Inventory management is key to keeping your business afloat. Many business owners can relate to the adverse effects of inventory disorganization and mismanagement on their business and finances. According to some sources, inventory mistakes have cost companies over one trillion dollars worldwide. This article will discuss five common inventory mistakes that can be detrimental to your financial stability and how you can avoid them.
Common inventory mistakes
1. Choosing the wrong inventory software
Traditional inventory systems are not designed for SME adoption because they are challenging to operate even after extensive user training. For small and medium businesses with tight budgets, the time it requires to train users and the cost of training could be prohibitive. Having complicated inventory software also means that very few employees would know how to operate the system correctly and deal with exceptions.
Luckily, it is possible to find an inventory management solution that lets you and your team learn on the go. When selecting an inventory management solution for your business, always be sure to choose one that fits your business needs and is easy for you and your staff to pick up.
2. No inventory audits
A widespread misconception business owners have is that inventory management is a magic pill that can cure all of their inventory problems. In reality, there is always a chance that your inventory software isn’t in sync with physical stock. It is critical to have regular inventory audits to ensure you are making the most of your inventory. A complete cycle count at least once every three months works best for most businesses. However, we would also recommend scheduling additional checks before keys events or holiday seasons. The right inventory software can help you streamline cycle counting and get it done quicker.
3. Lack of inventory automation
While spreadsheets and basic inventory systems may work for small businesses and startups with low order volumes, they are not the best tools for high-growth companies. Inventory automation is a must-have for growing businesses to scale out their operations efficiently. Inventory automation not only saves your business time and money but can also dramatically increase fulfillment accuracy and customer satisfaction. Here’s a list of inventory automation you should consider implementing:
- Automatically reserve stock on order confirmations
- Alerts for minimum stock levels or reorder points for products
- Barcode scanning for pickings and cycle counting
- Marketplace integration
- Reporting
- Demand forecasting
4. Lack of inventory demand planning
Small and medium businesses often lack the right tools to plan their inventory accurately. The impact of not adapting your inventory to variations in demand is that you could end up overstocking or understocking. Both understocking and overstocking can hurt your business. While understocking can result in your business losing customers to competitors because you are not carrying enough stock, overstocking can affect your cash flow by tying too much capital to unwanted inventory. Therefore, it is critical to plan your inventory by adapting safety stock and reorder points for your products to align with current and future demand. An inventory management solution with demand planning capabilities can assist you in inventory planning based on multiple factors, including sales history and seasonality.
5. Forgetting to reorder
Running out of stock is one of the leading causes of financial loss caused by inventory issues. It is easy for businesses to lose visibility of items running low on stock. While inventory audits help you sync your inventory software with physical stock, it isn’t practical to do a cycle count once a week. The best approach is to use an inventory management solution that lets you define minimum stock rules for your products and automatically notifies you which products you need to reorder.
Final Thoughts
Avoiding these common mistakes is the first step to better inventory management. Once you have a streamlined inventory management process, it is easy to prevent financial losses caused by inventory issues. A well-managed inventory will help you ship products faster, serve customers better, and improve your cash flow.
