The Top 6 Challenges of Managing Inventory
Making wise decisions with your inventory and how to manage it is a challenge in today’s changing economy. Inventory management has lots of moving parts that make it more complex than it may seem. Even the smallest changes can have an effect on your margins. The key is to know the challenges that lie ahead and have solutions for them when they arise.
Real-Time Inventory Management
You’re not alone if you still face challenges with your inventory, even when you monitor it and keep a close eye on those sales reports. This is a problem for many retailers because they simply don’t see the inventory management issues that decrease efficiencies and take a bite out of profits. Knowing the challenges you face when managing inventory is a good step in building the solutions that are right for you. Here are six of the most common inventory management issues retailers face every day:
1. Incomplete Picture of Your Inventory
From the vendor to your customer, knowledge of your supply chain has a direct impact on how you control your inventory. You need to be aware of your real-time inventory levels to avoid significant problems, such as backorders and products going out of stock.
Do you know how many purchase orders you have and when they are expected to arrive? How much of each delivery goes to the shelves or becomes safety stock? Having full visibility of your inventory at all times will ensure a complete picture. This can be a cumbersome task, especially if it’s a manual one, so switching over to an automated inventory management system will help with seeing the bigger picture.
2. Operational Inefficiency
Standard operating procedures may be affecting your efficiency. Many procedures are in place because that’s the way it’s always been done. The problem with this is that the procedure was never planned or part of a general strategy. More likely, it was a reaction to a situation. These “duct tape” solutions are a major drain on your efficiencies and need to be addressed through strategic planning.
To take full advantage of your employee’s time, you need to revisit their daily procedures and find areas where you can improve their productivity. Plus, every inch of warehouse space that goes unused costs you money. To overcome inefficiencies, you need to think and plan strategically.
3. Customer Demand
Customers are looking for more value and convenience from their favorite brands. They’re also looking for more flexibility with orders and delivery. To reassure them and meet their expectations, you’ll need to know the swings in demand that may be seasonal or driven by special promotions. Customer demand plays a major role in inventory turnover and how you maintain your stock levels.
4. Obsolete Stock
One of the biggest drains on your profitability is obsolete or dead stock. It takes up shelf space, warehouse space, and employees’ time to move it around. When there is no market demand for a particular product anymore, then it has reached the end of its product lifecycle. This is usually determined through sales reports over a set amount of time. Typically, obsolete inventory occurs from inaccurate forecasting. Obsolete inventory in your store means that you haven’t been paying attention to sales data and customer demand.
5. Physical Counts
There are several ways that physical counts of your inventory are reducing your efficiencies and affecting your inventory. The most significant one is counting inventory once a year versus cycle counting. Any problems that you may have with inventory shrinkage will be worse if you count only once a year. Another problem is using manual processes instead of simply scanning barcodes and allowing the software to keep track. Finally, employee training has a bigger effect on physical counts than you may expect. Poorly trained employees will miss details that are necessary when you need accurate data.
6. Increasing Competition
From big box stores to neighborhood rivalries, increased competition puts a strain on your supply chain. Vendor relationships are still important but have changed over the years. It’s no longer about getting the best price from them. You need to find the value of working with the right vendors in order to provide your customers with the products they want and when they want them. Competition plays a big role in how you can deliver the best customer experience possible.
Finding Solutions to Your Challenges
Every business is unique and has its own sets of challenges. Some may be geography, while others may be the availability of employees. Knowing the challenges you face will help you become a more strategic planner and avoid the most common inventory management issues. This will improve productivity and eliminate most of those preventable problems that you had in the past.