IS-Based Inventory Management System - Essay Example

LOGISTICS AND OPERATIONS by goes here] [your goes here] s [due the paper] Logistics and Operations 1. Introduction Inventory management is one of the key functions of every manufacturing company. The basic meaning of the term inventory is record or list of products. Inventory includes the record of all those materials that a company uses in the process of product manufacturing, as well as the record of the products that a company manufactures to sell out. Companies use different types of inventory systems to keep track of work-in-process goods, raw materials, and manufactured goods that are parts of a company’s assets. Companies usually use inventory systems to control the inflow and outflow of stock. According to Airman (n.d.), different companies use different types of inventory systems for inventory management and asset tracking. Inventory systems help managers in keeping track of assets and stocks, as well as in knowing where and when they have used their assets within companies. Some of the widely used inventory systems include information services inventory system, fixed asset inventory system, and information system (IS) for inventory management. All of these inventory systems are useful as they help companies keep an eye over stock and assets. In this paper, we will discuss IS-based inventory management system in order to know its effectiveness, as well as the way managers can use this to track deliveries. 2. IS-Based Inventory Management System In today’s age of information technology, almost every company and organization is making a good use of technology based information services to carry out business activities. An information system (IS) based inventory system is one of such tools which helps managers keep track of incoming and outgoing stock. According to Kietzman (n.d.), inventory software is a specialized computer-based program that is used to keep track of the stock inventory, quantity, location, and current status. IS-based inventory management system deals with the use of information technology tools to help managers in doing information processing and management. An information system is a part of internal business control system that deals with a company’s inventory information, stock keeping procedures, and information technology. IS-based inventory systems help managers in tracking deliveries while improving efficiency and keeping control of business processes. A manufacturing or distribution company can never be successful without an IS-based inventory management system because IS keeps proper record of information related to inventory that managers can use for analysis and decision-making purposes. IS-based inventory management system ensures delivery of correct and up-to-date information to intended receivers. An IS-based inventory management system differs from management information system (MIS) in a sense that MIS is concerned with collection, processing, and retrieval of all information related to the company, whereas an IS-based inventory management system deals with the stock of the company and helps managers in taking inventory-related decisions. 2.1 Key Tasks of Inventory Management Software If we talk about key tasks of an IS-based inventory management system, we can say that an inventory management system is capable of performing various tasks related to the management of stock. Some of those tasks include tracking stock levels, creating work order, tracking sales and deliveries, generating bills, avoiding product outages, storing information in appropriate locations, keeping track of stored information, and generating stock related reports. An inventory management software is an essential part of a company as it stores data in the form of information and helps managers in processing, analysis, and dissemination of collected information. The IS-based software presents information to the concerned department in the form of a well-documented report that consists of information related to those activities that inventory managers need to execute. An IS-based inventory management system also helps managers in setting and achieving long-term strategic goals and objectives. Financial and manufacturing companies also use inventory management software to keep a complete and accurate record of inventory and finance related information. One of the most important aspects of inventory management software is that it keeps the information up to date, which is critical for the success of a manufacturing company. Inventory management systems regulate stock keeping mechanisms which results in improved stock management. Therefore, we can say that an inventory management software is an imperative part of any stock keeping company. 2.2 Main Components of Inventory Management Software While talking about IS-based inventory management system, let us get some information about some of the main components of the inventory management software. Some of the integral components of an inventory management software include asset tracking, order management system, and cost management system. The software tracks the assets stored in the warehouse using the barcodes associated with each asset. The software associates a barcode with each asset which helps managers track each asset using their respective barcodes. The software gets the barcode as an input and tells managers whether the item associated wit that barcode is in the stock or it has been delivered already. Another component of an IS-based inventory management system is order management system which helps managers track the delivery of orders to the customers. Some companies get orders and deliver products to the customers. Order management helps managers know whether they have delivered the products to the customers or the products are still in the stock. The managers take decision based on the report generated by the software. Third important component of IS-based inventory management system is cost management. This feature helps managers know the cost of the raw material and the products available in stock. All of these components play a vital role in ensuring efficiency of IS-based inventory management system. An IS-based inventory management system of a company helps managers store customers’ requests in the system properly, as well as helps them retrieve the information when needed. In an internet based company, information retrieval needs to be extremely accurate and fast as there are a number orders in the queue waiting for processing. Therefore, managers need to process information quickly while ensuring information reliability. Online companies need to ensure delivery of orders to the customers within time in order to maintain their reputation and customer base. This is only possible when such companies make use of efficient inventory management software that can help them assess the current status of stock. The analysis helps managers know whether they have required items in stock or they have to arrange more items to fulfill customers’ needs. 2.3 Operating an Inventory Management Software Operating an IS-based inventory management system is not an easy task as it has to deal with all business operations, processes, and employees. It requires a skilled and highly qualified team of professionals to carry out the tasks related to inventory management system. The tasks that maintenance professionals perform include maintenance of existing systems, analysis of efficacy and competence of existing systems, and implementation of up-to-the-minute systems and technologies where required. IS-based inventory management system is one of the main systems of any company because it helps managers take appropriate decisions, as well as expand their businesses in other markets. 