Welcome to chapter 16 of our inventory management guide. This chapter will detail the importance of automation in inventory management.
‘Automation’ is another big word we often throw around in this inventory management guide. Now, it’s time to see how it connects many elements of inventory management and helps improve processes.
Confused? No problem. Head back to the inventory management guide home page.
Can Inventory Management Be Automated?
Yes, using a perpetual inventory management system, various inventory management tasks can be automated. You will not be able to automate processes with a periodic inventory system.
In recent years, there has been a significant push to automate as many tasks as possible in warehouse inventory management.
Our reliance on inventory management software has increased, so improving your technical skills is essential. Inventory managers need to understand how these processes can be automated and how they work.
Ideally, using software that makes it easier and doesn’t require too much technical expertise to the point where you need developers to get it to work how you need it to.
What Is Automation in Inventory Management?
In inventory management, the number of areas that can be automated is almost endless. Practically any scenario where information is being exchanged is an opportunity for automation.
In simple terms, automation works when certain information is received within the system. Automation relies on conditional programming that typically has an ‘if this, then that’ logic, though some may have a more complex process.
For example, if a predetermined level is reached or an action is performed, the system activates another action.
Automating as many areas as possible is a best practice in inventory management. Many of the software tasks used in inventory management can be automated.
However, you must still check certain areas, as mistakes can happen. Hence, cycle counts are still important.
What Are the Benefits of an Automated Inventory Management System?
The benefits of automated inventory management are pretty vast and will improve many areas of your business operations. Here are five of the most important benefits of automated inventory management:
- Improve accuracy and reduce human error.
- Save time.
- Save money.
- Promote growth.
- Boost overall efficiency.
Let’s look at each benefit in more detail below.
1. Improve Accuracy and Reduce Human Error
Automating inventory management tasks improves stock accuracy as less inventory is unaccounted for, miscounted, or entered incorrectly because of human error typically caused by employees overlooking something or taking shortcuts.
According to some sources, the human error rate is 1 in 1,000. So, for approximately 1 in every 1,000 actions, humans will make at least one mistake.
It may not sound significant, but ideally, that level should be zero, as you never know how much time will be lost trying to solve that one problem.
Reducing human error will improve report accuracy, positively impacting many inventory management areas. For example, you might not realize that you have inaccurate stock levels because of undetected human error.
It also means you can rely on your reports more than you used to because you know the data is more likely to be correct, and you will spot potential problems significantly earlier.
Finally, accuracy directly affects your ability to forecast properly and improve inventory tracking (check Chapter 7 for more on inventory tracking systems).
2. Saves Time
Mundane tasks can be done exceptionally quicker when you adopt automation, and inventory management has no shortage of mundane tasks.
With such tasks out of the way, your business will be more efficient, and you will have more time to focus on more pressing issues.
Furthermore, because you have better access to more accurate data, you will waste less time on mistakes, be more direct with your tasks, and speed up decision-making.
On top of that, spotting problems earlier means you can prevent them from becoming bigger problems later on.
Automation also means that everything can be recorded, which improves warehouse visibility. Staff can see where things are and who did what, saving employees’ and managers’ time.
As an added benefit, automation also impacts employee satisfaction as they can spend more time on more important tasks and are upskilled to learn new ones.
According to a report cited by Forbes, as many as 53% of employees say they can save up to 2 hours of work a day through automation—that’s approximately 240 hours a year.
3. Saves Companies Money
It’s important for any business’s survival to cut costs where possible. Every dollar you save will take the company further, and your business will last longer.
Though software is an additional expense, automation features will lower costs when used effectively.
This is because automation eliminates common mistakes that can cost companies money. For example, the chance of inventory breaking, sending customers the wrong products and dealing with returns.
According to a study by Salesforce, 57% of departments prioritizing automation reported between 10% and 30% cost reduction. Consumer goods saw some of the highest cost savings.
Furthermore, you might not need as much staff as before, or they might not need to work as many hours because you reduced the time it takes to complete tasks.
4. Helps Companies Grow
With extra time and more money, companies can divert their attention away from tiresome manual tasks and focus on efforts to take the company to the next step—exploring all those fresh ideas for growth.
Delegating tasks to the software through automation also means you can make better, data-informed decisions, and your company will grow by providing a consistent service.
Your company will also be better equipped for a changing market, which is vital for any business that operates in a fast-moving environment.
Tray.io says that companies using automation “see more than double revenue growth [and] significantly higher overall profits.” Furthermore, “Companies using business automation grow revenue 220% faster.”
