Inventory Management 101: Maximise Potential with A POS System

Inventory Management 101: Maximise Potential with A POS System

Every business that sells some form of product, has a need for inventory and inventory management. Whether it is a retail business that sources products from suppliers for direct sale, or a restaurant that uses raw materials to prepare food items to sell, inventory is involved. Inventory refers to the stock of goods and materials maintained by a business for the purpose of reselling, either in direct or an adapted format. Keeping track of the inventory is essential to make sure you have adequate supply for sale.

Over the years, the process of keeping track of inventory has evolved greatly, from written notes to manually entered details in spreadsheets to modern POS systems. While many businesses still use spreadsheets and other tools, POS systems are an effective way to optimise inventory management. Using a POS system for inventory management is especially ideal if you already have a POS system for conducting transactions. They offer accuracy, speed and reliability in updating inventory records, reducing the need for manual efforts while also preventing human errors.

Inventory management is essential for streamlined business operations and overall business success, and a POS system is an excellent tool for optimising your overall inventory management. Here is a complete guide on inventory management, and how you can maximise its potential with a POS system.

What is Inventory Management?

Inventory management is a business process that refers to sourcing, storing and selling of products or inventory used by a business. The inventory can consist of raw materials, partially finished products or completed products. The complexity of inventory management depends upon the supply chain you have, and the frequency of sales. The inventory of a business is among its most valuable assets, and shortages can be damaging for business. On the other hand, overstocking can be expensive and a waste of resources; again, harmful for business. Maintaining a suitable balance between adequate supply and overstocking, and adjusting the supply with sales, is at the core of inventory management.

The specific inventory management strategies tend to vary based on industry and the products that the inventory consists of. For example, if the inventory has perishable products like food items, they have specific storage requirements and expiration dates. Time-sensitive products like dated stationary or greeting cards, or fast fashion items will again have different inventory management needs. In any case, keeping close track of the products in the inventory is vital for businesses to be able to plan future orders. It can take time to develop an inventory management system and ordering schedule that best suits your business needs.

Why Do You Need Inventory Management?

Investing time, money and resources into inventory management may seem unnecessary, after all, why not just order new stock when you run out? This concern is especially high for small businesses, with up to 46% of small businesses not using an automated system for inventory management.

However, an inventory management system offers multiple benefits, and is a more organised and efficient way of maximising inventory for any business. It allows you to offer seamless service to your customers while optimising operational efficiencies. Here are the top reasons why you should have a dedicated inventory management system:

1.Inventory Tracking

The core purpose of inventory management is its single largest benefit – being able to effectively track inventory. With an inventory management system, you have a centralised view of the current state of your inventory. This includes the products you have in stock as well as where they are located. If you have multiple warehouses, branches, or storage locations, an inventory management system will help you keep track of where everything is located.

As and when sales needs arise, you can allocate products accordingly. If there is a shortage in one location, products can be shipped or re-ordered. Inventory management gives you adequate time to place orders for any products you may be running low on, and to move out slow selling products. An inventory management system is the most effective way to accurately track the state of inventory, and is even more essential when multiple branches, sales channels or warehouses are involved.

2.Cost Control

Managing and controlling costs are essential when you want to increase profits. Inventory management helps you in cost control in many ways, including by lowering ordering costs and lowering carrying costs. It helps you identify top selling products and the items that are not selling well. Accordingly, you can revise your catalogue and reduce orders for unpopular products while increasing supply for best sellers. Apart from controlling costs associated directly with inventory, the process of inventory management itself is cost-efficient.

With inventory management, you can optimise the usage of warehouses, stores and other storage spaces, and mobilise products as needed without reordering. Understanding the current inventory can help you avoid overstocking, thereby reducing expenses for storage of excess items. Businesses can improve space utilisation by up to 20% through inventory management. It can also help you plan in advance, for example for specific events or sales seasons. Last minute deliveries and shipments can be expensive, and with adequate inventory management you can order in advance, saving hassles and extra charges.

3.Improved Customer Service

Competition is becoming fierce in every industry and niche, and it is important to offer customers exceptional service to draw their attention and loyalty. Especially in offline stores and businesses, when a customer has made the effort to reach your business, turning them back can be detrimental for business. By having adequate inventory management, you can ensure that desired products are in stock, and you know exactly where they are.

Even if a particular item requested by a customer is unavailable, you can guide them on when and where they can find it. If possible, you can also consider recommending similar products or deliver the product to the customer when it arrives. With an accurate inventory management system, customers can call in advance to check the availability of desired products before visiting your establishment. Taking initiative with inventory management helps foster trust and builds a stronger relationship with customers, encouraging them to return to your business and show loyalty.

4.Better Planning and Forecasting

Forecasting is considered to be the most important inventory management practice by nearly 61.3% of businesses. Inventory management can help you spot patterns in sales, and better plan for increased or changing demands. With inventory management, you get hard data on sales, helping you identify purchasing trends, popular items and unpopular items. Based on data from your inventory system, you can revise the products you stock. The sales performance of new products and customer response to them can also be analysed through inventory management.

