Inventory management is a crucial aspect of any business, as it directly impacts efficiency, profitability, and customer satisfaction. However, managing inventory can be challenging, and there are several common challenges that businesses face in this regard. Indeed approximately 34% of businesses have encountered situations where they have unintentionally sold a product that was unavailable in their inventory, resulting in delayed order shipments.
This article explores common inventory management challenges and effective solutions to address them, essential for optimizing inventory processes and ensuring business growth.
What Is Inventory Management?
Inventory management is the monitoring of a company’s inventory, including the processes for manufacturing, ordering, storing and selling products on the market. This includes managing the storage and processing of raw materials, components and finished products.
Effective inventory management keeps a company organized. It also provides critical data that enables companies to respond to trends, avoid disruptions in supply chain management and maintain profitability.
The Benefits of Inventory Management
Accurate inventory management is key to running a successful product business. Tracking stock regularly can help avoid stock errors and other problems. The following are the benefits of strong inventory management:
Greater cost savings
By streamlining inventory management processes, you can eliminate all inventory costs associated with human error. Automation means that a business can eliminate excess and obsolete inventory and reduce the costs associated with that inventory in terms of space requirements or storage fees.
Better business negotiations
As products are more traceable, negotiations with suppliers and buyers become much easier. Companies could also better understand which suppliers are beneficial to the business and which could be improved.
Reduces the risk of overselling
Overselling is a major challenge for online sellers, which can result in loss of control and being suspended from marketplaces such as Amazon or eBay. Inventory management can allow businesses to synchronize orders and inventory across each eCommerce platform, ensuring that stock levels are adjusted when a sale comes through.
Profitable business decisions
Using the data provided by an inventory management system can allow for more data-driven business decisions, with a better-informed understanding of supply and demand. Many inventory management systems will equip companies with the tools needed to make strategic decisions, such as forecasting sales trends.
7 Common Inventory Management Challenges and Solutions to Overcome
Managing inventory is a daunting task. The process and results impact every aspect of your business. Here are 7 common inventory management challenges to watch for in your supply chain.
1. Inconsistent Tracking:
Manual inventory tracking procedures in various software programs and spreadsheets are time-consuming, redundant and error-prone. Even small businesses can benefit from a centralized inventory tracking system with accounting capabilities.
Consider upgrading to inventory tracking software that offers automated reordering and procurement capabilities. Inventory management platforms offer centralized, cloud-based databases for accurate, automatic inventory updates and real-time data backup.
2. Inaccurate Data:
You need to know exactly what stocks you have at all times. Gone are the days when stocks could be counted once a year, leaving you with your hands full.
Frequent inventory audits, such as daily cycle counts, reduce human error and provide more accurate, up-to-date inventory data for cash flow management. Moreover, organize audits by category and perform cycle counts of smaller inventory samples on a predictable schedule for more accurate financial data.
3. Changing Demand:
Customer demand is constantly shifting. Keeping too much could result in obsolete inventory you’re unable to sell while keeping too little could leave you unable to fulfill customer orders. Order strategies for core items, as well as technology to create and execute an inventory plan, can help compensate for changing demand.
Some inventory management platforms include demand forecasting tools. This feature integrates with accounting and sales data to help you predict demand and schedule orders based on shifting customer preferences, material availability or seasonal trends.
4. Inadequate Software:
To scale inventory management software to support complex logistics, it needs to integrate with your existing business process platforms. The difficult task is choosing from hundreds of inventory management solutions and mastering a host of features that require training and ongoing support.
Upgrading to a cloud-based inventory management platform doesn’t just give all the latest features. You get to take advantage of the vendor’s expertise and training while it’s being implemented.
5. Managing Warehouse Space:
Efficiently managing space is an intimidating task. Planning and designing warehouse spaces with inventory management platforms helps you better control the timing of new stock deliveries. It can account for important factors, such as available space.
That is the reason why you should use inventory management systems with warehouse management features to optimize storage space and inventory flow. Categorize inventory storage down to shelf, bin ,and compartment, and automate order picking, packing ,and shipping workflows.
6. Increasing Competition:
Today globalized supply chains are subject to unpredictable economic changes and market forces that affect competition for raw materials. Small businesses are sometimes faced with the choice of either competing for materials in high demand or holding enough inventory to control costs.
Thus, businesses should maintain safe stock levels to offset supply chain disruptions and manage longer lead times due to changing international competition for raw materials. Proper inventory planning helps operations adapt to dynamic global supply chains.
7. Inefficient Processes:
Low-tech procedures for manual inventory management do not seem to be a big challenge when the inventory is small and there is only one warehouse location to manage. However, as sales volume increases and inventory grows inefficient, labor-intensive, and low-tech standard procedures are difficult to scale.
All the information you need about your inventory can be in your pocket. Therefore, with mobile solutions and cloud-based software, you can control inventory and improve warehouse productivity from anywhere in the world.
Conclusion
Proper inventory management depends on the type of business and the products it sells. There may not be one perfect type of inventory management because there are pros and cons for each. However, taking advantage of the most appropriate type of inventory management can go a long way toward ensuring a company’s success.
The right inventory management platform can automate processes, improve inventory practices, and enhance customer experiences. BKPlus Software offers a collection of native inventory management and control features to help overcome some of the biggest inventory management challenges. Track inventory across multiple locations, automatically manage reorder points, forecast demand, and plan production and distribution.