5. Boosts Overall Efficiency
The biggest benefit a company can gain from automation is the boost in productivity and efficiency. A more efficient company lasts longer and is more reactive to change, whether a big change in the supply chain or changing trends in product demand, for example.
More importantly, automation increases efficiency by helping you get a lot of work done in a short period. According to Kissflow, “94% [of] companies perform repetitive, time-consuming tasks.”
On top of that, automation helps track activities, helping you understand your real performance, set realistic targets and KPIs, isolate problems, and work towards improvement.
Automation also helps companies stay ahead of their competition as they can aim to be more efficient than they are and provide a better service. Kissflow also claims, “67% of companies use business process automation.”
How to Automate Inventory Management?
First, you need to understand what you can and cannot automate. Based on how your business operates, some areas may be ripe for automation, but others are unsuitable.
You should also be aware of how automation will affect your staff, how to train them effectively, and how common processes will change.
Jumping to automate every process without thinking about the consequences could lead to growing pains. Some processes may take longer to get right as you try to figure out how to automate them properly.
With a clear idea of what you want to automate, you must adopt software with the right features.
However, before that, compatibility is a key factor when looking at software. You must check what you are already using will work with the software. Ideally, you want to change as few integrations and services as possible.
It will be an added benefit if the software is customizable, as not every company needs to integrate the same automations. Some will not be applicable because of the way your company operates.
Customizable inventory management software should include the option for plugins and integrating APIs to connect the services you need.
Automation relies on your system receiving the proper information to activate certain functionalities, so if the information comes from outside services, it needs to be able to reach your system to activate them.
Note that you may need a developer to help with this, depending on the complexity of the software.
What Are the Features of an Automated Inventory Management System? Top 5
While every company works differently and has different requirements, some areas are almost always the same. Here are the top five components an automated inventory system must have.
1. Automatically Send Inventory Updates
When things get busy, you can get distracted by the workload, forget to keep track of inventory levels, and not notice that you’re in desperate need of reordering.
However, when you use software, these common tasks can be automated. The software won’t get distracted by the workload and forget.
2. Reporting and Analytics
Reporting and analytics go hand in hand with automation. Every time an automation is activated, a record can be made to inform your reporting and analytics. You will likely collect more data than if you weren’t using an automated system.
With this data, you can better understand how well your company handles inventory management and set targets for improvement.
3. Alerts and Notifications
You should be able to set moments to receive alerts and notifications about processes in the warehouse.
You can then act on these notifications when received. You may take different actions depending on when you get them and the circumstances.
Alerts and notifications improve warehouse visibility, too. You don’t have to be on the warehouse floor every moment to know what’s happening.
4. Real-Time Tracking
Real-time tracking relies on automation and can help you prevent stockouts and overstocking. Automation especially can help track things such as inventory levels, locations, and movements.
5. Forecasting
Automated forecasting can save companies a lot of time. You can get work done while the system calculates what you’ll need for the coming period and automatically orders it when stock levels reach a predetermined level.
When inventory reaches a certain level, the automated inventory management system reorders the necessary inventory according to its forecasts.
Check Chapter 14 for more on inventory management forecasting.
What Is Smart Inventory Management?
‘Smart inventory management’ is a term sometimes used for inventory management systems that use automation and other intelligent features to improve the inventory management process.
Sellercloud also falls under the banner of smart inventory management.
In terms of inventory management automation, Sellercloud offers advanced automation features, such as automatic kit creation and the ability to automatically import orders.
Sellercloud is also highly customizable software, allowing for even more automation. For starters, it features custom reports and cost calculations.
Furthermore, with integrations such as Zapier, inventory managers can find more creative ways to automate their everyday tasks.
Lastly, you can also request more custom integrations, which can further help with automation (or whatever you need them for).
Key Points From Chapter 16
You’re now prepared to automate your inventory management and take it to the next level. Remember these key points.
- Inventory management processes can be automated, and it is a best practice to automate as many processes as possible.
- The top benefits of automating inventory management processes are improved accuracy, saving time and money, helping companies grow, and boosting efficiency.
- Before automating your inventory management process, ensure you understand what you hope to achieve through automation.
- An automated inventory management system should offer automatic reordering, reporting and analytics, alerts and notifications, real-time tracking, and forecasting features.
- Sellercloud offers various automation features and customization features, which open the doors to even more automation.
Chapter 17 will focus on how to improve the inventory management process.