Customers and their preferences tend to vary over time, influenced by latest trends, changing needs, and other factors. Based on your niche and the products offered, you will need to revise your catalogue offering at some point for effective sales. By revising your product offerings to suit the changing preferences of customers, you can increase sales significantly, and improve customer engagement and loyalty. When customers know they will get the latest products from your business, they will have no need to look further.

5.Greater Efficiency

Businesses have noted an improvement of 25% in productivity by having an effective inventory management system in place. Tracking inventory can be a lengthy and cumbersome process if you do not have a system in place, and errors are also more likely. The challenge is even greater if you want to support a larger product catalogue. Inventory management systems make it easy and fast to accurately keep track of stocks, and streamline ordering. They remove dependence on guesswork or scheduled ordering.

An inventory management system helps optimise day to day operations and also saves time for your employees. There is no need to personally check the warehouse and search for any item, as all data is already up-to-date. Alerts and reminders can be setup to notify you when stocks run low and need to be reordered. If you have multiple suppliers, the inventory management system can help you organise and optimise your ordering setup. The performance of products from each individual seller can be tracked, analysed and revised.

Tools for Inventory Management

Setting up an inventory management system that is easy to operate and efficient is a straightforward process. It involves two components, physically tracking the products and inventory management software to turn the data into useful insights. The exact tools you use for your inventory management system will depend upon the volume of products, speed of sale, and budget.

To physically identify and track the products, the top two options are barcodes and RFID tags. They can be used independently or combined.

Barcodes are a powerful tool for inventory management of physical products, whether they are raw materials or finished items. A single barcode symbol can decode to reveal a great deal of data, and a unique barcode can be used for each individual item. This helps keep accurate track of similar products when dealing with bulk volumes. To decode the barcodes, you will need a barcode scanner, and it can either be used handheld or fixed in a position.

RFID tags are used in a similar manner as barcodes, but can be scanned from a distance and can store a massive amount of data. These tags are helpful when you have large volumes of products that you want to scan quickly without scanning each individual item separately. The accuracy of RFID tags is excellent and they are durable, well-suited for transportation and long-term storage. While RFID tags are versatile and can be used to prevent theft, they can also be expensive.

Inventory management software turns the raw inputs collected through tracking systems such as barcodes or RFID tag into understandable and actionable data. There are multiple options of dedicated inventory management software available, with varying features and targeted at different industries. The basic inventory management features remain the same, for example, reordering, asset tracking, product identification and inventory optimisation.

POS Systems and Inventory Management

A point of sale (POS) system is used by businesses to conduct transactions by identifying products, creating a bill, accepting payments and printing receipts. Over the years, POS systems have evolved beyond completing basic transactions. There are two parts of any POS system: the hardware components such as POS terminal, monitor, cash drawer, EFTPOS, receipt printer, and the POS software. Based on the provider, POS software is capable of supporting a wide range of additional features, ranging from customer relationship management to advanced reporting, loyalty programmes and employee management. Inventory management has become a prominent feature of POS systems.

As each and every product sold by a business moves through the POS system, it is an easy way to keep track of sales. The details of sales can be directly collated with the inventory data, enabling accurate real-time inventory management. Since barcode systems or RFID tags are used with POS setups for billing purposes to identify products customers select for purchase, the same barcodes can reflect inventory status. Barcode scanners or compatible readers are already a part of the POS system, and so minimal extra equipment is required for inventory management.

The POS system serves as a real-time input source for inventory management, identifying when each product is being sold. By using the POS system, there is no need to manually update each individual sale, a process that is time-consuming and has high risk of errors. A POS system updating inventory management saves money, time and resources, and is beneficial for businesses of all sizes.

POS systems are specialised for the type of business, for example, retail or restaurants, or hospitality, and are already configured to recognise products sold by that business. The POS hardware components are targeted towards the surroundings and whether the POS setup needs to be stationary or mobile. Meanwhile, POS software is available in general format and industry-specific, and depends upon the size of the business.

There are plenty of POS software providers available, giving you full flexibility to choose one that matches your needs. For example, retail POS systems can offer wider variations for individual products to account for different sizes and colours. Restaurant POS systems can have a separate back office inventory for raw materials and front-end inventory for readymade products.

POS Features for Inventory Management

When you utilise a POS system for inventory management, you can use the POS software for inventory management, or integrate dedicated software. The specific inventory management features you can access will depend upon the POS software you use, or the features of the dedicated software.

The decision on POS versus dedicated software depends upon your inventory requirements and whether you are already using a particular inventory management software that you wish to continue. In general, using the POS software for inventory management is advisable as it will be cost-saving and easier to manage one main interface for sales and inventory data.

