Do you want your business’s profit to skyrocket but have product storage issues?
Inventory management is the secret to keeping your e-commerce running smoothly and making maximum sales. However, it isn’t only about shuffling items; the term is diverse. It consists of various aspects, which the staff should handle correctly to avoid massive blunders.
The efficient management of the inventory is necessary to make it worse. You can only make it happen by preventing the top ten disastrous situations discussed below.
10 Serious Problems with Inventory Management to Avoid (+Strategic Solutions!)
Old or Incomplete Product Catalogue
It is the worst thing you can do. Use an efficient tool to update your business’s product catalogue and include all necessary information. You cannot manage your company’s operations if you don’t have the correct details of active and outdated products. Therefore, keeping a catalogue up to date is essential for maintaining optimum efficiency within your organisation.
Your document is incomplete without the following info:
- Categories and types of products
- Name and status of each
- Purchasing price
- Sale price, including both the catalogue and the actual one
- Sales for the past year, month, and week, in both unit and monetary terms
- Gross margin
- Minimum number of orders
- Expiry date of items
- Images
- Typical stock in the past
Incorrect Measurement of Supply Chain Metrics
The performance of the supply chain is as important as your inventory management. Its incorrect assessment can create many problems, but you can avoid them by employing the best measurement KPIs. First, look into the expectancy of your stock. Second, assess your customer’s availability rate.
For instance, if your company can manage huge quantities, add to your inventory turnover and on-time delivery. The right approach is to use fewer indicators so as not to over-complicate the situation. A correct measurement of supply chain metrics will ensure the sufficient availability of products and minimise the additional costs.
Not Paying Attention to the Total Expenses of the Business Owner
Most companies mainly focus on the purchase price and search for suppliers who can sell at the lowest rates. They neglect the costs that should add to the purchase charges, such as transportation, warehousing expenses, higher insurance, etc. The owner has to bear all these costs as a result, which creates many challenges.
The solution to this problem is to keep a full-cost approach and think about the following things:
- Purchase rate
- Minimum order quantity
- Product quality
- Lead time, service, and reliability of supplier
- Shelf life of products
- Accuracy of sales prediction
- Supplier flexibility
- Lead duration of payment
If monitoring all these aspects feels tricky for the manager, employ an efficient warehouse inventory management system. This will alert you about the changes occurring in the storage space and offer real-time data. Besides, prefer the one that prioritises customer satisfaction while looking for a suitable vendor.
Excessive Areas for Storage
Does your inventory consist of reserves, stores, or warehouses? Do you have more areas in which to keep the same product? If yes, then it is time to fix it. Otherwise, it would increase costs by 50% and create many issues, such as mismanagement.
You may not know whether an item has enough quantity in your store. Keeping their records will become time-intensive plus would be prone to errors. Tackle excessive areas for storage by centralising them all. Decentralise items with long lead time, highly explosive, or high transport costs.
Stocking the Same Quantity for All Products
Many new startups commit the blunder of ordering the wrong quantities. For instance, a new garment company may offer different apparel sizes. They may commit the mistake of keeping equal quantities of sizes, from extra small to large.
The L size may increase sales, while Xs or XXL may sell out at a turtle speed. The same goes for colours. Some shades speedily fly off the shelves, while others take time. Identifying the quick sellers based on size, colour, or other variants will prevent loss. Perform an A/B testing to evaluate the profitable and risky points. Stock your inventory with products accordingly.
Lack of Staff Training
Inventory management systems are only as effective as the people using them. If the workers handling it are not smart enough, they cannot handle the system wisely. They would commit mistakes while picking, receiving, packing, or reporting. Lack of staff training will eventually increase the cost as they cannot efficiently operate the system.
Fix this issue by training your employees through relevant courses. Hold professional teaching sessions to foster digital literacy. Don’t keep the training as a one-day event. Arrange programs weekly or monthly so they can equip themselves with expert insights. Undertaking staff training would allow them to use the WMS to their advantage and meet their business goals.
Vague Communication
Communication is one of the secrets to successful business operations. Inventory management is not done in isolation. If there is a vague talking between the inventory team and the sales, production, or sales departments, it would lead to mismanagement. It may delay orders, duplicate orders, or ineffective decisions. It can cause many confusions and misunderstandings, ultimately negatively impacting customer satisfaction.
Avoid it by maintaining clear communication channels between all departments. Use online platforms, such as Slack, to communicate with each other within a second. Hold daily or weekly meetings to inform one another about essential details. It will streamline the collaboration and reduce the chances of delays or misunderstandings. Undertake training sessions to instil better communication skills within your employees.
Manual Managing the Inventory
Some entrepreneurs like to micro-manage everything. They think counting each thing manually will avoid big mistakes, but they forget that the staff is a human. They are bound to make mistakes in calculations. You may not realise it, but it can become overstocking or stockouts, damaging your finances. Consequently, this challenging situation can be avoided by employing an automated WMS.
Explore different options and select the one that suits your budget and feature needs. It will automate many tasks related to the warehouse and provide accurate real-time data, resulting in effective decision-making. Integrating suitable technology wherever possible will boost your company’s efficiency and revenue. For instance, order management software for small businesses will let them deal with incoming orders efficiently. It will let the staff focus on more value-adding tasks.
No Strategy to Counteract the Seasonal Fluctuations
While managing inventory, many professionals often don’t devise a plan for seasonal fluctuations. It causes delays, incorrect deliveries, or even stock-out situations. All this can hurt the company’s reputation, decrease sales, and lower customer retention rates.
The solution to this problem is to create a solid game plan based on historical data and market analysis. This would help you manage your storage space ahead of time and temporarily expand it whenever required. Plus, you could hire additional staff before the arrival of high seasonal sales. Consider forecasting tools to optimise the demand and avoid delays in your operations.
Long Distance Between Storage House and Workstations
Having too much space within the inventory can be problematic, as does the distance between it and where you work. A storage house should be as close to where you operate your business. It will make the stored items accessible whenever the displayed ones run out.
Visiting your warehouse frequently will quickly let you notice overstocking or understocking. If it is impossible to keep your storage house and workstation close to each other, often inspect it physically.
What is the primary concern of inventory management?
When the storage house has too many items, it cannot make sales or meet the coming order requirements. Improper tracking and outdated processes are other serious concerns.
What is the worst inventory management?
It is the lack of accurate real-time information on how many items you have. It increases the risk of reordering the wrong supplies or selling non-existent products. This situation is worse than overstocking or stockout.
What are the four common challenges in inventory management?
They are:
- Supply chain disruptions
- Overstocking
- Insufficient order management
- Inaccurate demand forecasting
How to overcome poor inventory management?
Here are some strategies to overcome it:
- Figure out problem areas
- Reflect on your needs
- Explore different software
- Choose the one that meets your requirements
- Get rid of items that are nearing the expiry date
- Regularly audit
- Use the power of automation
- Collaborate with a third-party logistics provider
The Bottom Line
Effective management of inventory is a must for smooth business operations. It will avoid overstocking or stockouts, financial damage, and damaging the brand’s reputation. As you have explored ten disastrous situations you should avoid at all costs, you’re all set to manage your warehouse. Remember these things to minimise expenses, enhance customer experience, and boost business growth.