The Best Inventory Management Software of 2022

Typically, inventory management software, on average, costs approximately $100 per month, though lower-cost solutions are available. The most expensive software can cost up to $3,000 per month or might come with a one-time licensing fee of a few thousand dollars.

The key factors that determine cost are the size of your business, the volume of your inventory, the number of orders you receive, and the number of locations you need a system to cover.

Key takeaway: Inventory management software ranges from $100 per month to $3,000 per month, or there can a one-time licensing fee of a few thousand dollars. Important factors include the size of your business, the amount of orders you receive and the number of locations you operate.

Inventory management software helps businesses monitor their stock in their stores and storage facilities, keeping track of where products are physically located, when they sell, and when more quantities need to be ordered. This software ensures that your stock of goods is updated in real time, and it can automatically import and export key data to and from other systems, like POS software or accounting software.

This type of software eliminates the double entry of data in spreadsheets and accounting software. It streamlines tracking the location of your products and raw materials, plus it helps you implement an order-management plan so you never have too much or too little of a particular item in stock. Inventory management software also offers detailed reporting so you can regularly review and analyze your business's inventory across multiple locations.

The best software hinges on the type and size of the business. For example, a single location retail business requires a less complex software application than a manufacturer that needs to track raw materials and finished products. As a business grows to multiple locations, a more comprehensive inventory management software is needed.

Inventory management software should supplement a thorough manual process. Your staff should be properly trained on how to scan items so the system is up to date. To learn more about how to implement an inventory management plan, read our article on effective inventory management strategies all businesses should employ.

Key takeaway: Inventory management software helps businesses monitor their products and raw materials. It also implements order-management protocols so you always have an optimal amount of stock on hand.

Here's a closer look at what an inventory management software includes and how these features support your business.

• Point-of-sale integration: Integrations with your inventory management and POS system allow you to track transactions at physical stores and on e-commerce platforms. Whenever a product is scanned at a register or checked out in an online cart, the order quantity is automatically deducted from the total inventory. This feature is especially important for businesses with multiple sales channels, where transactions could easily be overlooked and could skew the inventory.
  
  
• Inventory catalog: Many retailers carry a variety of the same product type, such as, for example, T-shirts in various sizes and colors. Inventory management software often includes a catalog that distinguishes products by size, color, and other characteristics and tracks how many smalls, mediums, and larges are in stock, as well as how many of each size are available in various colors.
  
  
• Automated reordering: Using the software's order-management tools, you determine the minimum quantity you need on hand of a given item. When your inventory reaches that pre-determined quantity, the software automatically reorders it. This tool helps you avoid running out of stock and, conversely, having too much on hand. The most sophisticated programs analyze historical sales data and adjust reordering points (and quantities), accounting for lead time for products to be ordered and shipped from suppliers.
  
  
• E-commerce integrations: Many businesses rely on e-commerce to supplement physical sales, while other businesses only sell online. The best inventory management software integrates with multiple e-commerce channels, including online marketplaces like Amazon or e-commerce platforms like Shopify.
  
  
• Barcode scanning: When storing inventory in a warehouse or a storage room in the back of your retail shop, you need to know how many of each item is on hand and where they are physically stored. Barcode scanning enables this quickly and easily, allowing staff to scan items as they arrive and as they are placed in storage. Then, when an item sells, staff can quickly look up where the item is stored and scan it. Each scan automatically updates your inventory accordingly. Some barcoding features can be done with a simple QR reader on a smartphone, reducing the hardware you need to purchase.
  
  
• RFID capabilities: The most advanced inventory management software enables RFID tags, which automatically track the movement of items through a warehouse without the need to scan them. By placing RFID tags on items, and affixing RFID scanners throughout the storage facility, items are automatically logged as they arrive at the loading bay, as workers place them in aisles and bins, and as they leave the warehouse for their final destination. This further automates location tracking and ensures human error (such as a worker forgetting to scan an item after moving it) doesn't result in inaccurate data entering the inventory management software.

