What’s Causing Your Inventory Management Problems and How to Avoid Them

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Businesses are quickly realising that inventory control is absolutely necessary to run an efficient business and make money in the process. Especially in today’s competitive marketplace, business owners simply can’t afford to have money go down the drain. We take a look at common inventory management problems, causes and how best to avoid this.

Identifying symptoms of inventory management problems

If your business is experiencing a combination of the below symptoms, chances are there is a root connection to the way inventory is managed:

  • High cost of inventory
  • Consistent stockouts
  • Low rate of inventory turnover
  • High amount of obsolete inventory
  • High amount of working capital
  • High cost of storage
  • Spreadsheet data-entry errors
  • Lost customers

Likely causes of inventory management problems

There are usually many factors that contribute to negative symptoms of inventory management problems. Although not an exhaustive list, the following does outline a few of the most probable reasons why your inventory management is suffering.

Spreadsheets and manual inventory tracking

Manual inventory management practices such as using Excel is usually the first tool small-to-medium sized businesses use to manage their inventory. While spreadsheets and the likes work fine in the beginning when you’re a small operation, they can quickly lead to crippling issues.

In the same way, manual inventory tracking and stocktaking can be suitable for small businesses but again become time-consuming and erroneous as your company grows. Not only does this impact your businesses ability to foster growth, data errors can have snowballing effects.

For example, there may be a wrong quantity recorded in an SKU. As a result you order 1000 units instead of 100. If this 1000 does not sell, this becomes wasted capital and can have very costly implications for the business.

Large inventory volumes

Large volumes of inventory can lead to management nightmares as they can cut into your profits. Most businesses have 20 to 40% of their working capital tied up in inventory stock. Inventory reduction is difficult to do, but it is essential if you want to go from poor inventory management to great inventory control and management.

Inadequate forecasting

If you are not using accurate data to identify sales trend, best-selling items, customer behaviour and more, you’ll either order too much and experience the problems of excess inventory stock, or order too little and experience stockouts and lost customers. With accurate reports, you can better forecast your customers future behaviour and order accordingly to meet customer demand.

The solution: Get automated

A proactive inventory management system is no longer science fiction. Effective inventory management systems now go beyond the management of merely recording in-stock inventory. They also offer valuable time-saving automation that can streamline business processes. For example, when your stock is reaching low levels, great inventory management software can notify your users and automatically reorder stock from your supplier.

By using a smart inventory management solution, your business is able to access accurate data in real-time. This means your business can make valuable insights for better forecasting. Most importantly, better inventory management systems that use proactive services and alerts can help deter stock out issues and allow business owners to remain in control over stock and the supply chain by providing a solid system as a foundation to integrate other services such as their accounting platform.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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