The Five Most Common Inventory Management Problems
Awareness of the frequent inventory control issues which could arise can assist you in avoiding them from occurring.
Lack of Automation
People can make mistakes that can lead to inventory issues. If your personnel are in charge of all stock keeping and you are using an unregulated system of records, e.g. Microsoft Excel, then complications are bound to happen.
Making mistakes when entering quantities (in an inventory count or while ordering more items) will always cause differences.
If you possess multiple warehouses to fulfill orders, not having a proficient warehouse management system renders it nearly impossible to get a precise observation of inventory amounts or find out where most orders are coming from so that you can guarantee adequate stock in the related warehouse locale.
When you manage an online shop, it’s highly probable that you are doing business in multiple channels. This may be a huge problem if the SKUs don’t match up in the different outlets if there are no robotic solutions.
Having multichannel inventory sync set up can help ensure that all your channels are doing well and that you never end up with too much or too little stock.
It’s possible that things out of our control (like the problems in manufacturing) can cause us to run out of a product.
In those kinds of situations, attempt to make something bad become good. By having knowledge of when a product is going to be available again, you can enable customers to purchase beforehand, for example. It can be beneficial to utilize products that are currently unavailable.
Poor Forecasting
A large portion of determining how many items to keep in stock is based on a prediction you’ve crafted from multiple sources including historic sales data, the average cost of a purchase, and changes that happen depending on the time of year. An example to illustrate this would be if you have a business that sells Christmas trees; you will likely only have a 3 to the 4-month time frame in which you will make a majority of your sales.
It is likely that you will purchase inventory in order to meet the needs of your sales from earlier years, which amounted to an average of 5,000 items in each applicable period.
Even so, if a large rival has gone bankrupt and you didn’t predict it in your predictions, then you may find that there is a marked contrast between what you possess and the orders that are being processed.
You may have incorporated a Facebook Store without reckoning on the additional requests.
This should be an exception rather than a rule. If you keep an accurate record of your metrics and stock-keeping units, you will frequently be able to make an accurate prediction in your forecasting.
It is virtually inconceivable to anticipate global circumstances like a pandemic. No matter what kind of crisis, the balance between supply and demand will never be the same, but you can still make sure to offer quality customer service even when the world is in the middle of a pandemic.
Poorly Trained Staff
Humans are not only responsible for errors in inventory control, but also play a greater role in the difficulty of managing it.
If you fail to properly educate your staff, you may have difficulties that not just concern your stock, but also with keeping your personnel which can add to the outlay of bringing in and enrolling new employees.
Not having the proper instruction can be a major mistake when utilizing automated or computerized systems. If an employee is not familiar with the usage of these systems, it could result in making mistakes.
A prime illustration of systems that necessitate instructing personnel properly is your order management solutions. If people aren’t proficient with them, your enterprise will suffer.
Insufficient training can cause adverse results not just in software engineering or automation.
If your workers do not get trained in fundamental warehouse activities like piling up pallets or working a forklift, it could lead to destroyed goods that are unable to be sold, and then have an influence on your stock management as a whole.
Inventory management training should not be a single, unchanging event but should be kept up-to-date. Ensure that any person associated with changes in procedures or the integration of fresh systems or automation are given the necessary instruction.
It is beneficial to incorporate training refreshers or refurbishment sessions to ensure that employees are still following the knowledge they initially gained.
Warehouse organization
If your warehouse is not well structured, then plenty of processes can take more time to complete than necessary, leading to an increase in costs and a decrease in revenue.
If it is difficult to access your most popular products, then workers are needing to spend additional time obtaining them, which leads to orders being fulfilled at a slower rate. It is essential to have a system of organization in place in your warehouse to maximize your staff’s productivity.
It is recommended that you put into practice the ABC technique (which is based on the Pareto Principle).
This implies that you ought to concentrate on the items in category “A”, which are the SKUs that account for approximately 80% of your requests and deals. Category “B” is the SKUs that produce moderate results, and “C” is the items for which there is less need and that are not as important.
Task management solutions can be of great help to the warehousing sector. You should make sure that everything in your warehouse has a designated spot and that everything is kept in its assigned area.
Arrange your warehouse in the ABC technique and divide products into categories as best you can if you offer a variety of items. As an illustration, items like electrical appliances and garments should have different areas of storage.
Any restructuring should not be a one-time act. The way in which items are incorporated into your ABC program may fluctuate as time goes on. You might considerably broaden your selection of offerings or even the capacity of your storage space, or you may detect other modifications.
Review your organization’s outline at least once a year to make sure that it remains suitable for the current requirements.
Outdated Systems
It is to be hoped that you have made advancements away from obsolete inventory management approaches such as filling out a spreadsheet. However, the quickly evolving world of software and automation implies that some of your procedures may now be out-of-date.
It is possible that introducing fresh technology that does not link up with present systems may occur.
In cases of larger or multiple warehouses, one should make use of software and automation that can communicate with one another effectively. If this is not applicable, you must then depend on your employees to move or enter info from one system to another.
This can result in the chance of mistakes being made, thus creating more potential issues in terms of inventory control, plus being a lengthy process.