Consider these pros and cons when choosing an inventory management system for your small business:

Pros

• Efficiency: Inventory management software automates several labor-intensive, time-consuming processes, such as tracking the location of items and reordering when quantities run low. The more you can automate these jobs using software, the more resources you save – your team no longer has to manually count your stock of ingredients or goods; they can focus on more important tasks.

• Cost savings: This optimization can translate to your balance sheet in two ways. One, you're no longer paying staff for hours of labor (or overtime) meticulously counting each item. Two, many inventory management solutions automatically adjust the reordering threshold so you are more precisely ordering realistic quantities of the items you need. For example, if you sell shoes and your bestsellers are red Air Jordans, the system sets a higher minimum quantity, reordering when, say, only 10 pairs are left so you have a sufficient supply to meet demand. Alternatively, if your worst-selling shoes are Crocs, the system might set a lower minimum and maximum, reordering when you're down to two pairs and only keeping 10 pairs. Because the system is maintaining optimal quantities of stock at any given time, you are putting cash flow to better use.
  
  
• Accuracy: An inventory management software with automated item tracking helps ensure your records are up to date. When integrated with your POS or accounting software, the inventory management system shares important data automatically (and vice versa), avoiding costly errors that occur when a human manually enters incorrect data into multiple systems.

• Scalable: Most inventory management software programs easily accommodate growth, such as if you open a second store or lease a warehouse. Starting small with your software plan is wise; for example, if you are a single-location retail store, you might purchase the lowest-volume plan. As you expand to two or more locations, you can add additional features or select a higher pricing tier. Eventually, when the time comes to open a warehouse, the right inventory management system accommodates your new needs there as well.

Cons

• Expensive: Of course, inventory management software represents an additional expense for your business. In some cases, it involves a significant upfront investment for a license plus a recurring annual fee to maintain support and receive software updates. To avoid spending too much on inventory software, budget accordingly, and select a system that offers the features you need to keep your costs manageable.
  
  
• Incompatible: There is some variation between inventory software solutions and the type and size of businesses they are designed for. For example, if you operate a small manufacturing company, it might seem more cost-effective to purchase a lower-priced software program; however, if that software is better suited for another type of business, perhaps a single-location retail store, for example, you will soon find the system does not meet your needs. Similarly, if a retail store implemented a system designed to track raw materials for manufacturers, believing they might need the ability to track materials (say the store sells an ingredient separately from their flagship product), they will spend a lot more than they need to on a system. Additionally, the system is going to be more complex, and the learning curve will be higher. The best way to circumvent this is to understand your operations and how inventory management software enhances your business operations.

Key takeaway: The pros of inventory management software are increased efficiency, cost savings, greater accuracy and scalability. The cons are cost and incompatibility (if you select a solution that isn't suited to the type or size of business you run).

To ensure your inventory management software solution integrates with your most important systems, businesses have two options.

Larger, more established businesses should consider an enterprise resource planning platform that includes an inventory management software component. These platforms include several key systems rolled into one, including POS software, accounting software, payroll software and customer relationship management software.

Smaller businesses that don't want a sprawling platform should select a system with open APIs that can be used to integrate with third-party software. Many inventory management program come with pre-built integrations to major platforms like QuickBooks or Salesforce. Choosing a system with an open API allows a vendor to build integrations to whatever other systems you use in your business.

Key takeaway: Larger businesses may want to isolate their search to enterprise resource planning solutions, whereas smaller businesses may want to choose software with open APIs or pre-built integrations to your favorite software.

Manufacturers require more specialized features. If you are a manufacturer looking for inventory management software, look for these two features:

• Product cost analysis: Product cost-analysis tools track your raw materials, as well as your finished goods, reordering the necessary components when they hit minimum levels. These solutions also help you predict labor costs and how much you spend on operating costs, such as machinery acquisition and ongoing maintenance expenses.

