How Inventory Management Technology is Evolving: Insights

8 min

There's not a single time in history when inventory management wasn't crucial to business operations. Even ancient cave dwellers needed a way to manage wood stockpiles—their primary source of energy then! But the need to accurately audit products or raw materials, manage customer expectations, avoid overstocking, and keep supply chain overheads in check has substantially influenced the transformation that inventory management has had over time.

Powered by intelligent software and the cloud, stock control has gradually morphed into a vital enterprise resource planning (ERP) function. It's becoming increasingly smarter, delivering real-time visibility into the supply chain, giving warehouse managers in-depth demand analytics, and helping retailers, distributors, and manufacturers keep costs down and grow profits. Let's take a look at the inventory management evolution through the years.

Taking a Physical Count in the Early Days

Before inventory management became automated, traders used to track their stocks by taking a physical count. They would record results on sheets of paper because computer databases were not available to them. Their manual techniques presented an array of challenges, including:

  • Inaccuracy: Someone's bound to make a mistake or miss something when manually counting items sold in a single day.
  • Tedious: Without computers, keeping count of hundreds or even thousands of items, from livestock to foodstuff, was a daunting task. The need to take a second or third physical count for more accurate results made the manual process even more cumbersome.
  • Costly and labor-intensive: Merchants would often hire more than one person to manage and count large stockpiles, which increased management costs. Personnel would record each purchase and continuously keep an eye on sold and unsold items each day. This approach impacted employee productivity in a big way.
  • Poor record keeping: Recordkeeping with pen and paper has never been reliable. It gets even more complicated when recording or looking up different brands and product categories available in a retail store.
  • Lack of centralization: There was no centralized database for record-sharing purposes. If a merchant expanded to a new location, they'd have to create new files and record information afresh.
  • Lack of scalability: The primitive system wasn't growth-friendly.
  • Slow: Manual counting would take ages to complete, so it was challenging for merchants to obtain an accurate picture of stock movement at any single time. Store managers couldn't determine what was available for sale and what needed replenishing, in real time. Stock imbalances and out-of-stock were persistent problems for business people then.

Punch Card Business Applications

The manual way of tracking items and managing business data wasn't going to last beyond the industrial revolution that had taken off during the late 1700s. A more efficient supply chain and better customer services at the point of sale were becoming increasingly critical objectives for retailers and manufacturers. But enterprises weren't going to accomplish their goals without a reliable data entry and storage method, and therefore, punched cards couldn't have entered the scene at a better time.

Herman Hollerith developed the world's first punch-card-based data representation system for use in the 1890 U.S. census. Holes in sheets of paper or cardboards represented data. Later in the 1930s, inventors at Harvard University came up with an improved punch card system for processing and presenting information. It could capture and store different types of business data, including inventories. This semi-automated solution allowed retail stores to record, look up, and retrieve product information by inserting punched cards into a computer. Companies could also track sales data and other financial transactions with the technology.

Stores began using the system to bring some level of organization in the checkout process. Since a punched card could carry data on items available for sale in a brick and mortar store, a shopper would fill it out to make an order. A computer program would decode and send the data to the storeroom, and an employee would pick and deliver the requested item to the customer.

Despite helping with the customer checkout experience and automation of certain aspects of inventory management, the punch card system was highly inefficient, costly, and slow. Storage space was an issue as the cards were much larger than the data they held. Additionally, the risk of data capture errors was high where it was essential to read the punched cards in a specific order or sequence.

The Advent of Automatic Identification Technology

The continued growth of the grocery business meant that retailers were stocking more and more products. Still, the financial success of supermarkets depended on their ability to identify and track their increasingly expanding inventories. As such, the industry kept researching on automatic identification systems for use in product marking. Some of the solutions that merchants used at the time to mark items for sale, such as ultraviolet light-sensitive ink, were burdensome. Another problem was the lack of computing power to support these early technological concepts.

Nonetheless, a working barcode system developed by Computer Identics became available in 1969. It used a laser beam to read information. Black and white bars represented product data. While the technology was promising, it lacked standardization, resulting in its limited adoption and short life. Later in 1972, a Kroger store in Cincinnati executed a test run of a bull's eye barcode system, which generated an impressive return on investment. But the automatic identification solution never caught on due to several reasons, including barcode printing and scanning flaws.

Subsequent improvements in optics and computer technology, including transistors and lasers, made it possible to develop more effective and viable automatic identification systems. Barcodes became more realistic with the development of the Universal Product Code (UPC) in 1973. A year later, a Marsh supermarket in Ohio deployed for the first time in history a UPC-based bar-coding system to log and sell a pack of Wrigley's chewing gum.

Standardization paved the way for the widespread application of barcodes to automatically mark, identify, and manage inventory items within and outside of the grocery industry. Companies no longer had to invent and make their own identification systems and scanning equipment. As computing power improved, the use of barcode scanning in inventories management grew exponentially across multiple industries. The technology became increasingly reliable over time, virtually eliminating data entry errors, minimizing understocking and overstocking, and helping develop more reliable procurement plans to satisfy demand.

While barcodes are still used to mark inventories today, they are limited in several ways, including their inability to encode large pieces of information.

