage, improve customer satisfaction, and ensure that your business is always ready to meet demand wherever it arises.

The Role of Safety Stock in Real-time Inventory Systems

Safety stock is a vital component of any real time inventory system, acting as a buffer to protect against unexpected changes in demand or supply chain disruptions. By maintaining a carefully calculated level of safety stock, businesses can ensure they always have enough inventory on hand to meet customer needs, even when faced with unforeseen challenges.

Real time inventory tracking makes it easier to manage and optimize safety stock levels. By analyzing historical data and monitoring market trends, businesses can adjust their safety stock in real time to reflect current conditions, such as changes in lead times or demand variability. This approach not only improves inventory accuracy but also reduces the risk of stockouts, helping to maintain high levels of customer satisfaction. With real time inventory data, companies can respond quickly to supply chain issues and keep their operations running smoothly, no matter what the market brings.

Enhancing Operational Efficiency through Real-time Inventory Tracking

Real time inventory tracking is a powerful tool for boosting operational efficiency. By providing instant access to accurate inventory data, businesses can streamline their inventory management processes, reduce waste, and optimize inventory levels across the entire supply chain. Real time inventory management software automates many routine tasks, such as tracking inventory movement, monitoring stock levels, and managing replenishment, which significantly reduces the need for manual data entry and minimizes errors.

With real time insights, businesses can quickly identify inefficiencies and implement process improvements, freeing up staff to focus on more strategic activities. This not only lowers operational costs but also enhances customer satisfaction by ensuring products are always available when needed. By leveraging real time inventory tracking, companies gain a competitive advantage, improve their ability to meet demand, and keep their business operations running at peak efficiency.