The Ultimate Guide to Inventory Management System for Warehouse (IMS & WMS)

Inventory management in a warehouse involves not only knowing what stocks are available but also ensuring that the right products are present in the right quantity at the right time. An inventory management system (IMS) comes into the picture there.

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An Inventory management system is an online-based tool that simplifies how companies manage their inventory by tracking and analyzing it in real-time. In the case of warehouses, this will entail having control over the movement of all the products, from the time they enter the facility to the time they are released. Managing one facility or three, IMS makes sure that your inventory levels are always up to date, replenishment is automatic, and data supports operations decisions.

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Many individuals tend to equate an IMS with a warehouse management system (WMS). The two are important but in different ways. A WMS is driven towards the daily activities in the warehouse, and thus it deals with actions such as picking, packing, and shipping. A more general inventory-related process that an IMS addresses includes stock forecasting, order management, and replenishment planning. 

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They both act as pillars of efficient warehouse activities. However, an IMS alone has the potential to drastically decrease inventory mistakes, enhance stock visibility, and improve fulfillment realization, particularly in a growing business where the supply chain is complex.

Why do you need an inventory management system for your warehouse 

Contemporary warehouses operate under the pressure of accelerating their operational patterns, maintaining accuracy, and expanding their capacity without increasing overhead. However, when one does not spend a sufficient amount of time understanding how to manage inventory without the proper tools, the whole process becomes hectic. That is when an inventory management system (IMS) would come in handy; it addresses essential business issues and paves the way to scalable, error-free expansion.

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1. Poor tracking and visibility

Spreadsheets, manual or unlinked systems, will not help today in managing a warehouse. According to a report, 72% of retailers intend to transform their supply chain operations using real-time visibility through automation, sensors, and analytics.

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In the absence of real-time tracking, it is challenging to maintain accurate stock levels, which can lead to oversales, stockouts, or unnecessary reorders. An IMS provides real-time access to every SKU, in multiple locations in warehouses, so managers can make decisions faster and more interactively.

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2. Inventory inaccuracies lead to lost revenue

Incorrect inventory is an expensive issue. A study discovered that retailers all over the world lost 1.77 trillion dollars in inventory distortion in a year (overstock and out-of-stock problems combined). These losses are especially likely in warehouses that handle a high volume of stock or fast-moving items.

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An IMS can automate stock count checks, barcode scanning, and alerts. When properly implemented in a company, its inventory accuracy rate can increase, significantly reducing the number of mis-picks, backorders, and expensive returns.

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3. Scaling operations without chaos

Whenever a business expands, either through the addition of product lines, establishing new warehouses, or entering new markets, manual systems become obsolete very quickly. IMS also ensures a centralized control whereby teams manage multiple warehouses, vendors, and sales channels, all in one dashboard.

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Having such a unified structure can enable the company to scale its operations and expand without having to proportionally increase its staff and their expenses proportionally, thus being more sustainable.

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4. Time and labor inefficiency

The time-consuming physical method of inventory tracking is both time-consuming and prone to human error. In the absence of automation, teams will spend numerous hours managing stock, correcting discrepancies, and reconciling stock.

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IMS software makes functions such as cycle counts, reorder alerts, and stock transfer automatic. This not only saves time but also gives warehouse employees time to concentrate on other activities that hold more value to the organization, such as accuracy of fulfillment and customer service.

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5. Data-driven decision making

What an IMS does, however, is not keep track of inventory; it converts data into interesting information. The warehouse managers can identify slow-moving SKUs, prepare for seasonal demand, and prevent capital from being locked up in deadstock. Businesses can also have real-time performance measurements with access to built-in analytics and reporting, making it easier to predict future performance and keep inventory turnover in good health.

Key features of a warehouse inventory management system

Inventory management systems are not always created equal. In the case of a warehouse, inventory management software should accommodate rapid processing, real-time accuracy, and cross-location control. 

