Part numbers recorded incorrectly, inconsistent unit measurement and inaccurate ending inventory amounts are all common inventory management mistakes. These mistakes can lead to unit counts not matching the recorded unit measure, inaccurate inventory valuations and understating or overstating the cost of goods sold. Managing for optimum inventory levels requires a certain amount of strategic planning. A good understanding of common errors in inventory management will help avoid these mistakes, reduce costs and improve responsiveness to consumer demands.
Three Common Inventory Management Oversights
Not tracking performance measures
Two performance measures that should be tracked are customer service and inventory turnover. Customer satisfaction needs to be monitored and maintained for a company to keep customers over the long-term. This can only be achieved by knowing how well you are doing to meet customer needs.
Similarly, it is difficult to manage inventory levels if you do not know how quickly the inventory moves through your organization. Tracking fill rates should be done daily with sales and production cycles guiding measures of inventory turns on all lines.
When managers fail to track and measure performance they fail to identify problems and therefore, miss opportunities to improve turn rates.
Lack of staff training
Inventory management requires specific job skills. Responsibility for inventory management should be assigned to the person employed or trained in inventory management. However, all staff should be trained and be familiar with the company’s inventory system.
Cloud-based inventory management systems have the advantage of improving visibility of inventory, updated in real time and easy to access from any location. Additionally, they provide an opportunity for a coordinated approach across functional areas from purchasing and production to operations and sales.
Importantly, with cloud-based systems, staff training is relatively simple and ensures an easy to control, consistent approach to inventory management. Proper training improves the organization’s ability to keep up with orders, check stock and track inventory.
Absence of warehouse systems
Lack of warehouse systems can lead to poorly managed storage and handling. When no system is in place to manage warehouse inventory it is often placed in any available space. This can result in time wasted to search several areas to locate stock, or unnecessary movement and double handling of inventory from one spot to another.
Use of sales reports will help to determine popular items and these items can then be organized by location. Allocate specific areas for each product based on popularity. Popular items should be stored close to the shipping or picking area for easy retrieval or dispatch. Ensure items are correctly labeled, locations are clearly marked and products easy to access.
Integrated software systems allow items to be tracked as they move into, through and out of the warehouse. Effective systems improve warehouse operations through consistent approaches, lead-time reduction, and elimination of waste.
Make no mistake!
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.
Online technology aids customer-level sales forecasting, helping to improve forecast management and inventory planning accuracy. It provides a complete picture to support strategic direction.