2.4 A Need in Today’s Competitive Environment Success of a company without implementation of an IS-based inventory management system is impossible in today’s world of competition. As Smith (2009, p. 1) states, “When the amount of inventories is huge, it becomes next to impossible to keep record of the number of inventories manually by counting them.” Today, a company using manual mode of inventory management cannot achieve competitive advantage in market. The reason is that there is a lot of competition among production companies these days and only those companies get competitive advantage over others that keep up to date information of stock. 2.5 Benefits Related To Inventory Management Software IS-based inventory management system provides companies with considerable benefits related to inventory management. Some of the main benefits that companies get using inventory management software include reduced carrying costs and tracking of products on route from production plants to warehouses and from warehouses to retailers and customers. Companies use IS-based inventory management system for many purposes related to stock management. Some of those purposes include maintaining balance between required and available stock, tracking exact location of the inventory, ordering more products to production houses in case of stock shortage, keeping track of the cost of raw material, keeping track of deliveries, and cutting down inventory management costs. Let us discuss some of the main benefits of inventory management software in some detail in order to know their significance. 2.5.1 Accuracy Accuracy is one of the main benefits that a company can get using IS-based inventory management system. Managers need accurate reports regarding stock in order to take correct decisions regarding inventory management. Inventory management software generates accurate reports regarding stock status which managers can use to know the current status of available items and raw material. IS-based inventory management system also provides companies with accuracy of internal controls, which is essential for proper functioning of an online company. Inventory management software helps managers keep complete and accurate record of sock accessible through mobiles, PDAs, and laptops. Using inventory management software, managers do not need to go to each warehouse personally to check the status of stock. They can do this activity using their own computer systems being anywhere in the world. It also reduces travel costs for the companies because managers do not need to go personally to warehouses and spend time to know about stock levels. 2.5.2 Timeliness Quick information processing is another main benefit of IS-based inventory management system. Companies using inventory management software can get more time to spend on business matters than to spend on inventory management. Timeliness is extremely important for an efficient information system because it improves performance of a company, as well as helps the company achieve competitive advantage in any market. Implementation of IS-based inventory management system makes information ready to be retrieved by different departments of the company. The data collection and processing time also become less which results in saving time of the company’s employees and customers. Moreover, managers also get more time to assist their employees in different job matters than to spend time on analyzing different aspects of inventory. 2.5.3 Completeness and Relevance Completeness and relevance are two more benefits of using IS-based inventory management system to track deliveries. Inventory management software provides only that information to managers that they need to carry out some specific business operation. The software prepares a properly assembled report which is free of any irrelevant or unrelated information. The reason is that irrelevant details lead to wastage of time, as well as to delayed decisions. An efficient inventory management software is one which can provide complete but the most relevant information to the users. With the implementation of IS-based inventory management system, users get the information that they actually need. For example, if a user wants to know the total number of items in stock, he/she will get the exact within no time. The user will not get any extra information which may distract his/her attention from the actual matter. Similarly, if a user wants to know the cost of raw material, he/she will only need to enter the query. The software will show the actual cost on the screen on the computer system which will also save the user’s time. Therefore, we can say that IS-based inventory management system provides the most relevant information to the users, as well as saves precious time of manager and employees. 2.5.4 Consistency Data consistency is another major benefit of using IS-based inventory management system. The inventory management software stores and processes collected data in a consistent manner. There is no issue of time delay in using such software. In today’s age of information technology, more and more companies are making use of inventory management software to enjoy its considerable benefits. Inventory management software ensures data consistency, as well as presentation of information in the form of a well-structured report. The software never provides employees with incorrect data or information. A human being can make errors in counting but an information-based software does not disappoint its users. For example, if a user wants to calculate the total number products available in stock, the software will tell the correct number. The only requirement is the provision of correct information to the software’s database because the software provides information based on the information stored in its database. Provision of accurate data to employees and managers is the core aspect of an effective inventory management software. The reason is that if the software will not process and compile in a consistent manner, it will be very difficult for the users to do their job tasks effectively. 2.6 Limitations of IS-Based Inventory Management System Along with a number of considerable benefits that inventory management software provides to companies, there also exist some limitations. Two of the major limitations of using such software include expense of buying the software and training of employees. Many small companies cannot afford to buy such software because they are very costly and need big money for maintenance and upgrade purposes. As mentioned earlier, such software products use barcodes to track stock items and deliveries. Buying barcode readers can also be a major problem for small companies. Moreover, employee training can be an issue both for large and small companies. Managers need to provide effective training to their employees in order to make them proficient in the use of inventory management software. 3. Conclusion Summing it up, an IS-based inventory management system is one of the integral parts of any company as it keeps proper record of all information that managers and employees need to run business activities in an appropriate manner. Implementation of IS-based inventory management system plays an effective role in making the company reach heights of success in a short span of time. Inventory management software helps managers get consistent and accurate inventory information in a timely manner. Therefore, we can say that inventory management software is a key towards success of a company in the XXI century. References Airman, J., n.d. What Is an Asset Inventory System? Available at [Accessed 11 August 2012]. Kietzman, S., n.d. What is Inventory Software? Available at: [Accessed 11 August 2012]. Smith, A., 2009. Inventory Management Software for Effective Warehouse Goods Management. Available at: [Accessed 11 August 2012]. Read More