The following are some of the major characteristics that you ought to find in a good, robust warehouse IMS:

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1. Inventory tracking in real time

Real-time tracking is at the centre of any IMS. When products are received, moved, picked, or shipped, the system keeps the stock levels in check automatically. This real-time can reduce errors, avoid overstock or stockouts, and also provide a live inventory view by warehouse managers of all locations.

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Why it matters: Less lag in data updates, which in turn increases the accuracy of orders and customer satisfaction.

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2. Scanning of barcodes and RFID

Barcode and RFID (Radio Frequency Identification) technology eliminates the chances of manual data entry errors and improves processes. Barcodes are scanned at each step (receiving, picking, or packing) to ensure that the right item is in the right place. RFID takes it a step further by scanning items without needing to be in line of sight, which is especially useful in high-speed or high-volume environments.

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Why it matters: Increases picking and packing accuracy and decreases picking mistakes up to 67%. 

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3. Multi-location and multi-warehouse

An ideal IMS will support multiple warehouse locations, bins, and areas. At the same time, it should provide centralized control and reporting, so that inventory decisions are based on a single, organization-wide perspective on stock level capabilities, whether they exist within a single large DC or multiple regional or franchise warehouses.

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Why it matters: It supports expansion and helps coordinate inventory management across multi-location operations.

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4. Returns & Reverse Logistics Management

Returns are unavoidable in certain fields, and within the warehouse setting, such as apparel or e-commerce. A warehouse IMS should help you efficiently process returns (as well as keep track of the reason for returns), and once items have been authorized, reintegrate them back into inventory without affecting the workflow.

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Why it matters: It helps recover revenue lost due to returned goods and reduces friction.

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5. Alerts & notifications

The best systems offer configurable alerts for low inventory, stale stock, impending expiry, or reaching a reorder point. These alerts help get ahead of potential problems and prevent stock-outs for lost sales, as well as stock that sits (unproductive) in the warehouse.

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Why it matters: It helps you stay ahead of issues rather than being reactive, trusting automated alerts instead of people to trigger or take action.

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6. Analytics and inventory dashboards

Data is only valuable when it is actionable data. A quality IMS will feature intuitive dashboards and customizable reports that will display inventory turnover, holding costs, order cycle time and SKU performance.

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Why it matters: To make wiser purchasing, fulfillment, and inventory planning decisions.

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7. Easy integration with other systems

An effective IMS needs to integrate fast to your current tech stack ( ERP (SAP, NetSuite), e-commerce ( Shopify, Magento), WMS or accounting systems ).

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Why it matters: To eliminate silos, sync data across departments, and augment operational efficiencies.

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8. Demand forecasting and replenishment

Advanced IMS platforms incorporate AI or algorithms to analyze historical sales data to project demand and automate the reordering of products stocked. The best systems eliminate out-of-stocking and reduce the guesswork involved in replenishing stock, which supports taking advantage of spikes and dips in demand.

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Why it matters: Eliminate over-stocked and stockouts, maximize the use of working capital, which supports strategic purchasing.

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The above elements present the foundations of offering warehouse inventory management on an efficient basis. The better your system is automated and integrated, the more efficient your warehouse systems will work, particularly as you increase the number of orders and the complexity of the order process increases with your operational level.

Benefits of using an inventory management system in your warehouse

Moving to an inventory management system doesn't just allow you to "track stock"-it completely changes how your warehouse functions. From enhancing accuracy to enabling better strategic planning, the right IMS provides operational advantage for the long haul. 

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Let's identify the main benefits you can expect:

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1. Better inventory accuracy

Countless inventory discrepancies between a company's recorded stock and actual inventory levels produce mis-picks, delays in orders being shipped, and unhappy customers.

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With an IMS, inventory is updated automatically anytime stock is received, picked, or shipped out of the warehouse. With that kind of accuracy, costly errors are reduced, and inventory can be reordered confidently, ensuring sellable stock is always available.

