The Complete Guide to Inventory Management Systems (IMS)

What is an Inventory Management System (IMS)?

An Inventory Management System (IMS) is software that tracks inventory quantities, locations, and movements across a business. IMS ensures you know what you have, where it is, and when to reorder—preventing both stockouts that lose sales and excess inventory that ties up capital.

Modern IMS solutions range from standalone inventory tools to integrated modules within ERP or e-commerce platforms. They serve businesses from single-location retailers to complex multi-warehouse, multi-channel operations.

IMS vs. WMS: Understanding the Difference

While often confused, IMS and WMS serve different purposes:

• IMS focuses on: What inventory you have and when to reorder—stock quantities, reorder points, demand forecasting
• WMS focuses on: How to execute warehouse operations—receiving, putaway, picking, packing, shipping

Simple operations may use IMS alone. Complex warehouse operations typically need both, with IMS handling planning and WMS handling execution.

Types of IMS

Inventory management systems are tailored to different business models:

Retail / eCommerce IMS

Designed for omnichannel retailers and online sellers managing inventory across stores, warehouses, and multiple sales channels. Key features include real-time sync with marketplaces (Amazon, eBay, Walmart), Shopify and e-commerce platform integration, multi-location visibility across stores and fulfillment centers, oversell prevention with buffer stock management, and customer-facing inventory availability displays.

Wholesale / Distribution IMS

Built for B2B distributors and wholesalers managing large catalogs with complex pricing and customer relationships. Key features include customer-specific pricing tiers and contracts, large SKU catalog management (10,000+ items), lot and batch tracking for traceability, automated reorder and vendor management, and integration with B2B portals and EDI systems.

Manufacturing IMS

Specialized for manufacturers tracking raw materials, work-in-progress (WIP), and finished goods through production. Key features include bill of materials (BOM) management, raw material consumption tracking, production planning integration, component availability and MRP, and finished goods inventory tied to production schedules.

Core IMS Capabilities

1. Inventory Tracking

• Real-time quantities: Current stock levels by location and status
• Lot & serial tracking: Trace individual items for recalls or warranty
• Expiration management: Track shelf life for perishables
• Multi-location visibility: Unified view across warehouses and stores

2. Reorder Management

• Reorder points: Automatic alerts when stock falls below threshold
• Safety stock calculation: Buffer inventory for demand variability
• Purchase order creation: Automated or suggested reorders
• Vendor lead times: Factor supplier timing into reorder triggers

3. Demand Planning

• Sales forecasting: Predict future demand based on history and trends
• Seasonality adjustment: Account for predictable demand patterns
• Promotion impact: Adjust forecasts for planned marketing activities
• ABC analysis: Classify inventory by importance for focused management

4. Multi-Channel Sync

• Channel integration: Connect to marketplaces, e-commerce platforms, POS
• Quantity synchronization: Update available inventory across all channels
• Buffer stock: Reserve inventory for specific channels or customers
• Order routing: Fulfill from optimal location based on rules

5. Reporting & Analytics

• Stock turnover: How quickly inventory sells and replenishes
• Dead stock identification: Flag slow-moving or obsolete inventory
• Carrying costs: Understand true cost of holding inventory
• Stock accuracy: Compare system quantities to physical counts

IMS Selection Criteria

1. Channel Integration

Verify pre-built connections to your current and planned sales channels: marketplaces, e-commerce platforms, POS systems, and B2B portals.

2. SKU Volume

Ensure the platform can handle your catalog size and growth. Some solutions have SKU limits or performance issues at high volumes.

3. Inventory Complexity

Consider your specific needs: lot tracking, serial numbers, expiration dates, kitting, bundles, or manufacturing components.

4. Accounting Integration

IMS should sync with your accounting system for inventory valuation, cost of goods sold, and purchase order management.

5. Reporting Needs

Evaluate analytics capabilities for demand forecasting, inventory optimization, and business intelligence.

IMS ROI Drivers

Inventory management systems deliver value through:

• Reduced stockouts: Fewer lost sales from out-of-stock situations
• Lower carrying costs: Optimized inventory levels reduce capital tied up in stock
• Prevented overselling: Accurate quantities across channels avoid negative customer experiences
• Improved turns: Better forecasting increases inventory velocity
• Labor savings: Automation reduces manual counting and reconciliation

Implementation Considerations

Data Migration

Plan for moving product data, stock quantities, and historical information. Clean up data before migration—garbage in, garbage out.

Physical Inventory

Start with accurate counts. Conduct physical inventory before go-live to establish a clean baseline.

Process Changes

New IMS often requires workflow changes for receiving, picking, and counting. Document new processes and train staff accordingly.

Getting Started

Explore inventory management solutions in our IMS comparison tool to find platforms that match your channels and inventory complexity.