Inventory Management System Overview

The complete rundown of what an inventory management system is, how it works, and what benefits users receive.



What is an Inventory Management System?

An inventory management system combines the use of desktop software, barcode scanners, barcode printers, and mobile devices to streamline the management of inventory (e.g. goods, consumables, supplies, stock, etc.).

Whether you are tracking inventory used to perform a service or sold to customers, using an inventory system provides staff accountability and minimizes inventory stockouts and shrinkage.

inventory management system overview

How Inventory Control Works

At its core, inventory control works by tracking two main functions of your stock room or warehouse — receiving (incoming) and shipping (outgoing). The goal of inventory control is to accurately know current inventory levels and automatically minimize understock and overstock situations. By efficiently tracking quantities across stocking locations you’ll have insight and be able to make smarter inventory decisions.

Common Inventory Applications

  • Warehouses
  • Stockrooms and supply rooms
  • Distribution
  • Offices and classrooms
  • Facilities management
  • Light manufacturing
  • Work-In-Progress

Popular System Functionality

  • Create purchase orders
  • Receive, put away, relocate, adjust, and dispose inventory
  • Create sales orders
  • Pick
  • Pack and Ship
  • Physical inventory counts and cycle counts
  • Create, run, schedule, and share reports
  • Print barcode labels

Inventory System Benefits

Improve Your
Bottom Line

You'll spend less time on inventory control, and reduce understock and overstock.


Eliminate data entry errors by using mobile barcode scanners to scan stock item barcodes.

Improve Company

Share inventory data with colleagues and standardize inventory control tasks.

Does Everyone Perform Inventory Management the Same Way?

The answer is no, each inventory management system can be different!

Passport is configurable which means it is perfect for a broad range of inventory situations and allows you to create an inventory system that is right for you. Here are a few examples:

  • Your stockrooms and warehouses may not be generating purchase orders. This means that upon receiving inventory there is no need to see the purchase order field onscreen. Thus, it should be removed or hidden. Passport allows for this.

  • Organizations may have a combination of systems in place to handle ordering. Sometimes receiving is done against a formal purchase order, and other times there’s no purchase order. In other words, the inventory system should include a purchase order data field, however, it doesn’t need to be a required field. Passport allows for this.

  • R&D facilities often don't require formal cost tracking with regard to their inventory management. Having a software interface that allows them to hide the data fields related to cost helps the overall usability of the system. Passport allows for this.

Inventory Management System vs. Asset Tracking System: Which do I Need?

These two terms are often misused because the tracking processes appear similar and there is varying terminology across industries. Although both systems help organizations make better use of their resources and budget, the two provide different sets of functionalities and benefits.

If you are getting started with your research, it’s helpful to begin by learning the difference between inventory and assets. After reading the following overviews you’ll be able to determine if you have inventory (i.e. stock), assets, or both, and get a sense of how you want to track them.

Inventory, also known as Stock

Inventory represents a business’s stocked goods or materials, and as such, the terms stock and inventory are often used interchangeably. You can think of inventory or stock as items that are either consumed in the production process or sold to customers.

helpful example of tracking inventory is a toy store. When a toy is being purchased and gets scanned at the register, the toy store cares about the quantity of that item that needs to be subtracted from inventory levels and eventually replenished. The data from the individual toy is not the priority, it’s the data from the set of identical inventory items that matters.

Typically, inventory is stored in a warehouse or storage area and tracked by quantity, as well as a common stock keeping unit (SKU), which identifies each stocked item by distinct attributes (e.g. color, size, brand). Batch or lot numbers are often used to track perishable inventory items, such as food or medications, in groups based on expiration dates. In addition, inventory such as parts and components can be tracked by serial numbers.

Inventory management systems come into play because of the need to handle this process quickly and track it as accurately as possible. Aside from optimizing inventory levels, some businesses also need to account for the cost of inventory in the same system.

Assets, Property, Equipment

Assets are also known as fixed or capital assets, and typically refer to an organization’s valuable resources and equipment. These items have long-term business use and enable their owner to produce goods or perform services; they are not consumed in production.

Because the word “asset” has a different meaning in the world of finance and accounting, the phrase “asset tracking,” is used to indicate the monitoring of physical asset movement, not the change in monetary value of an intangible financial asset.

Systematically tracking assets is necessary across every industry in order to maintain accurate accounting records, as well as real-time visibility of operations. For tracking purposes, each asset is tagged with a unique barcode identifier (e.g. make, model, serial number, etc.) and associated with a custodian or location.

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