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Impact: Fewer stockouts and mis-shipments, better overall customer experience.

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2. Quicker and more accurate order fulfillment

According to a report by PwC, 78% of customers are unlikely to reorder after a poor delivery experience. An IMS helps improve the fulfillment process by providing directions to every location of the products and indicating whether those products are available for immediate shipping. 

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If the IMS is integrated within warehouse automation or e-commerce platforms, this operational efficiency means a faster pick, pack, and ship experience. 

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Impact: Meets SLAs and delivery expectations without increased labor effort.

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3. Cost savings through better stock control

Keeping too many unwanted goods occupies working capital and results in holding costs (storage, insurance, obsolescence). Running out of stock will mean lost markets.  An inventory management system (IMS) is in that balance with relevant information and the ability to forecast. 

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Automating their replenishment processes and flagging the poor performers in terms of stock-keeping units (SKUs), a business can effectively reduce inventory carrying costs and prevent poor replenishment actions. 

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Impact: Optimal inventory levels = more cash flow and warehouse optimization.

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4. Smarter forecasting and demand planning

An effective IMS is not only capable of tracking past performance, but is also able to predict your demands in future. It will be driven by the past and seasonal trends, and in specific instances, also by the lead times of the vendors.

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This can be of great benefit in businesses whose demand occasionally takes a giant leap, such as electronics or fashion items. Making sure of what you require in advance eliminates upbuying and losing what could have been a peak event of all time. 

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Impact: Data-driven decisions leading to improved profitability and waste avoidance.

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5. Better utilization of warehouse space

Inefficient inventory processes can lead to over-stuffing, empty zones, and lost square footage. A solid IMS can support the tracking of items at the bin-level along with optimal storage assignments. 

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Some systems will even recommend where to store items based on their velocity (slow or fast), which helps improve layout efficiency and reduce travel time. 

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Impact: Greater throughput without expansion of warehouse square footage.

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6. Less dependence on labor

Manual inventory audits and reconciliations are labor-intensive, slow, and prone to errors. An IMS automates mundane processes, such as cycle counting, transferring stock between warehouses, and replenishment alerts, which puts staff back to value-added activities.

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Impact: Increases staff productivity and reduces staff training for new hires.

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7. Real-time reporting and performance metrics

It becomes simpler to make decisions when all relevant details about the accuracy of orders, turnover, and back-order are known in real-time. The dashboards can also be used to find out the bottlenecks, the seasonality and the blind spots of the operations which would be rectified in advance.

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Impact: Continuous improvement and accurate real-time data.

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8. Increased compliance and traceability

The healthcare, food, and electronics industries require stringent compliance standards around batch numbers, expiration dates, and recalls. An IMS provides the full traceability of every product movement, from supplier to end customer, at your fingertips.

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Impact: Fewer compliance risks and easier audits.

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9. Improved collaboration between teams and systems

Every department relies on inventory data: marketing, procurement, sales, and logistics. When the IMS is integrated into your larger tech stack (ERP, accounting, WMS), every team is working off the same accurate inventory data.

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Impact: Fewer silos, smoother workflows, and greater consistency across the business.

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The benefits of an IMS build up over time. The more efficiently your warehouse runs, the better customers you will serve and the easier it will be to scale your business.

Industries that benefit from a warehouse inventory management system

While every company with inventory can use an inventory management system, some businesses rely on them more heavily because of the volume, velocity, or complexity of their business processes. Below are some industries that utilize a warehouse IMS, where it would not just benefit them, but it would be imperative. 

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1. Retail and E-commerce

Retail businesses, and specifically omnichannel ones, have to deal with numerous SKUs, seasonality, returns, and the pressure of immediacy continuously. 

