Inventory management software market 2026 - A USD 5 billion revenue opportunity

According to a recent study from market research firm Global Market Insights, the inventory management software market is set to grow from its current market value of more than $5 billion to over $5 billion by 2026, gaining remarkable traction over the 2020 to 2026 period.

Inventory management, a component of supply-chain management refers to the management of inventory and stock to ensure the smooth flow of goods from manufacturers to warehouses and ultimately to the point of sale. As managing huge inventory is a complex process, organisations use the inventory management software, which enables them to keep track of a large volume of goods as they move through their supply chain. Every organisation must maintain an optimum inventory to ensure that it has enough stock to meet the changing customer demands. To effectively organise and maintain the appropriate levels of stock, organisations use inventory management systems, which further help them in reducing the total cost of the inventory and maximising their ability to provide customers with products at a right time. Other benefits associated with the deployment of these systems are reduced inventory holding costs, increased productivity, efficiency, and avoidance of stock-outs & excess stock.

The factors fuelling the growth of the inventory management software market include the increased adoption of the software in retail, logistics, and transportation. The growth of the e-commerce sector has led to the expansion of warehouse and inventory operations, which have increased the demand for scalable and robust cloud-based inventory management solutions. The presence of well-established distribution channels and the highly competitive retail landscape is expected to generate the need for efficient inventory management systems, which will help the organisations to know which stock is on hand and enable effective demand and supply forecasts.

Another important factor accelerating the market growth is the inventory shrinkage that can be attributed to shoplifting, customer theft, and vendor fraud, leading to a revenue leakage. For instance, in Asia Pacific, it is estimated that the countries including India, China, and South Korea faced the highest shrinkage value in 2018 amounting to around USD 0.52 billion, USD 13.52 billion, and USD 1.56 billion, respectively.

The barcode technology is widely used for increasing the accuracy and efficiency of inventory management systems. Barcode scanners enable organizations to easily process large item sets with the ability to pull the data directly from the cash registers and POS systems. Using such systems reduces the man-hours spent on the inventory counting and increases the organisation's overall productivity. However, with the use of advanced technologies, such Radio Frequency Identification (RFID), monitoring the movement of inventory in real-time has become more efficient. The growing adoption of the RFID technology in inventory management practices is expected to further facilitate the inventory management software market growth.

North America is projected to hold a significant share of over 42% in the inventory management software market by 2024 due to the increasing number of retailers and manufacturing companies, which are using the omni-channel platforms to increase their productivity and efficiency. For instance, in July 2017, indiCo and RSMA, providers of retail planning and forecasting solutions entered into a strategic partnership to make advanced inventory tools for small and independent campus stores. These tools improve merchandise inventory decisions and the financial performance of campus stores, including monthly sales forecasts, open-to-buy budgets, and retail metrics by merchandise category. 

Another factor accelerating the growth of the North America inventory management software market is the penetration of cloud-based inventory management solutions that offer cost-benefits for the maintenance of large-scale inventory as compared to the traditional systems. The region has also witnessed huge investments, driven by the trends such as growth in the e-commerce platforms and the modernisation of supply chains. For instance, in July 2018, the Canada Pension Plan Investment Board (CPPIB), Alberta Investment Management Corporation (AIMCo), and WPT Industrial Real Estate Investment Trust (REIT) announced to invest up to USD 1 billion of equity in the U.S. logistics market. The joint venture will help to aggregate the portfolio of industrial assets by making value-added acquisitions and funding developments.

The inventory management software market growth in Asia Pacific is driven by various government-led initiatives to boost the digitalization, particularly in the developing economies. The government, particularly in China, India, South Korea, and Australia, are also taking efforts for the development and growth of the SMBs, especially with respect to financing and tax reforms. For instance, in September 2017, the Chinese government revised a legislation to protect the interests of these enterprises. 

The revised law strengthened the protection on the property rights and increased the support in areas such as taxation, financing, and employment. The country also supported SMBs in attracting the professional talent by encouraging colleges and research institutions to cooperate on the transformation of scientific and technological achievements. The robust growth of the SMB sector is likely to support the growing adoption of the inventory management software in the region.

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