The Importance of Accurate Inventory Levels

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Accurate inventory allows a business owner to operate like a seasoned general – directing his or her resources where they are most valued and needed, predicting crises before they arise, and mapping out a strategy for growth and success as opposed to adopting an ad hoc approach to inventory management.

Overstock; underperform

Trying to run a business without an up-to-date insight into inventory levels is like attempting to herd cats with a flock of sheepdogs – things will go awry, in many directions, all at once. Overstock is one of the major pitfalls that a business with poor inventory management is likely to fall into.

Where stock accumulates, cash flow pools in a wasteful, under-utilized pond. When inventory levels are accurate however, your purchasing, storage and sales flow will be streamlined, and in alignment with the rest of your business. Cash flow is then able to be directed to areas of greatest necessity – the purchasing of in-demand product, expanding your product line, and for marketing and incentives to drive your sales force.

Integrated inventory management software allows a manager to set maximum stock limits, receive alerts of sluggish stock movement, and therefore clear burdensome stock through special promotions, clear-out sales and higher discounts.

The Problem of Insufficient Inventory Control

If you don’t have the capability within your organization to instantly gauge where inventory is low and correlate that with what is selling well, you will more than likely drop into the second pitfall – out of stock.

Apart from the impact on your revenue stream, not being able to fulfill purchase orders for your customers is like raising a huge red banner reading ‘inefficient and unreliable’ right outside your door.

When you’re purchasing using cloud-based inventory software, storage and sales forces align and are always informed with up to date, remotely accessible data. Then planning, predicting and purchasing can be executed with maximum efficiency.

Minimum stock levels can be set, alerts sent out to prompt timely reordering, and trends in customer purchasing behavior identified and exploited. You can leave behind the days of bumbling about warehouses, clipboard in hand, manually compiling purchase orders.

Drowning in Damage Control – Reactive versus Proactive Inventory Management

Inaccurate inventory levels lead to the kind of reactive, crisis-driven management style that directs and pools resources towards putting out fire after fire, as opposed to actively looking to the future and growing the business.

When the decision makers in a business are being delivered data that is out of date or, (worse yet) incorrect, a domino effect of negative effects ripples through the organization. Poor purchasing decisions are made, warehouses operate inefficiently, miscommunication arises between distribution and sales, and customers’ orders don’t get fulfilled properly.

When inventory is kept accurate by implementing an integrated inventory management software system, decision-making is forward thinking, planning is effective and synergy arises between all departments.

Threats as a result of bad or inappropriate business practices, theft, fraud and collusion are also kept to a minimum, which means your people can invest their time and energy towards actually growing and enhancing your business and how it better meets the needs of your customers.

This is the proactive management approach, and when it comes to accurate inventory management, proactive means profitable.

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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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