5 Common Inventory Management Mistakes and How to Avoid Them

Kanya Anindita
Sep 6, 2018 · 3 min read
5 Common Inventory Management Mistakes and How to Avoid Them

Inventory is one of the most important components in retail and wholesale businesses. Poor inventory management leads to stockouts, shipment delays, customer dissatisfaction, and eventually financial loss. However, what is poor inventory management like? The following are five common mistakes made by retailers and wholesalers.

1. Conducting inventory counts once a year

Performing inventory counts once a year isn’t effective since you have the potential to go a very long time without noticing serious issues such as shrinkage and differences between the amount of items recorded in your computer system and the actual amount of items in your store or warehouse.

Doing yearly inventory counts can also be very disruptive as it requires you to close your store and stop the whole operation and it consumes a big chunk of time (depending on the amount of inventory you hold) as well.

The most effective way to manage and optimize inventory management is by performing periodic inventory counts. This means, instead of doing physical counts on a regular basis, you can try cycle counting.

Cycle counting only requires you to count a small portion of your inventory and compare it as you go to what’s listed in your system. This can be done in stages every month until everything is eventually covered and recorded properly.

2. Holding too much inventory

More inventory means more goods to sell which will then affect the increase in revenue, right? Well, this is the wrong way of thinking.

Holding too much inventory on hand can disadvantage your business. When consumer demand is receding, you’ll have to keep your stuff longer and this will reduce the value of it.

The more inventory you hold, the more the space you need to store it, and the more staff you need to manage it. Not to mention you will have to spend a lot of money up front to purchase it, and if you can’t make that money back, you will have to deal with financial grief and loss.

In order to be able to maintain the right amount of inventory which is adequate to meet consumer demand, you must be able to forecast your inventory needs. Find out how many stocks you should keep in your store or warehouse by regularly conducting an ABC analysis and reviewing your inventory reports.

3. Using manual techniques

Inventory tracking can be a very time-consuming, labor-intensive, and costly activity, when done manually. Paper records or Excel spreadsheets is very vulnerable to errors, damage, and loss.

If you keep a large amount of inventory in multiple warehouses and stores, you should have automated your inventory management. With the help of an automated solution, you can track your inventory levels, figure out inventory value, generate accurate in-depth reports to help forecast inventory needs, and manage your supplier data through one system.

4. Not keeping your storage space organized

Storing supplies carelessly will only prevent your business from achieving efficiency. Unorganized storage space can slow down the process of picking and packing which can lead to shipment delays. Therefore, it is very important to tidy up your store and warehouse.

Separate items based on the turnover ratio. Put the items that sell best in accessible locations. Don’t forget to put labels on each shelf to make it easier for pickers to find the items. You can integrate your inventory management software with barcode scanners to further speed up the picking process.

Note: For saving space, you can use vertical shelves instead of the horizontal ones

5. Not training your staff

Even if you have automated your operations, all will be in vain if your staff are not competent in managing inventory.

Inventory is a valuable asset that must be maintained properly so that the business doesn’t suffer losses. Therefore, it is important for you to teach your employees to properly manage your inventory. Make sure they can adapt to the inventory management system you use.

In addition to training employees, you also need to appoint someone to be the persona in charge of your inventory. This person is not only responsible for ensuring the smooth running of your operations, but also finding an inventory management strategy that is most suitable for your business, because what works for most businesses might not necessarily be best for yours.

Have you been unconsciously making these mistakes? Feel free to leave your comments below.

Kanya Anindita

Written by

A creative writer who loves traveling more than anything.

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