Have you ever been inside an FMCG distributorship for an Inventory Management System? One of my first visits was at a big distributor of a nationally renowned namkeen brand. For someone who loves snacking, I felt like a kid in a candy shop! That visit was probably one of my earliest experiences in understanding just how critical a distribution partner is for a brand. Super stockists, distributors, and sub-stockists all form a vital supply chain through which thousands of FMCG products reach millions of Kirana stores across the country.
Many distributors use some form of inventory management software or financial accounting tools to track purchase patterns, while smaller ones still depend on their ‘bahi-khaata’ to figure out how much of their money is tied up in stock. Whatever sells, sells—and whatever doesn’t move often gets returned to the company. But when too much money is locked in claims or slow-moving inventory, distributors struggle to boost profitability or streamline processes. Without adopting better solutions like a stock management system or order management system, they often remain stuck in the same rut, unable to optimize operations.
Read More: Why is the Indian FMCG distributor disgruntled today?
What is Inventory Management?
Inventory management is the practice of monitoring, controlling, and managing a company’s raw materials, parts, and finished products to ensure the right items are available at the right time to meet customer needs while keeping costs low. Modern businesses often rely on an inventory management system or inventory management software to balance supply and demand by efficiently ordering, storing, and selling goods, helping to prevent costly overstocking and disruptive stock shortages.
Why Your Business Needs Inventory Management Systems?
Running a business without clear visibility of your stock is like driving in the dark. An inventory management system or stock management software brings clarity, control, and efficiency to your operations. Here’s why investing in one is crucial:
- Real-time visibility
With inventory management software or a stock management system, you always know what you have in stock, what’s running low, and where things are stored. No more surprises when fulfilling orders. - Reduce errors and overspending
Manual systems are prone to mistakes. Inventory tracking management tools cut down on human error, avoid overstocking, and prevent stockouts. You save money by not holding extra inventory and not losing sales due to missing stock. - Better order fulfillment with an order management system
Integrating an order management system ensures orders are processed correctly, delivered on time, and customers are happy. It ties together sales, inventory, and shipping smoothly. - Smarter planning with inventory planning software
These tools help you forecast demand, plan ahead for busy seasons, decide how much to order and when — so you don’t commit too much cash or run out at peak times. - Scaling up is much easier
As your business grows (more SKUs, more locations, more customers), manual or ad-hoc systems break down. Stock management software or an inventory management system scales easily without chaos. - Better stock management (tracking, accounting, etc.)
You can track every item: when it arrived, where it’s stored, and who accessed it. Inventory accounting software helps with costs, valuation, and loss prevention. The stock management system keeps stock levels in sync everywhere. - Save time, focus on what matters
Automating with inventory management software/stock management software frees up your team from tedious tasks (counting, logging, chasing mismatches) so they can work on growing the business, improving customer service, etc. - Competitive advantage & customer satisfaction
If you’re always in stock, never letting customers wait, and fulfilling orders accurately, you build trust. A good inventory management system supports that. - Security, control, and auditability
Good inventory tracking management software gives you controlled access (who can do what), audit trails (who changed what, when), and reduces the risk of theft or loss. Much safer than loose spreadsheets or paper.
A CPG Company and its Inventory Management System struggle
Brands to struggle with their fair share of Inventory Management System woes. Once their products reach the distributors or the super stockists, data visibility on the product movement comes to a grinding halt. As a consequence, a company’s Inventory Management System – which should ideally be very scientific – becomes partly based on the historical purchase patterns of their distribution partners and partly on sheer instinct.
A recent study showed that the sector suffers from an inventory accuracy problem.
- The average CPG company has only 63% of its inventory accurately represented in its books. This means that for every INR 100 worth of product a company believes it has on hand, it can only account for INR 63. The other INR 37 is lost somewhere in the system, whether it’s sitting on store shelves or in a warehouse.
- The study also found that the average CPG company has 25 days of inventory on hand, while the optimal level would be 19 days. This means that the CPG sector is losing billions of dollars every year due to inefficiencies in its Inventory Management System.
When it comes to product visibility, brands are not fully aware of which products are selling well in which stores. This information is typically collected by distributors and sent back to brands for analysis, but since data is not collected in real-time it may be outdated by the time it arrives.
