Now that technology is closely integrated into many aspects of business, successful retailers rely on accurate and advanced inventory management systems that offer real-time updates. Although these cutting edge inventory management systems provide business owners with useful solutions to inventory management problems, these problems still persist for many global businesses. Keep a close eye on these four problems that are common in inventory management so you can avoid them and ensure your business continues to run smoothly.
A stockout occurs when you don’t have enough product in stock to meet the demands of your customers. Not only does this negatively affect your business’s potential profit, but it also can lead to backorders, which can make it even harder for you to catch up when you do get your inventory back in the green.
Customers may even cancel their orders due to frustration with the delay. In most cases, these customers associate this frustration with your brand and won’t make another purchase from you again. Some annoyed customers may even tell friends and family about their negative experiences attempting to buy from your business, which can affect your sales and brand reputation.
Keeping Adequate Stock
Research conducted by the Institute of Management Technology included in-store interviews with customers who experienced stock-outs. The study indicated that 32% of customers switched brands, 41% purchased a different size or variety, and 14% planned to go to another store. Customer loyalty is greatly affected when your business experiences a stock out.
To ensure you always have adequate stock, carefully track the needs of consumers and customers so you can pinpoint the threshold that signals you need to reorder your inventory. Even if you’re running a small business, this is almost impossible to do on your own. However, inventory software can help you identify the sweet spot that indicates its time to reorder. Most software sends you alerts when you meet a certain threshold, so you’ll never see your stock completely run out.
Excess inventory can also cause some serious problems for your business. While your customers may not be affected by an overproduction of goods, having too much inventory can cost your business a ton of potential profit. You’re negatively affected by overproduction with increased inventory management costs, space issues, and higher storage costs.
Depending on your product, you may also lose profit on waste if it becomes obsolete. This can happen with food production or if you’re selling a seasonal or trending product, such as holiday decorations or technology accessories.
Eliminating Excess Inventory
There are many ways to effectively get rid of excess inventory, but some of the most common and efficient methods include:
- Selling to customers: If you sell your products to consumers, consider selling off excess stock at a discounted price. You won’t make as much profit, but it’s better than dealing with waste and making no profit at all.
- Trading with competitors: Your competitors may be low on the stock you have and may have a product sitting in storage that you need. Forming a trading partnership can allow both of you to profit.
- Using the goods in new products: The excess goods you have may be redesigned as new products that are more likely to sell quickly. You could also bundle a few products together and sell them as a unit so they look like fresh, new products.
- Liquidating excess stock: You can sell your excess stock at a discounted price all at once in a liquidation sale. Order management software integrated with inventory and retail systems can help ensure you minimize losses while liquidating by keeping your inventory organized and providing crucial data on sales, minute by minute.
3. Inadequate Inventory Forecasting
Both stockouts and overproduction of inventory can be blamed on inadequate inventory forecasting. It’s hard to predict the future, but having a solid grasp on customer needs can help you to avoid these issues. Whether your industry hasn’t changed for 100 years or you’re in a business that’s susceptible to constant changes and dynamic customer desires, it’s important to keep abreast of market trends. Be ready to change your products and the way you do business as you forecast the changes in your industry.
The Basics of Inventory Forecasting
To successfully forecast your inventory needs, you must keep a few important calculations in mind. First, know your production company’s lead time, which is how long it takes to replenish your inventory. Have enough in stock to make it through until your next shipment.
You must also be familiar with the exact point at which you need to reorder stock, called your reorder point. To order the proper amount of stock, you must accurately calculate your reorder amount, or how much you order when you get to your reorder point. These calculations don’t need to be made manually. They can easily be streamlined through a technologically advanced inventory management system.
4. Management Issues
Poor inventory management can usually be blamed on employee errors and/or the lack of a streamlined system. Employees who have been insufficiently trained or who don’t have access to important data can easily order too much or not enough inventory.
Dated inventory management software or no software in place at all can also lead to inventory snafus that can cost your business money. By implementing a solid inventory management system that provides adequate data and by showing employees how to use it, you can avoid these management issues completely.
Preventing Employee Errors
All employees must have access to an inventory management system that provides reliable and accurate data. Employees from every department should be adequately trained on this software to ensure they can see the calculations and data they need to leverage the system’s benefits and keep inventory on track.
Avoiding Inventory Management Issues
Although inventory management is more affordable and easier to implement than ever, 46% of small businesses still don’t have an automated tracking system or don’t track inventory at all. A reliable inventory management platform can save you money, customers, space, and headaches. ApparelMagic inventory management systems offer accurate stock control, raw material management, and other cutting edge features to ensure you stay on top of your inventory.
With inventory management software, you’re not left guessing when and how much to reorder. Seeing a snapshot of your inventory through this easy-to-use system can help you stay in control of your business and keep your customers happy.