6 Most Costly Inventory Management Mistakes to Avoid

Inventory Management

Even if you are just starting out as a business owner or you already have a thriving enterprise, maintaining an adequate supply of inventory is critical to ensuring the success of your company.

Even if your budget isn’t the greatest, don’t underestimate the power of disorganisation with regard to your finances: some estimates suggest that over a trillion dollars were lost globally in 2014 due to inventory-related mismanagement.

Reducing mistakes is critical to effective inventory management.

While the method for identifying inventory faults is more varied than ever, it’s possible to make a mistake. Preventing mistakes in your inventory process may reduce the amount of money you lose because of such mistakes.

As Managing a warehouse is difficult, it’s better to outsource it. Precision and accuracy are essential in order to remain on the correct road.

No matter how well-intended, however, warehouse management errors often go undetected due to a lack of awareness on the part of warehouse managers.

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6 Inventory Management Mistakes to Avoid

1. Lack of training

Typically, inventory systems are complex, unintuitive, and difficult to operate. Medium-to-large businesses avoid wasting money on training workers on the new software, which may be a problem.

Many firms are able to lose the amount of on-the-clock time it would take to educate employees internally. This, coupled with the low staff turnover, means that just a small percentage of the workforce knows how to use the software, and if anything goes wrong and they don’t know how to repair it, then critical pieces of data may easily fall through the cracks.

Older inventory management systems are complex and difficult to master for small companies. Learning a system is going to be a waste of time for someone who’s working long hours to develop their brand.

Many small businesses and new firms don’t have the money or time to dedicate to comprehensive training, thus this is not an option for them. Another disadvantage is that conventional inventory systems are feature-rich and capable of handling situations that most small companies don’t have.

2. No inventory checks

Due to the daylong process to verify one’s physical inventory against current information on the system, companies are more than happy to devote a whole year to it each year. It is obsolete and ineffective to stop operations for a prolonged period of time.

Cycle counting is another option. To put it another way, yearly inventory inspections are no longer used. Many studies have shown that it is not as disruptive to everyday operations and doesn’t take as much time to keep track of calories consumed.

Also, because the check intervals are short, mistakes are easier to find. If you do daily or weekly inspections on your inventory, you’ll see it as a less difficult task.

3. Too many storage facilities

A storage location may be a warehouse, a retail shop, or a supply depot. As the number of storage locations available for the same product increases, the number of products that are stored increases, which may result in a rise in inventory without an improvement in service levels.

Stock reserves boost inventory by 10 to 50% even in a retail setting.

What are the causes behind this? There are four tumblers.

Cardboard, pallets, and other assorted objects in addition to cardboard constitute most or all of the storage container.
A higher number of storage locations means more complicated inventory management, and as a result, management mistake is more likely.
When there is a scarcity, the incorrect stock distribution results
The entire stock is not shown.
To maximise sales, it is very important to concentrate as much of your goods as possible, particularly on your cheap sales. Stock decentralisation is only advised for goods with lengthy lead times, for products with high sales volatility (which is hard to forecast) and products with significant transit costs.

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4. Inadequate organization of your storage system

Time and money are being wasted if your workers have to travel to the other side of the shop or if they must go past barriers to find your items. Make sure your physical storage system is equipped with automated inventory system, which will enable optimum efficiency. To help its implementation, keep things workers use often in places where they can easily reach them.

Special spaces are designated for the most required items. Items that workers require often should be located between the employee’s shoulders and hips, and seldom should employees have to bend over or reach up.

Fast-moving goods should be stored in bins, whereas slow-moving items should be stored on pallets or in cartons. Identify, classify, and arrange things using a system of section, row, rack, and shelf.

5. Warehouses not situated near Workstation

Like when you have too much room, efficiency and not comfort become factors. One of the greatest supply chain businesses in the world is found in direct contact with inventory, or even working among stock. The visuals in Excel aren’t replaced by working on lines in the programme.

Some company’s headquarters located in the city centre, but its warehouse was situated out from the city. In order to see the warehouse, it was required to travel two hours by road (one way – without traffic). Not routinely checking your inventory disconnects you from reality and reminds you that you have too much inventory, particularly if it is stuff that does not move quickly.

In my opinion, it is impossible to accurately assess the relative significance of this criteria, but if you have the option, it is always better to stand rather than sit close to your inventory. Don’t let your relationship with your team fade if this is not the case. Plan frequent and scheduled encounters with your teams in advance to maintain your relationship intact.

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6. Lack of Real-Time Reporting

Real-time reporting methods help to make more visibility available, thus leading multi-channel commerce companies focus on these. To get the most out of these possibilities for process improvements, your company should collect real-time data about inventories, orders, and other aspects of the business to help your organisation optimise its processes.

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7. Dependence on In-House Resources

Every successful eCommerce company eventually reaches a point where handling logistics and eCommerce fulfilment in-house makes no sense. A logistics consulting expert can assist you in determining the optimal moment to outsource logistics and inventory management to a reputable third-party supplier.

8. Absence of forecasting

Inaccurate forecasting will lead to failing to fulfil consumer requirements, as well as lowering customer happiness. By monitoring inventory, you can plan proactively and know what items are in stock and what is on the rise. It is possible to see what consumers desire, as well as see what goods are not as popular, via forecasting. If you know what’s not selling, you may save yourself the expense of buying items you don’t want and ending up with inventory that’s too great.

Inventory Management Mistakes Inventory Management Mistakes Inventory Management Mistakes

How these typical blunders may harm your company

A mismatch in inventory may create several issues, and negatively affect company profitability. It may involve issues such as:

Problems with auditing: Correcting incorrect inventory counts takes precious time and resources.

Money and efficiency losses: Time spent correcting errors loses revenue and locks up resources that might be better utilised elsewhere.

Angry customers: Inventory errors cause consumer discontent due to delayed delivery and discrepancies between requested and delivered goods.

Poor employee morale: Inventory management systems that are poorly designed or inefficient increase stress for your workers, lowering morale and productivity.

Inventory holding costs are very high: Inaccurate inventory planning may lead to excessive holding costs for inventories.