As a result, brands may miss opportunities to generate more sales. Sometimes sales team may not have visibility on slow-moving or out-of-stock products, leading to lost sales. To overcome these challenges, brands need to work closely with their distributors and adopt systems that provide real-time visibility into inventory levels and sales data.
By adopting a full-service DMS, companies can take a ‘proactive’ Inventory Management System approach, and forecast future demand.
What is a distributor management system?
A Distributor Management System (DMS) is a software solution designed to help brands oversee their entire distribution network from manufacturers and distributors to retailers—by streamlining key functions such as order management, inventory tracking, trade promotions, and sales monitoring. Serving as a central hub, it provides real-time insights into stock levels and sales performance, enabling smarter inventory planning, quicker order fulfillment, and data-driven decisions that improve efficiency, meet consumer demand, and drive business growth.
How does a DMS (Distribution Management System) address challenges in Inventory Management System?
The Distributor Management System is a powerful tool that helps CPG companies address the many challenges in the modern retail landscape. A smart and intuitive DMS system can provide both brands and distributors with unmatched visibility into crucial data such as sales trends, inventory levels, and consumer demand. By allowing brands to access this kind of detailed information, a DMS can help them make more informed, data-driven decisions that can improve their bottom line and better serve their customers.
1. Real-time tracking to get to the root cause of things
A DMS provides real-time sales data to the brand. This makes it much easier for businesses to understand how changing market conditions affect their products, allowing them to make necessary adjustments quickly and efficiently.
For example, one of our customers reported that the numbers for a particular product line, their recently launched bottled fruit juices, were dwindling, and therefore they were experiencing high returns on this product line. Had they not adopted a DMS, they would have continued to think that there was something wrong with the product or that the distributor wasn’t pushing it ahead to the retailers.
In reality, the DMS showed them that the reason the returns were high was because the caps of the juice bottles were slightly loose which was causing the beverage to ferment and have a much shorter shelf life. Because the company had access to this critical information in real time, they were able to recall the later batches, rectify the seals and put them back into the market before expiry.
Watch how Nobel Hygiene became a category leader when millions didn’t know they need it!
2. Right inventory at the right distributor
Beyond real-time sales trends, a Distributor Management System (DMS) or inventory planning software gives brands a deeper view of stock movement across all outlets. By comparing supply-demand patterns on dashboards, companies can optimize distribution routes, negotiate smarter with suppliers, and uncover cost-saving opportunities.
Distributors also benefit—knowing which items are nearing expiry, which products are fast movers, and how to push schemes more effectively. This ensures maximum return on investment and stronger partnerships with the brand.
3. Batch-wise aging of stock
A DMS helps track stock at a batch level, ensuring older products are rotated out first and customers always receive fresh goods. This feature reduces wastage and flags product issues well before expiry dates. Many modern stock management systems integrate this functionality, making it easier for distributors to monitor shelf life and maintain compliance.
4. Inventory reconciliation
One of the biggest advantages of a DMS is streamlined reconciliation. At the end of each month, it quickly matches inventory records across warehouses and sales points, resolving discrepancies with ease. Advanced tools even come with approval mechanisms for managers and automated email alerts for smoother workflows. When integrated with inventory accounting software, this process becomes even more accurate, ensuring that financial books align perfectly with physical stock.
5. Reporting
One of the most valuable features is the ability to create reports. With this system, CPG companies can generate reports on inventory levels, sales figures, and other data. This information can be extremely helpful in planning future production levels and strategies. Additionally, the system can help track distributor performance. This data can identify areas where distributors are not meeting expectations and adjust accordingly.
Read More: Why Do Our Comprehensive Reports Make Our Customers Smile?
Automation and data-driven decision-making are crucial for success in today’s competitive marketplace. CPG companies that adopt modern Inventory Management System solutions and tools such as an order management system, can gain a strong edge over competitors and achieve sustainable growth.
A DMS enables both automation and smarter decision-making. It empowers brands to act on accurate, real-time data instead of relying on guesswork. At the same time, it automates key tasks needed to maintain healthy inventory levels and streamline distribution operations.
For CPG businesses, having a DMS integrated with stock management software isn’t just an option—it’s essential. It equips them with the insights and tools required to optimize inventory, improve efficiency, and make informed decisions that directly impact profitability.
To see the power of the DMS yourself, schedule a demo today!
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