If you’re a distributor you know how critical your inventory management system is to your business. But is your inventory management system giving you all the functionality and features you need? This article outlines some of the key distributor inventory management software features you should be looking for.

Inventory Management Overview

Wikipedia defines an inventory management system as a software system for tracking inventory levels, orders, sales, and deliveries. Essentially, the inventory management system tracks the stock levels of all products at all times, from being purchased, received into the warehouse, being put on orders that are then shipped, or back-ordered. Distributors rely on the inventory management system to show the quantity of a particular product available to sell, when the product needs to be repurchased and what quantity to repurchase. Inventory management ties in directly to the ordering and purchasing functions and updates the general ledger accounting system to record transactions.

Inventory Workflows

Identifying the key distributor inventory management software features requires first understanding the flow of inventory in wholesale distribution businesses. Inventory management broadly covers the flow of defining your products, then purchasing these products from vendors on POs, receiving the POs, putting away the products received to defined warehouse locations, taking orders for these products, then fulfilling these orders, and finally replenishing your stock by re-purchasing. These workflow elements are summarized below:

  • Define Products. Inventory products can be specified by product code or SKU and can be classified as sales products, raw materials, kit products, bill of materials products, or special order products. They can be organized by group, category, or sub-category to facilitate reporting on these products.
  • Create POs. Products are purchased from vendors through purchase orders.
  • Receive POs. Purchase Orders filled by a Vendor and delivered are received into Inventory.
  • Put-Away POs. When purchase orders are received the products are put-away to assigned warehouse locations.
  • Warehouse Transfers. For businesses with multiple warehouses, products are often moved from one warehouse to another if the stock at a particular warehouse runs out, or as part of centralized purchasing.
  • Inventory Replenishment. When inventory levels drop below the set reorder points, the products are reordered from the vendor in a quantity equal to the Economic Order Quantity (EOQ).
  • Physical Inventory Counting. Do cycle counts or full counts and record discrepancies.
  • Creating Orders. When Customers seek to purchase products they are put on sales orders.
  • Fulfilling Orders. As sales orders get fulfilled the products are picked from the shelves, packed, and shipped, and then the customer is invoiced. Often picking, packing and shipping operations in the warehouse are done using mobile devices and barcode scanners.

Distributor Inventory Management Software Features

The basic distributor inventory management software workflows described above are fairly straightforward, and most inventory management systems support these workflows with basic inventory control functionality. For each product inventory control keeps track of the quantity of stock available on a perpetual basis (i.e., upon each transaction). Each product typically has a warehouse Ledger Card that tracks every transaction that affects that product coming in and going out of this warehouse. In addition to this basic functionality, advanced distributor inventory management software systems have a number of critical features that can substantially improve a distributor’s degree of control and efficiency.

Some of these advanced features are summarized below.

  • Multiple UOMs. Products can be specified in multiple units of measure, specifying the stocking and pricing UOMs, as well as selling UOMs, default selling UOM, PO UOMs, and the default PO UOM. You should be able to order in one UOM and sell in another.
  • Catch Weight. Catch Weight products are widely used particularly by Food distributors where a product is purchased and sold in one UOM (e.g., CASES), but priced by weight (e.g., per LB).
  • Kits. Specify Kits comprised of multiple products. Sell as unfinished kits which are a bundle of products sold together or finished (i.e., assembled) kits that are separate products.
  • Bill of Materials. BOM specifies a set of component products that are processed into a finished product. BOM allows unlimited levels of nested BOMs and is used in process industries or light manufacturing for assembled products (e.g., Furniture distributors).
  • Special Orders. Link a sales order line to a PO and fill the sales order only from the linked PO, either as a cross-dock or a drop-ship. This is widely used in industries (e.g., Restaurant Equipment distribution) where products can be customized.
  • Defective Inventory. Keep track of defective inventory quantities.
  • Hazardous Materials. Keep track of hazardous material quantities and create DOT shipping documents. This is widely used in industries subject to Hazmat regulation (e.g., Chemicals distribution).
  • Serialized Products. Track products by serial number and see a full ledger card by serial number.
  • Lot-Control. Track products by Lot, Expiry Date, and Location. This is widely used in industries where a product chain of custody is required and for possible recall purposes (e.g., Pharmaceuticals).
  • Location Tracking. Specify unlimited Locations per warehouse and associate products with one or more Locations, then track inventory levels of products by warehouse Location.
  • PO Management. Order a product from the Primary Vendor or select another vendor. Keep track of pricing and terms for all vendors that the product was previously purchased from.
  • PO Tracking. Keep track of purchase orders from the time they leave the vendor’s works, through containerization, loading onto a shipping vessel, shipping, port clearance, long-haul trucking, and rail through to local delivery. Update costs and arrival dates continuously throughout the supply chain.
  • RFQs. Send Requests for Quotation to multiple vendors and select the best sourcing by item based on terms and price.
  • PO Receiving. Receive POs in full or partially and put away products to designated Locations within a warehouse.
  • Landed Costs. POs placed on international suppliers can be associated with unlimited types of additional costs such as Ocean Freight, Insurance, Letter of Credit charges Port Clearances, Customs Tariffs, Long-Haul Trucking or Rail charges, etc. These landed costs are all automatically saved with the PO and allocated upon PO Receipt into each product’s average cost. This is particularly important for POs placed on international suppliers
  • Warehouse Transfers. Transfer goods internally between warehouses and support for centralized purchasing.
  • Inventory Replenishment. Specify safety stock, lead times, and use rates. Specify vendor review cycles. Create reorder report that can automatically create vendor POs.
  • Automatically Update Reorder Parameters. Automatically update safety stock, lead times, and use rates based on actual results.
  • Physical Inventory. Do inventory counting by Cycle Counts or Full Counts. Create Count Sheets, record counts, report on discrepancies, and automatically make a GL posting and inventory adjustment to record discrepancies.
  • Orders. Place products on orders, optionally override back-order quantity, automatically create back-orders or optionally specify order as ship-complete only. Auto-print pick tickets and/or delivery tickets.
  • Fill Orders Across Multiple Warehouses. Place orders and specify fulfillment from multiple warehouses.
  • Inventory Status Screen. On a single screen see the breakdown by warehouse of Qty Available to Quantity on Hand, Quantity on Orders, Quantity Picked, Quantity on Back Order. Also, see Quantity on PO and Quantity on Quotes.
  • Credit Memos. Create Credit Memos, issue Return Merchandise Authorizations, and record the return of goods.
  • Fulfillment. See on a single screen, all orders in fulfillment broken down by sub-statuses Ready to Pick, In Picking, Picked, Packed, and Shipped.
  • Back-Orders. Manage Back-orders by specified population to fill from quantity available or force to orders and run replenishment reports to automatically create POs.
  • Online Shopping Carts. Automatically through APIs, update inventory to online shopping carts and automatically pull orders from online shopping carts into fulfillment.
  • Online Self-Service Portal. Automatically update inventory and orders on the online B2B customer self-service portal

Does your inventory management system offer all these features? If not you’re not operating a maximum efficiency and are probably wasting money.

Upgrade Your Distributor Inventory Management Software

Contact ADS Solutions to demo Accolent ERP. Accolent ERP is Cloud-based and delivers all the most advanced features you could want in your distributor inventory management software system. See how these advanced features can improve your efficiency and productivity and save costs by optimizing your inventory levels.