Inventory, whether in the form of raw materials, work-in-progress or finished goods, can account for a substantial chunk of your business’ assets. Inventory loss, especially for SMEs, can negatively impact your company's bottom line.
There are many factors affecting inventory management and unfortunately, detecting the results of mismanaged inventories is not easy. Symptoms vary greatly and there are many areas that are susceptible to mistakes and mishaps, if not given the proper care and attention.
Indications you may have a problem include regular interruptions to production shipment delays to customers caused by surplus or insufficient stock, increased clerical costs for expedited procurement, and high incidents of waste through loss, spoilage and obsolescence.
Managing for optimal inventory control requires a certain amount of forward and strategic planning. Having a good understanding of the common mistakes encountered in inventory control will help you to avoid the factors affecting inventory management that lead to errors.
Simple mistakes such as inconsistent unit measurement, or part numbers being wrongly logged can lead to stock take counts not matching the recorded unit measure. This type of error can result in inaccurate inventory valuations, incorrect inventory totals and the potential of understating or overstating the cost of goods sold.
Accidents and Injury
Inventory management mishaps are not limited to issues caused by stock taking alone, they can just as easily occur when handling and storing inventory stock. Mishaps such as injury to personnel or damage to inventory stock are other factors affecting inventory management.
Typical injuries can involve slips and falls and may even involve workers being pinned between a forklift and a dock or racking system. Predict and mitigate accidents and potential hazards before they happen using guard railings, anti-slip tape, safety mats and cautionary signage in problem areas.
Poorly routed traffic within your warehouse can lead to accidents and costly injuries. Identify the best possible method of moving product in and around your facility. Keep areas clear and where possible, restrict areas prone to visual limitations. Also, monitor operator behaviour and ensure forklift operators are properly trained and certified.
Damage to Inventory
Inventory can spoil or be damaged through incorrect handing, improper storage or accidental breakage by staff and machinery.
Forklift collisions can damage inventory stock and even spark racking mishaps. Having properly positioned pallet racks are not always a guarantee against storage and racking incidents. Make sure all employees are adequately trained on the pallet racking systems and their limitations to avoid any overloading and to ensure that product will not fall from the shelves.
Tracking damages, particularly those which consistently occur, is a good way to establish the primary causes of damage, whether it is related to manufacturing processes, shipping or employee handling. By understanding how mishaps occur you can identify ways to avoid common blunders, further helping to reduce costs and improve responsiveness to consumer demands.
If inventory accounts for a major portion of your company’s assets, then surely it is worth the time and investment needed to reduce inventory mishaps and waste.
Effective inventory management is about having the right product in the right place, at the right time. Streamlining the process with reliable inventory software will significantly reduce mistakes and improve operations.
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.