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A warehouse inventory management system enables omnichannel retailers to have one distinct overview of their inventory, which can show them what they have in their warehouses, stores, and e-commerce. The tool assists inventory managers to implement practical tools such as auto reorder points, reverse logistics, and POS systems, and e-commerce sites such as Shopify, Magento, and Amazon.

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Why it matters: it allows stores to keep accurate stock levels across each sales channel, eliminates overselling, and can help reduce the time to fulfill purchase orders.

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2. Third-party logistics (3PL) providers

3PLs operate with inventory for multiple clients, at times, across multiple locations.  They must have applications that allow them to service client workflows, billing, and performance reporting.

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An IMS for 3PLs will allow multi-client management, real-time visibility, and integration with client platforms, providing accurate tracking & billing.

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Why it matters: Operational trust and scalability, reduce disputes and manual reporting.

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3. Food and beverage

Traceability, expiry date tracking, and stringent compliance requirements (like FIFO and FEFO) are a huge focus in the food industry. When dealing with food, it is imperative that products are rotated properly and managed based on batch, lot, or expiry dates.

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An IMS can assist to track the expiry dates and use FIFO logic and also to manage recalls, in case they arise. It is also helpful in cold-chain tracking of the inventory.

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Why it matters: It matters as it supports compliance with food safety and lets remove spoilages and waste.

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4. Health care and pharmaceuticals

This area requires a high level of consistency and regulation, and requires tracing of products from beginning to end. Inconsistent inventory levels, mismanaged expiry dates or batch numbers, or incorrect management of either could be fatal.

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An IMS can help to manage batch numbers, track expiry dates, keep records of storage conditions, and maintain records of regulatory documentation for FDA or ISO compliance. IMS systems help keep track of medical devices, controlled substances, and more.

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Why it matters: It improves safe and compliant inventory control while managing operational risk.

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5. Apparel and fashion

Fashion retailers usually have a lot of SKUs, such as colors, sizes, styles, and high return volumes in general, inventory takes place quickly, and seasonal declines can sometimes make it even more complicated.

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A fashion-specific IMS would allow SKU-level variances and also monitor returns and reshelves, and integrate with digital catalogs or websites to show real-time information on hand, inventory.

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Why it matters: enables an accurate forecast of inventory, quick reorders of stock, and a smooth returns process.

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6. Electronics and high-tech

Most electronics and high-tech companies can manage expensive, fast-depreciating, or fast-moving inventory. Components can often be small and expensive, increasing the importance of traceability and loss prevention.

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An IMS can manage serialized inventory (by supporting or tracking serial numbers), manage warranty and repair inventory, and connect with manufacturing planning systems for tighter inventory control.

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Why it matters: prevents loss, allows for better traceability, and helps manage complex BOM (bill of materials) inventory.

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7. Manufacturing

Manufacturers require agility to track raw materials precisely, work-in-progress (WIP), and finished goods. With an IMS, manufacturers can monitor inventory and production progress across various stages of the manufacturing process, all while supporting integration with ERP and MRP systems. As a result, lead time and raw material planning improve, as does the finished goods availability.

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Why it matters: It supports lean manufacturing by eliminating production delays and enabling just-in-time production, which in turn ensures finished goods availability.

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In all of these industries, a warehouse inventory management system will facilitate more efficient processes, lower transportation and production costs, and, ultimately, improve customer experience. The more complicated the warehoused and inventory-regulated products, the more beneficial an IMS solution becomes for your operations.

How to choose the right inventory management system for your warehouse

When it comes to finding an inventory management system for your warehouse, it's easy to feel overwhelmed with all the options available. Not all solutions are designed the same way, and missing the right one can cost you time, money, and momentum.

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Here is a breakdown of what to look for to ensure that you select an inventory management system that works for how your warehouse operates now, and for where it is heading in the future.

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1. Scalability

You can start with a system that meets your current needs, but be sure it is also scalable for future growth. Can it accommodate additional users, additional SKUs, or additional warehouses? Can it accommodate international shipping, multi-language, or multi-currency? Look for solutions that offer modular upgrades, so you do not outgrow your inventory management system in twelve months.

