Online Inventory Management: What it is and Why it’s Important

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In this comprehensive guide to online inventory management, we’ll take a look at what it is and why your product-based business can’t do without it. We’ll also cover

What is online inventory management?

Online inventory management is exactly that – inventory management, online. A cloud-based software system, online inventory management provides organisations with a digitised, logical, and systematic process to control the inward and outward flow of inventory stock. Crucial to the success of strong growth, and business sustainability.

The automation inherent in online inventory management removes time-consuming and costly manual processes associated with traditional inventory control. It helps companies efficiently manage and maintain inventory stock levels, to ensure that they have the right amount of inventory available, in the right place, and at the right time.

Why is online inventory management important?

Effective inventory control affects every part of your business, from warehousing costs to accurate and timely order fulfilment. Online inventory management is a valuable business tool because it automates inventory tracking, increases profitability, improves customer satisfaction, and generally makes it a lot easier to run your business.

Cloud-based inventory management also has the flexibility to grow with your business. It takes the guesswork out of inventory control by tracking stock levels in real-time. In addition, it allows you to generate accurate reports as and when required. Helping to meet daily demands, improve forecasting, inform decision-making and identify business growth opportunities.

inventory management

The first step to getting your inventory stock in order is to use online inventory management software.

Who uses online inventory management?

Online inventory management can be used by any business of any size, in any product-based industry. The scalability of a good cloud-based platform means that inventory solutions will expand as your business grows.

For manufacturers, online inventory control means better tracking and item-by-item costing of production jobs. Retailers can integrate systems with CRM and POS systems to gain holistic insights into their retail business. Wholesalers can combine online inventory management with modern marketing technology to improve customer experience and suggest solutions for customers every time they visit your website.

Effective inventory control is vital for any business that functions online. Therefore, online inventory management tools are fundamental to the success of eCommerce businesses, where stock-outs will negatively impact your reputation and ultimately, profits. Unique product identifiers generated by online inventory management solutions help eCommerce businesses to track product quantities and sales across a multitude of platforms.

Online inventory management for manufacturers

Manufacturing businesses need online inventory management solutions that offer advanced features for production and operations management. A platform that allows manufacturers to create multi-level bills of material, track inventory costs on an item-by-item basis for each completed job.

Features such as multi-level work orders will allow operations teams to group work orders across multiple production stages, creating a central production plan. Each stage can then be assigned to individual employees with specific instructions and build calculations.

Implementing online inventory management into your manufacturing business will facilitate better tracking of production jobs, more accurate costing, and increase forecast precision with accurate real-time data. Online inventory management will ultimately assist customers through enhanced supply chain management.

Online inventory management for retailers

With eCommerce overtaking the way we as consumers shop, retail managers are frequently seeking out new ways to improve distribution processes to meet the demand for faster customer delivery.

Cloud-based software means retailers can integrate inventory management with other online products such as point-of-sale systems that will notify the inventory software each time an item is sold at the register. Data then flows seamlessly between each system and can facilitate the automatic re-ordering of stock when supplies are low.

Retailers can optimise their entire order-to-fulfilment process with online inventory management. Saving considerable time by avoiding manual procurement tasks and manual inventory control activities.

Online inventory management for Shopify and Amazon

Online inventory management is an essential business tool for eCommerce to effectively manage inventory stock across Shopify, Amazon, and a variety of other eCommerce channels.

You should be able to integrate your inventory management software with your eCommerce and POS software. An online inventory management solution will optimise inventory control sending custom alerts that notify you when inventory stock levels are low. Or the right inventory software can even generate purchase orders and automate the re-order process entirely, helping to avoid or reduce stock-outs of high demand items.

Stockouts are a major issue for eCommerce businesses. They cause frustration and drive your customers to competitors’ stores. Studies have shown that customers who have experienced an out-of-stock situation will look for alternatives in your online store — but by the third time, over 70% of them will go to your competitor. And 91% of visitors won’t engage with a brand they’ve had bad experiences with again. That’s a significant number of potential customers lost to competitors.

