Managing inventory, even as a smaller start-up business, can be a delicate balancing act requiring real dedication and commitment. There are innumerable myths about inventory management that plague the world of business and may even prevent new business owners from becoming successful. In this article, we dispel four common myths about inventory that can stifle a business from reaching its potential and being successful.
Myth Number 1: Inventory management can be started after a business has launched
While having a comprehensive inventory management system in place may not be a top priority for very small business start-ups, an inventory management system is necessary for long time success.
The truth is, you need to have a plan in order for your business to grow. Managing unorganised inventory can become difficult and can stunt your business’s growth. In fact, mismanaged inventory is actually one of the top reasons many small businesses fail shortly after their launch. When you have an efficient inventory management strategy in place, it will grow along with your business.
Myth Number 2: Surplus stock is more effective
Many smaller businesses fall into the trap of ordering excess stock to prevent running out if customer demand increases. While preventing stock outs is important and it keeps customers happy by avoiding bad reviews and loss of sales, it certainly is not a foolproof method.
When you have too much stock, you not only have your capital tied up in products gathering dust on your shelves, you are also likely to be paying for storage fees. In addition, you must keep in mind that trends change, customers can be fickle, and product packaging changes all the time. Being stuck with a surplus of products that you can’t sell is a worst-case scenario.
Myth Number 3: Local is Better
Many eCommerce sellers believe that using local warehouses are the best way to store products. However, there are multiple things to think about when it comes to storage locations – it will serve you better to consider where your customers are most densely located. Which location is going to help you get products to the customers the quickest while providing great order fulfilment services? Even if you fulfil the orders yourself, it may be worth researching a hybrid fulfilment operation. When profit margins are low, saving a few dollars on shipping can be worth outsourcing fulfilment to certain parts of the country.
Myth Number 4: You don’t need inventory management for forecasting
Some business owners attempt to accurately forecast future sales with only past sales data. However, research shows us that this simply is not the most effective way to forecast. Effective and accurate inventory management will help you maintain the right quantities of stock, follow trends, calculate lead time for restocking, and most importantly, know what is no longer selling and should be removed from your inventory altogether.
Topics: forecasting, inventory management, small business, SME, stock control