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The Features of an Inventory Management System

By Kenneth Hamlett, eHow Contributor

Inventory management systems handle the movement and tracking of goodswithin a warehouse or distribution center.

Today's inventory management systems are a far cry from the card systems used many years ago.Today's systems offer numerous data inputs and outputs, feature specialized functions for differentindustries and typically carry large price tags. Most inventory systems have basic features thatallow users to see how much inventory sits in the system and where it resides.

1. Monitoringo Inventory management systems must monitor inventory levels across all

locations, internal and external. One of the chief components of a goodinventory management system is its ability to monitor inventory levels.Every transaction that moves inventory from one location to another,either internally or externally, affects the level of inventory in one or morelocations.

2.Trackingo Besides monitoring inventory levels, a good inventory management system

must track every movement of inventory---from receipts into thewarehouse, goods issued out of the warehouse, movement between storagelocations, picking and packing movements and any other movement fromone location, physically or virtually, to another location.

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3.Automationo Inventory management systems should automate certain functions of a

warehouse operation. Some inventory management systems automateroutine functions such as physical inventory reconciliation, cycle counting,

order fulfillment and transportation and logistics functions. Systems thatautomatically generate inventory management statistics such as life cycleinformation help inventory managers and other users make more informedpurchasing and distribution decisions.

4. Optimizationo A good inventory management system gives users the data required to

optimize inventory levels and warehouse space. Various reports availablefrom the system provide users with information on fast-moving inventory,

slow-moving inventory, inventory reaching its expiration date and "dead"inventory. This information lets users scale the volume of future purchasesup or down to optimize SKU level inventory. It also allows users tooptimize warehouse receiving, picking, packing and shipping by storing thefaster moving items to locations closer to the point-of-use.

5. RFIDo A large number of companies today require radio frequency identification

(RFID) on products. Some companies do not do business with suppliersunless the supplier uses RFID. An inventory management system that does

not handle RFID is antiquated. RFID identifies products flowing into,through and out of a warehouse or distribution center via tags and sensorsplaced throughout the facility. When products move from one location toanother (internal or external) the inventory management system getsupdated with these movements or transactions and moves the inventory

within the system to the correct location.

6. Reportingo An inventory management system must provide reliable reports that are

easy to generate and understand. A good inventory management systemprovides detailed reports of various inventory statistics such as usage,aging, turns, inventory valuation, FIFO/LIFO statistics, cost basis, amounton-hand in units and dollars, amount on order in units and dollars, amountin-transit in units and dollars, amount in work-in-process in units anddollars and also various supplier-related data such as on-time shipmentreceipts.