Advanced Automatic Identification Systems

Since barcodes, several asset tracking technologies have come up to help with inventory management. These include:


Organizations can use Radio Frequency Identification to determine the location of individual products or items in controlled spaces. The technology utilizes radio waves to transmit data between a tag fitted with a microchip and a reading device. After scanning an RFID tag, the reader sends coded product data, for example, the manufacturer, model, and ID, to a computer for processing using special software. The system is superior to traditional 1D-barcodes in ways such as:

  • Scanning range: An RFID scanner can read product info from a couple of yards away, so it's suitable for scanning goods on high shelves.
  • Anti-theft properties: Placing scanners at different strategic locations within a store, warehouse, factory, or other restricted environments allows the system to detect any removal of items.
  • Data storage: An RFID tag can hold more data than a 1D barcode.

However, RFID is not suitable for tracking merchandise or materials outside of controlled environments because it has a limited range. The technology is also relatively expensive (it could cost $250,000 or more).

Quick Response Codes

QR codes have also made significant differences in stock control. The technology is a revolutionary upgrade to traditional barcodes because it holds much more data than its predecessor. It's ideal for tracking stockpiles across multiple sites, remotely, and in the office. Personnel can use smartphone-based apps to read QR code labels on inventory items—a system that's much cheaper than RFID scanning.

The use of mobile GPS-enabled devices to read QR code tags makes it possible to update inventory databases with real-time location information. RFIDs do not offer this capability.

Evolution of Inventory Control Software

Transformations of computer software throughout history have contributed immensely to the growth of inventory management. Throughout the 1960s, companies employed inventory control (IC) packages, which they built in-house using third-generation programming languages. Next, manufacturers started using specialized software in the 1970s, such as material requirements planning (MRP) systems. Manufacturing resources planning (MRP 2) solutions entered the scene during the 1980s. Their purpose was to streamline factory workflows by matching production requirements with materials. These advanced systems introduced integrations that were not available previously, for example, by linking shop floor with distribution, procurement, and finance. They enabled an expanded view of enterprise data to help with collaborations across several company departments, but they left out some critical business functions.

Enterprise resource planning (ERP) systems of the early 1990s were something of a game changer in the history of inventory management because they introduced full interdepartmental coordination in business organizations. They integrated all business functions, from inventory control, human resources, and finance to transportation, procurement, manufacturing, and distribution. ERP systems continued to evolve in capabilities, and in the 2000s, businesses could link inventory management with additional functions, such as online-based customer relationship management. Despite their many benefits, these technological solutions were beyond the financial means of many small and midsize enterprises (SMEs).

Modern Inventory Management Systems and the Cloud

Today, inventory management is one of the most critical enterprise resource planning functions. Its availability as a SaaS (Software as a Service) offering in the cloud is impacting stock control in several key ways, including:

  • Affordability: Many SMEs are now able to leverage cloud-based inventory management systems at reduced costs, enabling them to compete effectively with their bigger industry rivals.
  • Access to Big Data: The cloud allows organizations to tap into a vast amount of structured and unstructured data, which is usually flowing in at unprecedented speeds from diverse and disjointed sources throughout the supply chain. Big data has helped transform inventory management into an insight-driven business function.
  • Artificial Intelligence: AI techniques like machine learning are helping advance predictive analytics in stock control. Organizations can now base their purchase plans and delivery schedules on actionable stock movement analytics and accurate demand forecasting.
  • Real-Time Database Access and Updates: Cloud-based inventory management systems let organizations update their databases in real time. For example, employees can scan QR codes, barcodes, or NFC tags with their mobile devices and immediately append the status of individual stock items.

The Future of Inventory Management is "Smart"

Smart business management solutions will drive profitability and growth as Industry 4.0 gains momentum. Already, intelligence-driven warehouse operations are becoming an increasingly vital factor of competitive differentiation. Here are some fundamental components that will define inventory management in the foreseeable future:

  • Internet of Things: Forbes estimates that the adoption of IoT in the retail sector will reach 71% by 2021. The network of interconnected smart devices will change the way businesses track their stockpiles. For example, more and more brick and mortar retail stores will be using a combination of "intelligent" shelves and tagged products to track sales in real time. Manufacturers are also increasingly leveraging a combination of AI-driven demand projections and IoT-tracked inventory information to optimize lead times. Technologies like QR codes and RFID will most likely remain essential to the automatic identification and monitoring of IoT items in warehouses and factories.
  • AI Bots: With a fully-fledged IoT network in place, a manufacturing inventory management system can track supply levels of crucial components, such as bearings or ball screws, more accurately. Since AI bots can plow through tons of such IoT data much faster than humans, they can be instrumental in predicting and highlighting potential supply shortfalls by comparing the information they collect with an organization's procurement records, current inventory levels, and sales history.
  • Embedded Intelligence: Integrating IoT, machine learning, and blockchain will help create smart inventory management systems necessary to automate and accelerate large-scale workflows in areas such as manufacturing.

In Conclusion

Inventory management has come a long way, from the manual tallying of stockpiles to modern, smart, and highly integrated cloud-based solutions. The ability to collect and analyze vast amounts of data with the help of AI, track inventories in real time, and leverage IoT and the cloud to streamline the supply chain will substantially influence the ability of enterprises to grow profits and compete in the Industry 4.0 era.

GoCodes is a provider of cutting-edge asset tracking solutions. For more information about customized inventory management systems, contact us right away!

About GoCodes

GoCodes is the industry leader in tool tracking. We provide customers with the ultimate single vendor solution that includes cloud-based software, top-rated smartphone scanner apps and rugged QR code tags.

We pride ourselves on delivering a personalized service, cutting-edge technology and software that is easily used by your entire team.

GoCodes ensures our customers achieve success in their tool management projects every time.

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