A system for managing physical and virtual inventory in a data center is disclosed. The system includes a resource management system for managing computing resources of the data center, an inventory management system for tracking physical locations of the plurality of hosts and the plurality of virtual machines in the data center and a smart rack for housing a plurality of hosts. The computing resources include a plurality of hosts and a plurality of virtual machines running on one or more of the plurality of virtual machines. The smart rack has sensors for detecting movement of each of the plurality of hosts in the data center. The smart rack also has a control unit to control the sensors and collecting data from sensors. The control unit is coupled to the inventory management system and configured to transmit the collected data to the inventory management system through a network. The plurality of hosts, the resource management system and the control unit are coupled together through the network.