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Inventory management is no easy task. If your company doesn’t do it carefully enough, loss of customers and profits is just the beginning. Here are the 5 most common inventory management mistakes and how to avoid them.
1. Inventory management mistake no.1: Skimming on inventory metrics
Inventory control deals with a variety of different metrics which directly affect operational, service, and product excellence.
Every single metric does not stand alone; they are all interconnected. Think about it, how do you stock your warehouse if not looking at customer demand, back orders, fill rates, inventory turnovers, and current inventory levels? Or how can you deliver excellent service without knowing how much time it takes for an order to be fulfilled, how many orders are being delivered late, and how many orders are returned due to “product not as pictured”?
The solution: We recommend look at all aspects of real-time inventory metrics and analyze them as a whole to make correct predictions about consumer trend and demand, avoid overselling and underselling, and increase inventory responsiveness and reliability.
2. Inventory management mistake no.2: Product specifications
As mentioned above, a returned item due to it is “not as pictured” is not uncommon.
If you have this problem in your inventory management, you’re the one to blame.
Technology, apparel, household items are a few of those that must have detailed specifications to make sure that customers are getting exactly what they are paying for. Colors, sizes, measurements, price, and pictures of every product angle must be included and true to the items’ features.
This is especially important for multichannel and omnichannel retailers and vendors because product information must be the same no matter which channels or devices customers are using to check your products.
The solution: It is best for retailers to have detailed product description from the vendors. This should be included in the purchasing contracts to make sure that retailers always know exactly what they are selling. Reduced returned items mean increased customer trust.
3. Inventory mistake no.3: Lack of automation
Still using spreadsheet, pen, and paper? We suggest that you stop.
Human errors are prone to happen when manually entering numbers and info. And synchronization among a number of different people using spreadsheets often proves impossible. Furthermore, it just takes so much time.
You want to keep manual intervention at minimum, and information updated in real time.
The solution: Invest in a comprehensive barcode system and scanner. They will help you with correct data record, easy tracking of stolen goods, and easy tracking of products on shelves and in warehouses.
To make it easier for your staff, equip them with deployable mobile devices: barcode scanners, smart phones, and iPads. These devices create an interconnected system, so that your warehouse stock will be constantly on the move. Save time. Save costs. And save your stock control from human error.
4. Inventory mistake no.4: Treating all inventory items the same
You have two kinds of product in your warehouse: the cash cow and the cash dog. Cash cow is best-selling products which yield big profits, while cash dog is the less popular ones, but need to be kept because there are still demands for them.
As all products require the same procedure (forecasting, ordering, reviewing, reordering, etc.), you treat them in the same manner, with the same attitude and sense of urgency, without setting priority. This can be a drain, and often times, a waste of effort. Your cash cow doesn’t get enough attention, and you cash dog gets more than it deserves.
The solution: Prioritize your cash cow. Most of your effort must be spent on these products. Forecasting and reordering should be carried out frequently. Place your cash cow near the shipping area so that it’s easier and quicker to find them.
For cash dog, use the “first in, first out” principle. Oldest products must be sold first, especially when they are slow-selling.
5. Inventory mistake no.5: Lack of accurate demand forecast
If you cannot deliver correct forecast reports, chances that you’re going to lose customers.
Not only that, there are other potential problems as well:
The solution: Use a trust-worthy automated inventory management system that can provide real-time data and provide both standard and custom inventory and sales report
Inventory management is not easy. Inventory management mistakes, or inventory “oops”, can take a rather long time to recover from, and in turn make you lose customers and profit. As your business grows, the need for a streamlined system becomes a pressing matter as mistakes must be avoided at all costs. A reliable inventory management system will help you reduce these mistakes, at the same time improve operation efficiency.