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4 Common Inventory Management Errors and How to Avoid Them

4 Common Inventory Management Errors and How to Avoid Them

Are you aware that most businesses have anywhere from 20-30 percent of dead inventory? Or that up to 90 percent of stockouts are caused by poor restocking practices?

Inventory management is key to the success of every retail business. Having obsolete inventory or running out of stock at times when customer demand is highest will have devastating consequences on your bottom line. Yet, a good number of small businesses find themselves grappling with various inventory issues.

If you don’t want to be one of those businesses, be sure to avoid these common inventory management errors.

1. Failing to Keep Close Track of Your Inventory

Do you know how much inventory is in your store, warehouses, and/or factory?

Close to 50 percent of small businesses don’t track their inventory or use unreliable manual methods to do so. If you’re among these business owners, you’re making a costly inventory management mistake.

Without having a clear picture of your inventory at all times, it’s difficult to develop a replenishing strategy. Or, some of your workers could be stealing your stock, and you won’t have a clue, or it will take you a long time to find out. Even calculating the present value of your business will become a challenge as you don’t know just how much stock you’re holding.

Avoiding this mistake is simple. Use software to track inventory.

There are several digital inventory management solutions in the market, so be sure to do plenty of research before settling on one. Consider the features the software offers, as well as the cost of acquiring, installing, and maintaining it.

2. Ordering Too Much or Too Little Stock

Ideally, you never want to run out of stock.

If you’re a brick-and-mortar business, you don’t want customers walking in and leaving because their favorite product isn’t on your shelves. Some will walk right into your competitor’s shop, and you’ll lose them forever.

If you’re an eCommerce business, running out of stock means you’ll either list the item as out of stock and lose sales or take orders that will take longer to deliver as you wait to restock.

Either way, you’re in this position because you ordered too little stock. Or you couldn’t anticipate an uptick in demand and add to your inventory in good time.

On the other hand, there is the issue of ordering way too much stock. Besides gobbling up your working capital, you run the risk of ending up with dead or obsolete stock. To sell it, if it’s sellable in the first place, you may be forced into running a clearance sale with massive discounts.

So, how do you order stock that’s neither too little nor too much? A lot depends on point 1 above.

When you have a clear picture of your inventory, it’s easy to crunch the data and pinpoint your business’s inventory needs. If you establish that the business sells about 500 pieces of product A and 750 pieces of product B per week, it follows that you should order just about the same number of products every week.

3. Inventory Storage Mistakes

You need adequate spaces to store your inventory. Most small businesses lease warehouse facilities. Others keep their inventory in their factories.

An inventory management mistake some businesses make is failing to design an effective inventory storage strategy. This will have a big impact on your operational efficiency and even hurt customer satisfaction down the road.

For instance, let’s say your business owns a manufacturing plant, and you elected to keep the finished goods within the factory’s premises. Your retail outlet is about 200 miles away. So, every time you need to restock, the goods have to be transported from your factory on demand.

While that strategy might work for you, it’s inefficient. It’s more prudent and cost-effective to rent a warehouse near your retail store and keep some of your inventory there. This way, there won’t be unnecessary delays whenever you need to restock urgently.

Assess your inventory operations and find a storage strategy that works for your business. And don’t forget that as the business grows, that strategy will need to evolve as well.

4. Failing to Train Your Inventory Workers

When did you last train your inventory management workers? If it’s been longer than a year, you’re making a common mistake.

Regular inventory system training upskills your workers and updates their inventory management knowledge. As a result, you’ll have a team of workers who are highly efficient and less likely to make costly errors.

Don’t assume that your employees don’t need as much training just because you’ve invested in state-of-the-art inventory management technology and automated most of your operations. Any piece of technology is just as good as the people using it. Those shiny new warehouse forklifts you just acquired won’t work until your operators know how to use them.

While at it, always ensure you’re hiring qualified inventory personnel. Also, avoid sending workers from other departments to deal with inventory.

Avoid These Common Inventory Management Errors

As a retail business, your inventory is your lifeblood. Without it, you have nothing to sell, which consequently means you have no business. This is why smart business owners develop an inventory management strategy.

Having a strategy isn’t enough, though. You must also be aware of common inventory management errors and know how to avoid them. With this guide, you’re now familiar with some of these errors.

Explore our blog for more tips on how to grow your retail business.

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