Examine what your main software or automation systems are. It is advisable to determine what systems integrate readily with the ones already in place and what tools or programs may have to be replaced or are in need of an update.
You will likely need to have your sales and inventory management integrated and functioning as a unit, with your inventory being changed instantly in reply to modifications in your sales.
Why focus on integration? The main benefit of having integrated systems is the decrease in workload for yourself and your staff, as well as better accuracy in tracking and metrics and a decreased risk of having too much or too few stocks.
You desire that all your stock control activities are comparable to a well-oiled engine: Effectively running and boosting productivity.
Badly laid out warehouse or stock room
Give the same amount of attention to your storeroom or storage room as you would the main office – particularly when it comes to the arrangement. Organize inventory systematically, allocating different zones for dynamic and static inventory.
Dynamic storage vs. static storage
This section of the warehouse is often referred to as the forward pick area and it is where goods are continually selected for dispatch. This region could incorporate various sorts of shelving to decrease total selecting time. By backing this “picking expedition”, you’re providing your pickers with a chance to complete an order rapidly. Static storage will include items that have been placed in predetermined areas, any overflow items from the dynamic storage region, and potentially some vacant spots.
Once you have organized your warehouse in the most efficient way possible, it is essential to maintain cleanliness and order, and establish a system for all workplaces – specifically with regard to stock. Getting the most out of your warehouse and keeping inventory on hand is as effortless as you decide to make it. If you are not organized with how you store things, it is likely that you will make mistakes with your inventory. Having a large number of orders at once is not an acceptable reason for storing inventory in random places. No matter how much work is going on, every single thing or collection should be kept in a specified region. It is difficult to maintain an orderly warehouse without labels and appropriate arrangements of items. Make sure you have popular items available, however, make sure that you aren’t leaving some items without a place to go.
Lack of adequate training leading to inventory mistakes
It is apparent that permitting an inexperienced employee to use your inventory control system could bring huge potential dangers. For those with limited familiarity, it can be challenging to quickly understand an unfamiliar inventory management system – even for someone who has previously utilized inventory software. Every system operates differently. This can result in conflict regarding the specifics of stock, the number of items in stock, financial accounts, and the exact status of orders (among many others). Make sure your employees have been properly instructed in the use of any automated stock control systems in the company.
Once your staff is effectively trained on a good ERP software system, you can expect to see the following:
- Manual tasks become automated
- Smarter workflows are implemented throughout the business
- The efficiency of staff increases from increased automation
- Increase in accuracy and accessibility of data
- Improved procurement management
- Improved relationships with vendors and suppliers
- Boosted cash flow from improved inventory handling and faster order processing
- Too much inventory = higher overheads + Too little inventory = longer fulfillment times – any good inventory management system will prevent both of these issues.
- Effective forecasting and more informed purchasing
- Increase transparency throughout the business
Prioritise communication between teams
The same amount of damage to your business’s inventory can be done if there is not enough training available as if there is little to no communication between teams. Sales teams have to be conscious of the supply of inventory in order to avoid excessively promoting products. Your customer service reps should be informed about any difficulty related to orders that may arise so that your customers can be kept up to date on what’s going on; furthermore, your accounts team should be made aware of any items that have gone astray or any problems encountered with suppliers. Neglecting to communicate will almost invariably cause a loss in revenue and customer loyalty.
Surplus or access stock
In addition to being a waste of resources and consuming valuable space on shelves, excess inventory requires capital that might otherwise be put towards further developing the business. Acquiring too much inventory is a blunder that is not hard to commit, particularly if you buy a large number of goods from vendors or if you have the latest trends. Nevertheless, it is difficult to rectify when you are left attempting to move surplus stock.
Supplier lead time
The amount of time it takes for your supplier to deliver directly influences the amount of control you have over your available stock. The more time you have in advance, the larger your surplus of inventory will be. Lead times that stretch out lead to a higher degree of unpredictability concerning shipments, leading a company to be almost entirely dependent on their estimation of customer demand in order to place orders.
Turnaround time
As well as your supplier lead time, and depending on your business model, there’s a handful of other lead times to take into consideration to maximize your stock control:
The length of time it takes to complete an order placed by a customer.
The timeframe for acquiring materials from a vendor.
The total period involved in the manufacturing process for a product, from the beginning to the end and its subsequent assembly for delivery.
After contemplating the pertinent factors through your own technique or having it calculated through an ERP computer program, you ought to have the right data to make an informed choice. Sales performance
Investigating the performance of the specific stocks you own should make it easier for you to figure out what quantity to buy. An inventory management system can be used to identify your most popular products, those which are not doing well, and combinations of stock items.
Movement of your items
Be certain to monitor your sales and inventory records – they will hold the solution to determining how much product to purchase. Monitor the particular stocks or collections producing consistent income, as well as your most rewarding campaigns. From this position, you ought to be able to come to strong buying conclusions and minimize wastefulness as much as feasible.
Keep a close eye on your sales and inventory records – all the essential information needed to figure out the right amount of stock to order can be found in them. Pay attention to the individual securities or groups that are generating steady income, as well as your most productive campaigns. From this point, it should be feasible for you to make sound buying choices and cut down on unwanted expenditures as much as possible.
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