Inventory Management Software Market Restrained by Low Adoption

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Managing inventory is a crucial practice in retail and ecommerce industries more so than ever. After all, when COVID-19 left everyone to their own devices at home, people from all over the world trooped to online stores for retail therapy. This trend is still ongoing even though the threat of the pandemic has tapered off. As such, many retailers and food businesses have opted to rely on a solution designed to impart convenience amid a sharp increase in supply chain activity—inventory management software.

These platforms have been gaining traction, given today’s retail and ecommerce demands. A report from Global Industry Analysts anticipates the inventory management software market size to rise from $1.6 billion in 2020 to $3.2 billion by 2027 at a compound annual growth rate (CAGR) of 9.8%. Both the software (9.2% CAGR) and services (10.8% CAGR) segments are primed for notable growth within the forecast period.

However, despite the decent growth of the market, its gains do not appear to be commensurate to the staggering rise of ecommerce. While the market’s performance is driven by the innovative solutions developed by software producers and the growing need for inventory accuracy, it is held back by a lack of awareness of inventory management systems. Not knowing the true value of these platforms, some consumers are prevented by high costs and the reluctance to forego manual and outdated systems to buy into inventory management software.

As a result, numerous inventory management challenges plague global supply chains despite the presence of software systems built to resolve them. In fact, recent small business statistics show that only 18% of small businesses leverage inventory management solutions. These concerns, if left unaddressed, lead to inconsistent stock, unfulfilled requests, higher expenses, dissatisfied customers, and ultimately a drop in returns.

The Horrors of Human Error

Based on a report from Industry Today, 46% of warehouses consider human error as their biggest concern. This stems from the use of manual systems to address complex situations, according to 62% of warehouse managers. After all, warehouse employees have to deal with the massive volume of orders coming from all over the world, which lead to conditions that contribute to the occurrence of errors like fatigue, stress, and rigid multitasking. On many occasions, staff have to fulfill orders beyond their capacity and commit errors in the process.

The warehouse isn’t the only place inventory errors typically occur. A report by Wasp Barcode found that employees using spreadsheets to track inventory are likely to commit a mistake for every 300 keystrokes. A likely reason for this is the tediousness of recording and updating inventory data from large volumes of concurrent transactions. And the growing number of digital shoppers in the United States and in other parts of the globe means things will get even more challenging in the long run.

Human errors are nothing to scoff at. Missing or misplaced figures can result in losing inventory, customers, and profits. These can also cause delays, higher expenses from duplicated items, and lost opportunities from unexpected stockouts.

Inventory management software solutions minimize human error by properly organizing inventory and streamlining warehouse workflows. In using one, managers can properly categorize all products. Any movement in the inventory is recorded with just a few keystrokes and updated for all users in real time. Moreover, these platforms automatically track inventory, packaging, and stock transfers, among others, reducing the burden on warehouse staff.

Persistent Use of Spreadsheets

In today’s digital age, it is surprising that 67.4% of supply chain managers still use spreadsheets for managing inventory. Even more shocking is that 43% of small firms do not religiously monitor their inventory. The discrepancies caused by these lead to company-wide repercussions.

While there’s nothing wrong with using spreadsheets, these are ill-equipped to process large volumes of orders. Creating consumer profiles also entails a lot of work and consumes too much time, which potentially results in errors and delays. Moreover, spreadsheets don’t always account for all the inventory-related workflows surrounding operations. As a result, data silos may be formed while some workflows would be disjointed.

Using a sophisticated software solution resolves a lot of inventory management challenges. Harnessing AI, some systems enable users to integrate and automate order processing, billing, inventory, and financial management. Some are even capable of forecasting the demand for inventory, which reduces stockouts and the oversupply of goods. Furthermore, inventory management platforms provide functionalities to all inventory workflows. The aforesaid features are far beyond the capabilities of spreadsheets and manual processes.

Lack of Visibility

The lack of visibility in inventory workflows is a two-pronged concern. First is the hardship of locating items in an expansive environment like a warehouse. Workers have to exert a lot of effort to find and obtain ordered items, especially if they are not properly categorized. The other issue is finding ordered items from and updating the stock on outdated listing systems like spreadsheets and paper-based databases. A delay from any or both of these avenues could result in unfulfilled orders, dissatisfied buyers, or customer loss.

Although inventory management software can’t really help with the physical distance of items in warehouses, it can impart convenience in organizing and labeling a wide variety of products. The platform enables users to implement any categorization scheme, which could then be applied to how items are arranged in warehouses for easier retrieval. In addition, comprehensive systems can apply tags and turn mobile devices into barcoding tools that automatically update inventory for all users. Inventory management systems also automatically send notifications on desktops and mobile devices for every inventory-related development.

Going back to the Global Industry Analysts report, there is a clear demand for inventory management platforms, as the market gradually gains traction globally. Now is the ideal time for software providers to ramp up their marketing efforts. Should the buying public recognize how much the software improves inventory management, the market’s annual growth rate would likely reach double digits.