Inventory tracking is vital for effective inventory management for businesses of all sizes. Appropriate inventory tracking enables companies to regulate stock levels, minimize waste, optimize ordering and restocking, and enhance operational efficiency.

If you’ve attempted to manage your inventory through manual tracking and spreadsheets, you might have experienced inconsistencies and inaccuracies, as well as difficulties meeting demand due to stockouts or overstocks. These inventory management issues can incur additional expenses and excess stock, and require extra time, indicating the need for a solution.

According to a report by FinancesOnline, businesses that implement inventory management systems can see an average inventory reduction of 17%. It demonstrates the importance and benefits of using inventory management systems for businesses of all sizes.

Whether you own a small business or work in a larger organization, you need insights and practical recommendations for optimizing inventory tracking and enhancing your business operations.

To maximize efficiency you can employ inventory tracking software for your business.

In this blog, let’s look into the benefits of inventory tracking, different tracking methods, and best practices to improve and streamline your tracking processes.

What Is Inventory Tracking?

Inventory tracking is a critical process for any business that deals with physical products. Inventory management involves tracking the flow of goods from their arrival at a warehouse to their sale to customers. With proper tracking, businesses can better manage their stock levels, reduce the risk of stockouts or overstocks, and make informed decisions about their operations.

For example, a clothing store or E-commerce company that wants to ensure it has enough inventory of a particular dress can use tracking to monitor the stock levels of that dress. They can set up alerts to notify them when the stock levels fall below a certain threshold and reorder more inventory to prevent running out of stock.

Inventory tracking can be done manually or with the help of technology such as barcode scanning, RFID, and GPS tracking. Cloud software such as Moon POS also aids in easy-flowing inventory management.

The process of tracking typically involves the following steps:

  1. Receiving inventory – Inventory tracking on the supply chain management begins when a company obtains goods from suppliers.
  2. Recording inventory – Once the inventory is received, it is recorded in the company’s goods management tool. This system tracks the quantity and other information such as the cost of each item in stock.
  3. Tracking inventory movements – As inventory is moved within the company, it is tracked in the goods management tool. It includes movements from storage to production, as well as movements from production to storage or shipment.
  4. Updating inventory levels – As inventory is used or sold from the supply chain, the inventory management tool is updated to reflect the new inventory levels.
  5. Reordering inventory – When inventory levels reach a certain point, the company can use the inventory management tool to generate purchase orders for new inventory.

What Is an Inventory Tracking System?

An inventory tracking system is a software or hardware-based solution, that automates and streamlines supply chain management. These systems use various techniques such as barcode scanning, RFID, and GPS to monitor the movement of goods and update inventory records in real-time.

A tracking system typically includes the following features:

Inventory Management

It includes features like stock level monitoring, inventory movement tracking, and inventory analysis of the supply chain management.

Barcode Scanning

When items are received or moved, they are scanned using a barcode scanner, which updates the inventory management system in real-time.


Tracking systems generate reports that provide insights into inventory levels, trends, and movement patterns.

Integration with Other Systems

A tracking system may be integrated with other processes, such as accounting or sales systems, to provide a comprehensive view of business operations.

Alerts and Notifications

Tracking systems may generate alerts or notifications when inventory levels fall below a certain threshold or when inventory movements do not match expected patterns.

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Inventory Tracking Methods

There are several methods businesses can use to track their inventory, including manual techniques such as pen-and-paper systems and spreadsheets, as well as automated methods such as barcode scanning and RFID tracking. Each method has its own advantages and disadvantages, and businesses should choose the one that best fits their needs and budget.

Inventory Tracking Methods

1. Manual Tracking

Manual inventory management involves physically counting items in the supply chain and recording the information in a spreadsheet or other manual system. It is a low-cost option but is time-consuming and prone to errors.

2. Barcode Scanning

Barcode scanning involves using a handheld scanner to read the barcode on an inventory item. The information is recorded in an inventory management system. This method is faster and more accurate than manual tracking but requires an initial investment in barcode scanning equipment.

