Inventory costs money. Businesses need to pay for the space it occupies, as well as electricity and other overhead expenses. Every item left unsold can mean a missed opportunity to generate income.
Many businesses, though, cannot operate without one. The next best step, therefore, is to conduct efficient inventory management. It begins by knowing the most common mistakes and the best solutions for each.
1. Inefficient Inventory Management Process
A business is likely to have a weak or wrong inventory management system when it cannot track the movement of the goods in the supply chain. The data available is already outdated, or managers cannot estimate lead times.
Solution: Inefficiency can happen for many reasons, and in some cases, it can be a technical error. One solution may be Zebra barcode scanner repair. Faulty barcode scanners won’t provide correct data.
Businesses can also consider investing in automated inventory management programs. Some are already easy to integrate into existing systems, while others offer subscription models, so it’s more scalable.
2. Inventory Shrinkage
Shrinkage occurs when the difference between the number of goods available and the data available is negative. It indicates some products “disappeared.”
This problem costs businesses over £5 billion in the UK, so it’s not something companies can ignore. Unfortunately, one of the leading causes of shrinkage is theft. The total crime cost in 2019 reached £73 per person.
Solution: First, businesses need to have a sound inventory management system in place. They must be able to track down the movements of the products, so they can determine quickly where the problem lies. Studies show theft happens externally, which means customers do it. However, 22% is internal or employee theft, while over 15% of the crime occurs in the warehouse or supplier level.
Automating the process, though, may not be enough. Doing the basics still matters. Businesses may need to raise the level of accountability and shrinkage awareness in the workplace. They may have to develop policies, which specify consequences for violations. In the same manner, they can teach the staff how to spot and deal with external theft.
3. Out-of-Stock Items
Cart abandonment is a common problem for anyone doing e-commerce. One of the reasons is empty stock. Customers leaving the checkout page means a lost sale. It may also hurt the brand as they may no longer revisit the site.
Solution: There are many ways to deal with out-of-stock items. The following are some of the ideas:
- Fine-tune lead times. Find the right employee to forecast and adjust lead times accordingly. Knowing these data can also help businesses accomplish the second idea below.
- Work closely with vendors or suppliers. Businesses must not wait until their inventory is critically low before they consider making a follow-up.
- Automate the inventory management process. Excellent software can notify the business which kinds of goods are running low. It may also immediately display that the product is out of stock on the website.
- Anticipate the possible demand. Consider increasing inventory on specific seasons, such as Christmas.
In accounting, inventory is an asset, as it’s assumed at some point, the company can convert it to cash. But like other known assets, such as equipment or machinery, it also costs money.
Inventory management, therefore, is about striking a balance between being an expense and investment. It starts by dealing with the common issues before they go out of hand.