• Forecasting: Forecasting analyzes historical production and sales data to predict what your future order management needs look like. Software with a forecasting feature analyzes your data to determine optimal reordering points, it can provide hiring recommendations, and it can propose shift schedules so you're able to reach your targets and continue growing.

Key takeaway: Manufacturers require more specialized features, including product cost-analysis and forecasting tools, to catalog and track items your business needs, and to ensure your manufacturing business is running efficiently and keeping up with consumer demand.

We asked small business owners what makes a good inventory management platform and which solution they use in their business. Here's what they said:

Brett Downes, creative director and founder of Haro Helpers Inc., said he prefers Cin7 because of its vast knowledge base, which includes expert articles and videos detailing its in-depth features.

"In addition, Cin7 provides in-house experts to guide you through the setup process, plus plenty of webinars, tutorials and extensive guides," Downes said. "After that, you'll have a dedicated account manager at your disposal. We also love that Cin7 can sync up easily with your POS system."

Caspio, a no-code to low-code software builder that allows users to create a system tailored to their needs, is the preferred software for Max Harlan, CEO of Dentaly.

"Caspio offers extreme cloud functionality without the need to hire a professional team of programmers," Harland said. "The interface is easy to use, even for non-coders. Users without any knowledge about Java, Python or other coding languages can create a data-centered application based on the web."

Customized security and compliance standards, as well as 24/7 live chat support, are among the other reasons Harland likes Caspio.

Paul Lewis, CEO and founder of ScrumExplainer, said inFlow Inventory allows him to successfully run his retail business. Unlike other software that he has tested, such as Locate and Kechie, inFlow Inventory lets him easily track and manage orders.

"It eliminated my dilemma about the redundancies in invoicing and packing slips," Lewis said. "I never have to worry anymore about having enough stock on hand. With just a single glimpse, I can easily tell the exact stock count and pinpoint which ones need ordering. And, on top of [that], I love the idea that I can add barcodes and use images in the same place."

If he had to point to a downside of inFlow Inventory, Lewis said it would be its lack of integration with e-commerce marketplaces. "But overall, it's the best inventory management software I've tested so far that offers great product visibility from receipt to sale," he said.

Market research projections released in June 2021 by Market Insight Reports, projects significant growth in the global inventory management software industry. The market analysts estimate that the space will grow at a compound annual growth rate (CAGR) of 8.1%, reaching a total value of $2.85 billion by 2024, up from $2.083 billion.

Market research suggests that the adoption of inventory management software has grown largely due to improvements in the software, the expansion of e-commerce businesses, and industry-specific growth (particularly in the healthcare space).

August 2021: Fishbowl, a QuickBooks solution recently announced the launch of the first annual inventory management and growth summit on September 28, which is intended to "help small- to medium-sized businesses and new entrepreneurs … to 'Learn, Grow, and Scale,' the theme for this year's event." The summit will include keynote speaker Daymond John, CEO and founder of apparel line FUBU and Shark Tank investor. In addition, John will be joined by Intuit chief revenue officer Bobby Morrison and vice president of partnerships Gavin Orleow, as well as Navy SEAL John Choate and two-time MLB MVP Dale Murphy.

To determine the best inventory management software for small businesses, we spent dozens of hours researching software solutions based on the common needs of small business owners (best overall, price, ease of use, integrations). Here is the methodology we used in selecting our best picks:

Locating the Best Services

We reviewed nearly 50 vendors. We examined their websites, marketing materials, user reviews and Better Business Bureau scores to narrow down our initial list.

Choosing the Best Services

This left us with a dozen finalists, which we reviewed in depth. We evaluated our finalists on criteria that included, to name a few, pricing, ease of use, features, third-party integrations, scalability and tech support.

Researching Each Service

We called each finalist to discuss product features and implementation in more detail and tested trial versions where available. Ultimately, we ended up with the following best picks: Cin7, Lightspeed, QuickBooks Commerce, Oracle NetSuite and Fishbowl.