Inventory management is a critical aspect of any wholesale business. Efficiently tracking and managing stock can lead to improved customer satisfaction, better financial control, and overall operational efficiency.
Whether your wholesale business deals with physical goods, raw materials, or finished products, having an effective inventory system in place can be the decisive factor that can make or break your operations—therefore, choosing the right inventory management system can significantly impact the profitability and overall productivity of operations in your business.
As far back as 2012, according to The Grocer’s latest Big 30 survey, the average pre-tax profit margin made by the UK’s 30 largest wholesalers is a “razor-thin 0.8%”. This notably includes the losses recorded by some of the major wholesalers in the UK that year. Conditions have only become more challenging for wholesalers in the UK over the 12 years leading up to 2024.
Since efficiency and savings in inventory management contribute in a large part to the overall profitability of wholesale businesses, this is one key area you need to focus on in achieving the generally desirable gross profit margins of 15-20% in your business.
Read on to explore the various types of inventory management systems that wholesale businesses can use and determine which one is best for maximising outcomes in your business.
Types of inventory management systems that are commonly used in wholesale businesses
Wholesale businesses of all scales and sizes resort to using a few common systems for managing their inventory based on the priority they place on this function or due to cost constraints. While the effectiveness of these systems may vary from business to business, some of the more modern and comprehensive systems deliver better and consistent results and have proven to be better overall.
Here are the most prevalent inventory management system types in the wholesale sector and how they are used:
Manual inventory management
Despite many technological advancements that have brought about automated stock control systems to the forefront, some small wholesale businesses still rely on manual inventory management.
This method involves tracking inventory through spreadsheets, written records, or simple software like Microsoft Excel. While manual systems for inventory management can be cost-effective for very small businesses to implement and use without the need for specialised training, they are prone to human error and can be time-consuming and inefficient for modern wholesale operations.
The most common drawback of manual management of inventory is its considerable lack of accuracy, especially as operations scale up. Additionally, manual systems lack real-time data updates, which can lead to stockouts that lead to lost sales and dissatisfied customers who will not get their orders fulfilled or to overstocking which can inflate stock holding costs significantly.
Periodic inventory management
Commonly used in wholesale businesses that order stocks from manufacturers in large batches that are meant to last and be sold over a longer period of time, periodic inventory systems involve physical counting of inventory at regular intervals. Stock counts are typically taken monthly or quarterly, sometimes weekly, for businesses that have shorter inventory cycle times.
Stock levels are updated in the records based on these counts. The simplicity of implementation and lower initial setup costs compared to automated systems make periodic inventory management appealing.
However, it is labour-intensive, requiring frequent manual counts, and can lead to significant discrepancies between actual and recorded inventory due to the lack of real-time tracking.
Moreover, reconciliation of stock levels and identifying the reasons behind any shortfalls can be a drawn-out and time-consuming process that requires detailed audits that could rack up overall costs of operating this system over the long term.
Perpetual inventory management
This method of managing inventory encompasses most automated types of inventory management systems. Perpetual inventory systems use technology to continuously update inventory records in real time as transactions occur. Typically integrated with POS systems, barcode readers, and even RFID technology in advanced cases.
The main advantage of opting for this system is the accurate data provided with regard to all aspects of the inventory management process. The ability to gather data effectively and generate insights through comprehensive analytics and reporting will allow wholesale business owners and managers to establish better decision-making.
Perpetual inventory management also allows for real-time inventory tracking which significantly reduces human error while also boosting savings in labour costs and hours as extensive stock reconciliations are avoided.
Although there is a comparatively higher setup cost and training involved in the integration of a perpetual inventory management process, this is ideal for growing businesses that will soon require the greater scale and optimal efficiency offered by this system.
Furthermore, when taking long-term returns and savings into account, opting for the perpetual inventory management method by investing in wholesale EPOS systems is a wise decision for wholesale businesses of any scale.
Considerations to take into account when choosing the right inventory management system
Specific requirements pertaining to the relevant industry should also be taken into account. Different industries have unique inventory management needs. For example, businesses in the food industry might need systems with batch tracking and expiry date management, while electronics wholesalers might prioritise real-time tracking and anti-theft features.
Integration capabilities are another important factor. Ensure the chosen types of inventory management systems can integrate seamlessly with your existing software, such as accounting systems and e-commerce platforms, enhancing data accuracy and operational efficiency throughout the entire process.
Scalability is also crucial for future growth. Choose a system that can grow with your business to avoid the need for a complete overhaul as your business expands. Consider the ease of use which is essential for reducing training time and ensuring smooth adoption by your staff.
Maintain optimal inventory management efficiency with wholesale EPOS systems tailored to your needs
The team of specialists at WITMEG has decades of expertise and experience in helping wholesale businesses across the UK achieve their goals of greater operational efficiency and profitability with EPOS solutions that deliver proven results.
Reach out to us with your inventory management requirements and through a simple consultation, our team will closely assist you in identifying and integrating the right types of inventory management systems that provide the levels of performance you desire.