On the flip side, eCommerce businesses can experience overstocking issues that tie up cashflow due to poor inventory control. Online inventory management helps eCommerce businesses by updating inventory levels automatically, in real-time.

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How wholesalers use online inventory management

With online inventory management, wholesalers can effortlessly manage inventory across multiple warehouses, keeping track of inventory stock levels in real time. In addition, the holistic view offered by online inventory systems means you can seamlessly move inventory between warehouses to deliver products to your customers, faster and more efficiently.

Having a cohesive view of all warehouses through a single online system provides wholesalers with access to all of their inventory-related data anywhere and at any time. This means they get access to real-time reports on their inventory stock levels, sales activities, and purchases relative to each warehouse.

Wholesalers also instinctively understand traditional upselling and can apply this knowledge to analytics and information generated via online inventory management software. This means they can drive sales by creating customised upselling opportunities, tailored to the customers purchasing history.

inventory managementCloud-based or on-premise? Depends on your business needs but most businesses will suit cloud-based software.

On-premise inventory management software versus online inventory management

On-premise and cloud-based inventory management systems are comparable from a features and capabilities stance. Here’s a quick look at how they compare.

Method of delivery

On-premise software is a program on your computer and can’t be used on any other device. Cloud-based software is usually accessed via a web page and can be used anywhere with an internet connection.

Online inventory management has an intrinsic advantage over on-premises inventory control because browser-driven access means multiple teams can coordinate activities in real-time. Likewise, web-friendly, cloud-based systems adapt efficiently across mobile devices and are also adaptive across a variety of screens.

Features and updates

Many on-premise software and online inventory management software share similar features but differ in how they are updated. With cloud-based software, you leave software updates to the developer and it often happens without you even knowing. On-premise software offers more customisability — you can choose which features you want to use — but is limited by infrequent or challenging updates; user interface and experience can quickly become outdated.

Data ownership

With online inventory management, only the data belongs to the business. The software and server that holds your data is in effect, being rented. With on-premises computer servers, you own all the data and are responsible for keeping it safe.


The non-subscription model of on-premises systems can cut down on recurring costs and will follow security rules of the network it is installed on. However, there are the initial costs of purchasing hardware to consider and the need for ongoing in-house IT support.

With cloud-based inventory management you pay a monthly or annual fee based on the features required. Updates happen automatically and all aspects of the service are managed by the cloud provider. Planned and preventative maintenance is generally carried out outside of business hours to create less disruption. The same cannot always be said for on-premises asset management.

Cloud-based inventory management evolves rapidly with technological advances. Therefore, organisations will always get the most up-to-date version of available software. Equally, online inventory management offers increasingly more and more flexibility and business-specific configuration as technology evolves. Cloud-based systems are also better suited for ease of access than that of the on-premises alternative.

Advantages of online inventory management

Online inventory management provides real-time inventory control. Not only does it give a complete picture of what’s happening in your business with up-to-the-minute inventory data, but it also records every transaction in real time. Some benefits of online inventory management include:

  • Enhanced inventory tracking with barcoding and RFID capabilities help warehouse staff quickly find and pick products from shelves
  • Improved forecasting for better inventory control and optimal use of space, time, and cash flow
  • Improve financial reporting accuracy because there’s one source of data that flows through to the accountants
  • Can be integrated with other cloud-based software to form a customised solution
  • Happy customers that keep coming back because you have stock on hand and can fulfil orders quickly

Common online inventory management systems

Contemporary inventory management systems offer a range of functionality and integration to suit a myriad of business needs. Key to this is real-time data that provides organisations with a true representation of what is happening in the business at any given point in time. Check out the the 19 best inventory management software features to look for.

The take-out here is to understand that the importance of inventory management regardless of whether it is implemented as an on-premise system or an online inventory management solution is key to having a long-term, sustainable business. Effective inventory control drives the success of any organisation that sells and trades products.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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