The learning curve is sharp and steep, with losses potentially running into the tens of thousands, even millions, of dollars. Businesses operating with an inventory management system that is out of alignment with their objectives, and out of touch with the data, have to learn the hard way just how costly inventory management mistakes can be.
Fortunately, the overwhelming majority of errors that occur in a business’s supply chain are avoidable. Having said that, let’s take a closer look at some of the most common and costly mistakes that can and do occur in the management of inventory.
1. Keeping it Old School
Any business that insists on keeping it old school and conducting their inventory management manually is wasting time, resources and money. While sticklers for spreadsheet stock management are a dying breed, falling into the trap of setting up a manual inventory-based system is one that new businesses sometimes fall into.
The hole is deep and the journey back out is costly. Having to physically monitor, count and track every piece of inventory that moves through your business is not only highly labor-intensive (and therefore costly), but it increases the likelihood of errors drastically.
Unlike software-based solutions, where inventory is counted, tracked and traced precisely, human error can – and often does – come into play. The results include inaccurate stock counts, mislabeled items and an increased likelihood of losing track of stock and shipments.
Switching to a cloud-based inventory management system provides business owners with an automated, integrated and real-time solution that will make tracking, tracing and accounting for their goods simple, accurate and fast.
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2. Mistiming purchase orders
Mistimed and inaccurate purchase orders are the result of inventory managers relying on outdated or erroneous data. This leads to a faulty assessment of the current inventory standing, what’s on order already, and what is required to meet future demand.
A kind of not-so-funny comedy of errors is unleashed, and the results can be disastrous enough to bring the entire supply chain grinding to a halt, causing the business to begin hemorrhaging money.
When a business over-forecasts, they order beyond their needs and end up with overstock clogging up expensive storage real estate, and holding much needed cash flow hostage. Only no supply-chain SWAT team is coming, and no miracle working hostage negotiator is on the way to release the cash flow safely and unharmed. There will be heavy casualties, including liquidated stock, losses due to selling off at a massive discount, or offering surplus to overseas markets at dismal prices.
Under-forecasting leads to the ‘flip side of the coin’ dilemma – not enough stock on hand to meet demand. The result is revenue being redirected away from your business and straight into the waiting arms of your competitors.
Again, a simple and effective tool to ensure your business masters it’s timing, quantities and forecasting is by getting real-time, accurate and detailed accounting, tracking and tracing data of your stock into the decision makers’ hands – or, should I say, onto their connected device of choice. This is easily achieved by switching to a good cloud-based inventory management software solution, such as that offered by Unleashed.
3. Communication breakdown – the broken telephone effect
Communication is key in life, and business and inventory management is no exception. When a business suffers from the lack of an effective and efficient communication infrastructure between departments in its supply chain, disaster stalks its every step.
What you end up with is a business where there is no way for department heads to instantly gain access to the real time situation of inventory at every point in the distribution chain; the business will fall out of alignment and mistakes will spring up like icebergs.
Synergy is vital, and an integrated inventory management software solution, accessible at any time, from anywhere, by all the relevant departments in the supply chain will ensure that everyone is working toward the same target, in perfect alignment, driven by instant, accurate data.