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2. Ease of use and onboarding

An IMS should not make your task more complex than it is, so choose an inventory management platform that is easy to use with an intuitive dashboard. Particularly if it doesn't take months of training or involve an overly complex setup. 

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If a provider has a good onboarding platform, has training resources, and offers phone support, it's even better.

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3. Cloud-based and mobile access

Being cloud-based means you can access your inventory data from anywhere at any time and also share it with your team when needed. This offers enormous advantages when teams are remote and/or have multiple business locations. 

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Mobile access is also crucial, where warehouse team members can scan a barcode, receive inventory, and update records on handheld devices. 

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4. Integration capabilities

Your IMS doesn’t exist in a vacuum; however, it requires integration with other systems. Look for seamless integration with your ERP (i.e., SAP, NetSuite, Microsoft Dynamics), e-commerce platforms (Shopify, WooCommerce, Amazon), shipping tools (ShipStation, EasyPost), and accounting systems (QuickBooks, Xero). This will avoid duplication of data entry, errors and ensure that you have visibility in your operation.

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5. Support for your specific industry

There are also portable IMS and industry-specific ones (fashion, healthcare, or 3PL). Choosing an IMS that covers a particular industry will therefore most likely have a module or feature that streamlines your processes.

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6. Comprehensive reporting 

A solid IMS does not just provide an inventory count; it offers an in-depth inventory analysis. 

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Find customizable reporting and visual dashboards that can help you discover:

• Inventory turnover.
• Deadstock.
• Backorder rates.
• Forecasting accuracy.

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7. Security and data compliance

If you are in a regulated industry like healthcare, food, and more, you need a compliant IMS (FDA, HIPAA, GDPR, etc). Most importantly, ensure the provider can meet the security requirements around data.

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8. Total cost of ownership

Pricing is a key consideration, but don’t stop with just the subscription cost. 

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Think about:

• Set-up fees.
• Hardware requirements (if any).
• Integration costs.
• Customization costs.
• Training or support costs.

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Several cloud-based solutions offer a pay-as-you-grow pricing model, which can be affordable for small or mid-sized warehouse operations.

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9. Customer support and vendor reputation

Your IMS provider should be a partner, not just a vendor. Evaluate the customer support model. Do they offer help 24/7? Do the support teams know the intricacies of warehouse operations?

Do a bit of digging in the reviews on G2, Capterra, Software Advice, etc., to see what real users are saying.

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Ultimately, selecting the right IMS for your business is an investment in operational excellence. Put the time in to review your options with oversight from your IT, warehouse, and procurement stakeholders. Along with the discussions, invite your stakeholders to speak with the IMS providers as well to include their opinions in your decision-making.

IMS vs. WMS: what’s the difference?

Inventory management system (IMS) and warehouse management system (WMS) are terms sometimes used synonymously, but they are different, yet complementary systems.

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To ensure you are making a knowledgeable technology decision, it is important to understand where each fits into your operations and their capabilities to work together.

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What is an IMS (inventory management system)?

An IMS is specifically used to track, monitor and control the amount of stocks be it in different warehouses, retail stores and distribution centres. It enables its users to monitor the level of stock, search items, set reorder points and absorb the value of the stock taken; in stock.

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Think of it as a system that answers the following questions:

• How much inventory do I have?
• Where do I have it?
• When do I need to reorder?

What is a WMS (warehouse management system)?

A WMS incorporates a detailed look at the workflow of a warehouse as a whole, that is, receiving, picking, packing and shipping. WMS focuses on such processes of that workflow as the use of the space, the efficiency of the labor force and the network of the automated tasks in the warehouse.

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Think of it as a system that answers the following questions:

• How do I manage my space and resources in my warehouse?
• What is the most efficient way to fulfill this order?
• How do I optimize routes and picking paths?

