Whilst no one ever said inventory management was easy, it is possible to overcome the challenges most business owners – both new and experienced – face on a daily basis. Here we’ll explore some of the major challenges faced by businesses in managing their inventory efficiently.
The two-headed beast
By far the most daunting inventory-related challenges that arise across business in a wide range of industries are in the form of a two-headed beast – overstock and under stock.
This issue arises when a business struggles in managing the balance between knowing how much stock it needs to order, and when to order that stock. Executed correctly, timely and accurate stock forecasting and ordering ensures that a business’ inventory flows from supplier to customer at just the right rate, and its ROI is maximized.
However things can get ugly fast when one of the two heads of the ever-dormant beast are awoken, due to inaccurate forecasting and mismanagement of inventory.
When too much stock is ordered a business is left standing by helplessly as its cash flow slows to a trickle, and then dams up around unnecessary inventory on the shelves.
As a result, money that could be invested in driving stock that is in demand in a timely manner languishes in limbo, where it’s flushed down the drain in the form of clearance or stock liquidation sales.
The second, equally as malevolent head, is that of under stock. Failing to order in the right timeframe or quantity for a product that has a quick turnover results in revenue flowing out the door in a line of unhappy and disgruntled customers.
Your bottom line will bear the brunt, but so will your corporate image, as customer dissatisfaction spreads in your marketplace.
Crystal ball forecasting – doomed if you do and doomed if you don’t
Any manager with inventory control experience will tell you that there is a huge difference between data-driven projections, and forecasting then carrying out ‘calculated’ stock purchasing decisions, that are based on outdated and inaccurate inventory reports.
The former is an example of proactive and strategic inventory management – the kind that hits the nail right on the head. It ensures a business maintains optimal inventory levels throughout its distribution chain, satisfying demand, maintaining steady supply and keeping stock on hand to a sufficient minimum.
The latter is akin to peering inscrutably into a crystal ball and plucking order quantities from the ether. The result is anybody’s guess, but it’s almost a given that a poorly managed stock room will drain your profitability.
Every cloud-based software management system has a silver lining
Inventory management software, particularly a cloud-based solution that’s able to integrate with a host of other useful programs, is startlingly effective at helping businesses – big or small – accurately keep track of everything they sell.
Smart software functionality also allows businesses who struggle with order timing to set order prompts when it is necessary to re-order. Minimum and maximum inventory levels can be set, and the system will notify managers when a certain item is either reaching overstock or under-stock levels. This allows for prompt re-orders or adjustments on future order forecasts.
Invest in the future of inventory management
So while inventory management will always pose a significant challenge to any business, investing in an affordable, smart and effective inventory management software solution will help ensure that profitability is maintained, and stock flows optimally through your business.
Unleashed helps businesses track, trace and account for the products that drive your business forward. Now, the flow of inventory through your business can be viewed in detail, in real-time, from supply through to customer delivery.
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.