3. Radio Frequency Identification (RFID)

RFID involves attaching a small chip to each inventory item. The chip contains information about the item, such as its location and quantity. This method is highly accurate and efficient but requires a significant initial investment.

4. First In, First Out (FIFO)

This method involves tracking inventory based on the order in which it was received. This ensures that older inventory items are utilized or sold first, reducing the risk of spoilage or obsolescence.

5. Just-In-Time (JIT)

It is another way to track inventory. Although it reduces costs, it requires high coordination and efficiency in the supply chain.

6. ABC Analysis

ABC analysis lets companies focus on managing the most critical inventory items.

7. Point of Sale software

POS software like Moon POS is typically used in retail environments to track sales and stock.

8. Cloud-Based Inventory Management Tool

Cloud-based management software is a web-based tool that allows companies to track stock levels and movements in real time from anywhere with an internet connection.

Benefits of Inventory Tracking

Inventory tracking is a process that involves monitoring the movement and quantity of goods in a business’s inventory. The benefits of tracking include improved accuracy, better forecasting, reduced costs, and improved customer satisfaction. By knowing exactly how much stock they have on hand, businesses can avoid stockouts and overstocks, which can lead to lost sales or increased holding costs.

The benefits of tracking are numerous and include:

1. Improved Accuracy

With tracking, businesses can keep a precise count of their stock levels, which helps them to avoid stockouts or overstocks.

2. Better Forecasting

Tracking inventory allows businesses to analyze patterns in customer demand and adjust their inventory accordingly, ensuring they always have enough stock to meet customer needs.

3. Reduced Costs

By tracking inventory, businesses can avoid overstock, which can cause higher holding costs.

4. Improved Customer Satisfaction

The use of tracking enables businesses to stock the right products to meet customer demand, which in turn leads to enhanced customer satisfaction and loyalty.

5. Increased Efficiency

With inventory tracking, businesses can quickly and easily locate items in their inventory, reducing the time spent searching for products.

6. Enhanced Decision-Making

By having accurate data on inventory, businesses can make informed decisions about their operations, such as when to reorder products, which products to discontinue, and which products to promote.

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How to Choose the Right Inventory Tracking Method for Your Business?

While manual methods may be sufficient for small businesses with simple operations, larger businesses with more complex supply chains may require more sophisticated solutions.

Here are some factors to consider when choosing the right tracking method for your business:

1. Business Size

A basic manual system may suffice for a small business, but an automated system may be necessary for a larger business.

2. Inventory Complexity

The complexity of your inventory will also determine the tracking method you need. A tracking system for a business that sells perishable goods will need to be more advanced than a business that sells non-perishable goods.

3. Budget

Automated inventory tracking methods can be more expensive than manual systems, so you’ll need to consider how much you can afford to spend.

4. Staff Expertise

The level of expertise of your staff will also determine the tracking method you choose. If you have a team with experience in warehouse management, you can use a more complex system.

5. Business Goals

Finally, your business goals will also play a role in determining the tracking method you choose. However, if you want to maintain a personal touch with customers, using a manual system may be more appropriate.

Challenges of Inventory Tracking

Despite its many benefits, inventory tracking can be challenging for businesses, particularly those that deal with many SKUs or operate in multiple areas. Challenges include the cost of implementing a tracking system, the need for employee training, and the potential for errors and inaccuracies.

Inventory tracking benefits a business, but there are also challenges associated with the process. Here are some of the common challenges of tracking:

1. Human Error

One of the most significant challenges of tracking is the risk of human error in manual inventory tracking. Whether it’s miscounting items or recording incorrect data, errors can result in inaccurate inventory.

2. Time-Consuming

Manual inventory tracking can be time-consuming, particularly for businesses with large inventories. Counting items, updating records, and reconciling data can be demanding and time-consuming.

3. Cost

Automated tracking systems can be expensive, particularly for small businesses. The cost of inventory management software, hardware, and staff training can be a barrier for businesses to adopt an automated inventory management system.

