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Being able to manage a balanced level of inventory is one of the critical aspects of any retail business. As a part of any inventory management organization, it is vital that you have an updated inventory management system that is more efficient. The process of inventory involves a series of intricate steps in order to ensure accurate product delivery. However, no matter how minor, a single error can cost the company millions and have long-term consequences.
No matter the size of your organization, it is key that everyone in the company's chain of command is aware of inventory management's importance. It is vital that companies understand the importance of inventory management to analyze the risk associated with improper inventory management accordingly. Despite being in the industry for decades, people still fail to realize that even a simple glitch can tremble the entire warehouse operation.
5 Inventory Management Issues and How to Solve Them
Inventory management issues have plagued numerous companies over the years. Large-scale or small-scale, every industry needs to be aware of inventory management and should be ready to deal with every inventory management issue that arises.
We have put together a list of 5 of the most common inventory management issues companies face and how to solve them. This article will guide you through the problem and accordingly help you find the solution you are looking for.
1. Miscommunication/ Unclear Communication
As we mentioned above, the company size doesn't matter when it comes to inventory management. No matter how uncomplicated and straightforward your business, communication is the key that keeps everything sharp and well-oiled. However, even a single ounce of miscommunication can be harmful and tend to have far-reaching effects on the company's work efficiency.
Since there are numerous components involved in inventory management, a glitch in communication is enough to disturb a seamless workflow.
For example, It is critical to put the price tags on every single item in your inventory. However, suppose an update in the pricing is not communicated to the lower management. In that case, the updated prices won't be reflected on the labels, which will ultimately result in the products going out in the market at the wrong price. Once the product is out, it is tedious to revise the prices as it requires recalling the entire product line.
The best possible solution for this is automation, which can help streamline the communication throughout the organization across each and every department. In addition, automation will lead to correct and timely information being passed around, thus minimizing the chances of miscommunication.
2. Manual Processes
Tracking inventory using simple spreadsheets or by keeping paper records is not only time consuming, but is in-efficient and error prone. It is also labor-intensive, causing your employees to spend countless hours entering data and analyzing it.
Even small businesses would feel the pains of time-consuming, inaccurate inventory management. Employees are overworked and their motivation is low; visibility of the overall performance of the business is limited since there is no centralized system keeping track of stocking levels.
Sometimes manual stock counting requires that business comes to a grinding halt for at least a few hours and may take several days in some cases, to be completed. The potential loss in sales revenue is oftentimes, too costly and may not be worth it to do regular and manual stock taking.
The most effective way to solve this issue and the many headaches that come with it, is to automate through the use of an inventory management software. Based on the size and nature of your business, you would choose among: a standalone single computer solution, a cloud based service, or an ERP solution. If you are just starting out and have limited budget, these solutions would be great choices to evaluate.
3. Disorganized Warehouses
The number of issues due to stock being piled up can often cause problems for a warehouse manager. Large-scale industries often lack the space to stock new inventory. As a result, these companies just place stock anywhere they find space. While this may provide a temporary solution to the space problem, it can hamper warehouse efficiency.
For example; A disorganized warehouse ultimately means that there are going to be essential things scattered all over the place. This could have the average employee using the forklift every time an order is placed, which can be tedious and time-consuming. Every minute the employee spends driving around a forklift costs the company money.
The easiest and most convenient solution to this, is spending a considerable amount of time taking into account all the things present in the warehouse and arranging/re-arranging them accordingly. Companies are likely to save a lot of money if they could effectively arrange their warehouse. This keeps employees from walking all the way across the warehouse to search for haphazardly-placed items every time a product is purchased or required by an internal user/department.
4. Damaged Goods
For those companies dealing with FMCG and perishable products, inventory management can be a highly complex process. This is because the company has to take into consideration the expiry date of the products as it becomes the most crucial factor. At such times, not having an accurate track of the inventory can lead to enormous losses for the company. Similarly, if the goods aren't taken care of properly, they are likely to be damaged, eventually leading to stock as well as monetary losses for the company.
For example; a company dealing with dairy products may send out shipments with a later expiry date while warehousing stock with an early expiration date. This can largely hamper the process cycle while increasing the chances of spoilage of the products with an early expiry date.
An easy and convenient solution to this is using an inventory management software which is configured to keep track of all the perishable goods present and shipped from your warehouse. This way, you can know when to restock your shelves as well as get rid of the damaged goods before they hit the market.
5. Annual Physical Inventories
Majority of the companies tend to shut down their business for a few days at a stretch every year. During this period, the companies physically inspect their warehouses and count the inventory to ensure that everything matches their software data. However, a ten-day break can ultimately lead to great losses and cost the company a considerable amount of time.
A quick fix to all this is arranging these checks in a quarterly cycle (3 months). Doing quarterly checks instead of annual physical inventories can save the company a great deal of money and time while keeping accurate track of the inventory at the same time. We recommend picking one section each day during these quarterly inventories to check your product levels against your inventory software information.
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