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Here’s a quick comparison to highlight the distinction between the two:

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Top Warehouse Management and Inventory Management System Providers

Selecting a warehouse inventory management system can dramatically change how your business operates. Here are five popular choices that cater to various industries and business sizes, ranging from agile retailers to complex, multi-tier, multinational supply chains. 

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1. Fynd WMS 

Fynd WMS is a fast, flexible, and real-time visibility cloud-based system that manages the warehouses. Fynd WMS is recognized for its user-friendly interface, quick implementation cycle and helps the business to track the inventory, automation of flows, handling returns, and expansion over multiple geographically distributed warehouses. 

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Fynd WMS has the potential to integrate quickly with popular marketplaces and ERP systems and appears appropriate for retailers, D2C brands, and 3PL providers whose purpose is to modernize their fulfillment processes with minimum effort.

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2. SAP Extended Warehouse Management (SAP EWM)

SAP EWM is arguably the most comprehensive enterprise-level warehouse management application. SAP EWM is extremely robust in different functional areas, including slotting, task interleaving, labor management, and real-time process control. 

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SAP EWM is well-suited for larger organizations with complex supply chains or logistics networks. It will keep the logistics operations all running in lock-step across their global operations. Although it is expensive and requires substantial resources to implement, its scalability and accuracy make it an industry leader for organizations with high-volume, high-accuracy fulfillment requirements.

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3. Oracle NetSuite WMS

Part of the larger Oracle NetSuite ERP ecosystem, Oracle's NetSuite WMS provides end-to-end visibility into inventory and warehouse processes. The features of the WMS include mobile barcode scanning, bin and wave picking, inventory cycle counting, and real-time reporting capabilities. 

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It is aimed towards growing mid-sized to large enterprises. It will be able to integrate seamlessly with NetSuite financials, CRM, and procurement and by having the capability of using all that NetSuite offers facilitates the betterment of decision-making across all departments. 

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4. Zoho Inventory

Zoho Inventory is a low cost, scalable solution in terms of managing inventory and orders and is ideal in streamlining those of a start-up and small to medium business. It has multichannel sale, barcode, inventory reconciliation, and real-time stock update among other features. 

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It is also integrated with various platforms, including Shopify, Amazon, eBay, among others, and this can enable businesses to adapt to changes and respond to them swiftly. Although it is more inventory and order management-oriented than a standalone WMS with its deep end capability in on-the-floor operational automation, it offers a lot of value and flexibility to smaller operations and smaller brands on the rise.

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5. QuickBooks Commerce (formerly TradeGecko)

QuickBooks Commerce combines inventory management with sales and accounting to provide a perfect solution for e-commerce brands and wholesalers already using QuickBooks. QuickBooks Commerce enables order processing, backordering, and inventory alerts, with shipping integration to platforms like ShipStation and DHL.

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While it may not handle the advanced, granular warehouse floor processes of a full WMS, it is an excellent fit for small businesses with a simple working style and is very affordable. All of these five providers offer an excellent mix of functionality in relation to different types and sizes of businesses.

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Regardless of whether your business is a fast-scaling D2C brand, an established distributor, or an omnichannel seller, selecting an appropriate IMS/WMS platform, you could diminish the number of errors, accelerate delivery schedules, and make smarter cross-supply chain decisions altogether.

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In today's business climate where a competitive edge is achieved through speed, accuracy and flexibility, outdated inventory procedures can easily negate all efficiencies your warehouse may achieve. 

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Being in possession of the right system minimises errors, cuts costs and leads to enhanced decision making processes, which makes your warehouse turn into one of the most important drivers of your business. Speed is crucial, and as the organization expands, its ability to obtain a dependable picture of the inventory in real-time at every point of contact becomes critical.

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The challenge becomes being able to find a system that you can apply to your particular needs today and can grow with tomorrow to survive, and in fact thrive in an ever more competitive business environment.