4. Technical Issues

Automated systems can experience technical issues, such as software bugs or hardware malfunctions that can cause inaccurate data or system downtime.

5. Lack of Visibility

Businesses face difficulty making informed decisions about their operations if they lack real-time visibility. It can result in overstocks or stockouts, both of which can impact profitability.

6. Theft and Shrinkage

Inventory tracking can help businesses identify cases of theft or shrinkage, but it can be challenging to prevent these issues from occurring in the first place.

Best ways to Streamline & Improve Inventory Tracking

Businesses can streamline and improve their inventory tracking processes by using barcode scanning or RFID technology, implementing a cloud-based inventory management software, and training employees on best practices for stock management.

Here are some of the best ways to streamline and improve tracking:

Automate the Process

Automated tracking systems can help businesses to save time and reduce the risk of human error.

Use RFID Technology

RFID (radio frequency identification) technology can provide real-time tracking of inventory, even in large warehouses or distribution centers.

Implement a Cycle Counting Program

Instead of conducting a full physical count, cycle counting involves regularly counting a small portion of the inventory. This approach can help businesses to identify and address discrepancies more quickly, reducing the need for time-consuming physical counts.

Optimize Storage and Organization

Organizing and storing inventory logically and efficiently can make it easier to track and manage. By optimizing storage and organization, businesses can reduce the time spent searching for products and improve inventory accuracy.

Use Forecasting Tools

Forecasting tools can help businesses to predict demand and plan inventory accordingly.

Train Staff

Staff training is essential for effective tracking. By providing training to streamline inventory management best practices and using inventory tracking systems, businesses can reduce the risk of errors and ensure that staff members are equipped to track inventory effectively.

How Moon POS Can Improve Your Inventory Tracking?

Moon POS is a powerful point-of-sale system that includes advanced inventory tracking features. With Moon POS, businesses can easily track stock levels, set reorder points, and receive real-time notifications when inventory falls below a certain threshold. Moon POS also includes features such as barcode scanning, bulk inventory updates, and the ability to manage inventory across multiple locations. With Moon POS, businesses can improve their inventory tracking processes and make better-informed decisions about their operations.

Moon POS is a comprehensive point-of-sale (POS) system that can help businesses to improve their tracking processes in several ways:

Real-time Inventory Tracking

Moon POS provides real-time inventory tracking, allowing businesses to view inventory in real time. By utilizing tracking, businesses can promptly detect and resolve inventory inconsistencies, minimizing the possibility of stock shortages, storage space, or excess stock.

Automated Management

Moon POS provides the advantage of automating stock management responsibilities such as updating records and reordering, which mitigates the potential for human error and saves time.

Barcode Scanning

Moon POS allows businesses to use barcode scanning technology to oversee inventory. By using inventory management systems, companies can decrease the probability of errors and streamline the inventory tracking process.

Forecasting Tools

Moon POS provides forecasting tools that can help businesses to predict demand and plan inventory accordingly. Employing an inventory tracking method can decrease the possibility of inaccuracies and simplify the tracking process in the supply chain.

Multiple Locations

For businesses with multiple sites, Moon POS allows for centralized stock management across all locations. Incorporating inventory tracking tools to track inventory can enhance inventory precision and streamline the process of tracking the supply chain.

Reporting and Analytics

Moon POS provides reporting and analytics tools that can help businesses to manage inventory performance, identify trends, and make informed decisions about stock management.

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Incorporating tracking tools can enhance inventory precision and streamline the process of inventory tracking. By implementing a tracking system and choosing the correct method for their needs, businesses can improve accuracy, reduce costs, and improve customer satisfaction. With Moon POS, companies can take their tracking processes to the next level and streamline their operations for maximum efficiency.

Moon POS can assist businesses in improving their inventory tracking procedures, minimizing the possibility of errors, and enhancing overall efficiency. With real-time tracking, automation, and forecasting tools, Moon POS can provide businesses with the data and insights they need to optimize their stock management and improve their bottom line.