Here are some of the popular features of POS software for inventory management:

  • Reporting: One of the top benefits of POS software is their support for detailed reports, and there are specialised inventory management reports also available. With inventory management reports you can have an instant glance into the state of your inventory. The inventory can be viewed on the basis of product type, inventory level, supplier, and date of arrival, and other parameters such as top selling items. The reports can be shared as desired and used for planning promotions, orders, catalogue changes, supplier changes and more.
  • Bulk Importing: When you order items in bulk from suppliers, you want to be able to upload them in bulk onto your inventory management system. Most suppliers will have some form of bulk detailed listing or vendor catalogue that you can adapt for your inventory setup. A bulk upload is fast and efficient way to add a large number of products to your inventory without manually adding each individual item. For repeat orders, similar uploads can be reused with minor changes for the serial numbers.
  • Product Variants: The inventory management system should be able to save and store an adequate number of product variants under a single category. There are customisable matrices available where unique items and their variants can be saved. For example, a retailer storing multiple sizes and colours of a shirt as individual variants or a restaurant recording different variations of a particular spice for a restaurant. While each variant should be traceable on its own, the popularity and overall sales performance can be tracked based on product category.
  • Flexible Bundles: If you plan to sell package deals or bundles, then the inventory management system needs to be able to adapt. With flexible bundles, you can combine low-popularity products or other items to sell as a package deal. While the POS system will bill as a single item, all the individual products in the bundle will be reduced from the inventory to maintain accuracy. In sales reports, you can choose to view these bundles as grouped sales for future reference.
  • Notifications: Inventory management systems can be set up to give automatic notifications when required. These notifications can be for when supply is running low, or if products have been in inventory for an extended period of time, or any other desired parameter. With automatic notifications, you don’t have to worry about manually checking inventory numbers. This helps in maintaining inventory management efficiency, and you can decide the parameters and timelines when you need to be notified, who should be notified and how.
  • Auto-Orders: An inventory management system can do more than just notify you when stocks are running low, it can also place automated orders. While this feature is optional, it can be of great benefit if you have frequent repeat orders. A standard order can be specified and the inventory management system can place the order when needed. This is especially helpful if you have limited storage space and fast supply service. When needed, the standard orders can be revised or placed on hold for auto-ordering.
  • Integrated Sales Channels: It is becoming increasingly common for businesses to have more than one sales channel to increase sales and establish branding. The popularity of online shopping and ease of managing eCommerce sites has made it a great complement to an offline business. Whether you have multiple offline locations or a combination of offline and online sales channels, an inventory management system can merge and manage all the data effectively. As required, you can view inventory and sales data individually for each sales channel to track performance, or the overall inventory for ordering purposes.
  • Stock Transfer: When you have multiple storage locations, with or without different sales channels, it is important to know where everything is located so that stock can be transferred as needed. If you have a large volume of smaller items this can be tricky to attempt manually. Inventory management can help you track the location of products and aid in efficient transfer of inventory from one location to the next. Accurate inventory counting enables you to avoid losing products or ordering multiple when not required.
  • Promotions: For any business, offering promotions, discounts and deals are an excellent way to increase sales and sell otherwise slow-moving inventory. If you want to offer major sales, the inventory management system should enable instant updates of prices across product categories, without requiring each individual price to be manually changed. The inventory management system can also help you identify slow-moving products that should be used for discounts on a priority basis. Depending upon the reason for discounts, you can choose to view the sales differently. For example, high sales of discounted products that were earlier not popular can indicate that the product was not in-demand at full price and might not be advisable to re-stock.

Advantages of Using a POS System for Inventory Management

Most often, a business that sells physical products will have some form of point of sale system to conduct transactions. That same business will also need inventory management to keep track of stock. Merging POS systems and inventory management is a great idea to streamline operations and reduce costs. There are multiple advantages of using a POS system for inventory management, whether you use POS software or dedicated inventory management software integrated with the POS system. They are:

  • 1.Instant Updates: When a POS system is used for inventory management, as soon as a sale is made, it can be reflected in the inventory. There is no need to separately record sales.
  • 2.Accuracy: There is greater accuracy of inventory when a POS system is used, since all confirmed transactions are updated.
  • 3.Centralised Management: Regardless of the number of suppliers, storage facilities, stores, sales channels or business premises, inventory management is unified and centralised.
  • 4.Flexibility: Using a POS system for inventory management gives you full flexibility to explore and try out the features you need, and that suit you best.
  • 5.Greater Efficiency: For greater efficiency, using a POS system for inventory management is ideal as it reduces expenses, frees up resources, saves time and helps increase profits.


Inventory management is key to business success as only by optimising your supply can you gain the highest profits from your sales. Keeping track of current inventory, speed of sales, last date of products, and suppliers is vital. With adequate inventory management, you can ensure that you always have stock of popular items, are not wasting too much space on slow-moving items and are regularly revising your catalogue.

If you are involved in the sales of products, you will undoubtedly have a need for a POS system to conduct transactions. A good quality POS system can significantly help in business success and with inventory management. An adequate label printer and barcode scanner can help with physical tracking of products while POS software provides inventory management features or support with integration. Choosing the right POS software and POS hardware components is vital.

Here at POS Plaza, you can find a full range of good quality POS hardware components, label printers, accessories and consumables. Reach out to us today to discuss your POS needs and find an ideal POS solution within your budget.