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Inventory management mistakes can sink your business. With 45% of new businesses failing in their first 5 years, you want to make sure that you make the best decisions when it comes to managing inventory efficiently and effectively.
To start, you could end up buying too much or even the wrong kinds of materials. You can also waste time and effort trying to find misplaced items, like when a specific product never shows up. Worst of all, you could waste time, money, and effort trying to get rid of damaged or expired products.
How much is your business worth and how bad do you want to reduce such mistakes? If a mistake that affects your customer’s happiness gets past you, you could end up paying a heavy price. This article will go over the common inventory management mistakes that can sidetrack or sink your business.
Sometimes people tend to buy more than necessary in an effort to reduce costs per item. The problem is that overstocking will lead to higher storage costs (for items that are not being sold fast enough), and stock that might end up sitting there occupying space.
Instead, figure out how much inventory you truly need and order accordingly, so that you don’t waste products and money.
Although you don’t want to overstock you also don’t want to go the other extreme and understock. The problem with understocking is that you can end up with disappointed customers because of unfulfilled orders. This can lead to negative reviews across the internet including social media and it can hurt your business in the long run.
When you understock you might find out too late when you are low on inventory. Some people opt for RFID Tracking Technology to help with being alerted when inventory is starting to run low.
3. Not Enough Staff to Run Optimal Operations
When it comes to effective inventory management, you will need to find people that you can trust to get the job done while representing your company. Without the right people in place your entire company will suffer.
To find more candidates for your team, you can advertise job listings in other places to attract people in close by areas.
4. Inventory Gaps
Anytime stock levels get low and it takes a while to fulfill your stock it will lead to a bad reputation. Inventory gaps will leave you with upset customers because of a bad experience. This will also lead to customers shopping from your competitor’s site because they have enough inventory in stock.
Your reputation and customer count will all be affected because in the long run your retention rates will suffer.
5. Not Measuring Your Results
Tracking inventory management KPIs is an essential part of ensuring that you have the best inventory management process in place. You have to keep track of how much money you’re spending, the amount of time you’re spending and if that time and money makes sense.
Those that choose to not track those metrics will remain in the dark about how inventory and business is going.
6. Irregularities in Management
Taking inventory on a regular basis is a must and although you might and should already have procedures and rules in place, how consistently and often are these rules being followed?
You can incorporate a block in the schedule to see how each manager is handling inventory and operations. This will help ensure that all managers across the board are going by the same standards.
7. Too Many Variants
Having a few product variants is normal such as different sizes and different colors. But, you have to be careful to not go overboard with the variant options. This can create chaos in your system.
It is easier to run into logistical problems when you have too many categories and way too many SKUs to manage. Also, having so many options will make it more difficult for employees and yourself to manage and will also make the system less intuitive.
Keep this timeless advice in mind: “less is more.”
8. Poor Warehouse Design
If you have your own warehouse then the layout of the warehouse is going to come into play with your inventory. You need enough space to stock everything that you need but not too much where you end up with a ton of space not being used.
Make sure that all of your stock is stored in a logical manner. Take into account the dynamic and static stock you have and separate them.
The dynamic stock of the warehouse is where employees pick up the orders as they receive them. Static stock is when there is stock with fixed locations and some overflow of dynamic storage.
The key is to designate an area to every single category and product to make it easy to find and get to when a sale is made. Having your fast selling stock in a very accessible area makes total sense with designing the location of your inventory. Just make sure you don’t push your slower selling stock too far back where you forget about it.
Ready to Avoid These Common Inventory Management Mistakes?
One of the best things you can do to have a profitable business is to avoid any of these common inventory management mistakes. To improve your entire system right away opt for software that will help centralize all of your inventory information across the entire organization.
Did our blog post come in handy? Make sure you check out the business section before you leave.