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Inventory Management

18 May 2015 6:09 PM - Common Inventory Management Mistakes

Common Inventory Management Mistakes

Whether you're a retail or manufacturing business, poor management of your inventory can spell the end for your business. In this article, we're going to look at four of the most common mistakes that businesses make in regards to inventory management.

Excess Inventory

The last thing a business wants is to miss out on sales due to a shortage of inventory. But is overstocking really the answer?

The problem with keeping a large volume of items on hand is the extra storage space that it takes up, space that costs money to rent and maintain. You also need to take into account the money that is tied up in excess stock that could be put to better use elsewhere for the business. This money could instead be reinvested into new equipment to increase productivity or be earning interest at the bank.

In order to get rid of the excess inventory, businesses generally wind up selling it at discounted prices - sometimes below what they paid for them. As a result, this will impact negatively on the bottom line.

Manual Inventory Systems

Many businesses today are still using spreadsheets like Microsoft Excel to track their inventory. A business owner may prefer a manual system because it's simpler to use and gives them a greater sense of control in making reorder decisions. However, manual tracking takes too much time as it requires constant monitoring to ensure each transaction is accounted for. You're wasting your energy and resources when you should be focusing them on other areas that can help grow your business.

A manual inventory system is very prone to human error. You could easily forget to record a transaction or miscount your inventory. This will lead to higher or lower inventory levels than what is actually required and your overall costs will increase.

The best way to resolve these issues is to use cloud based inventory management software. With an automated system, you will be able to eliminate unnecessary labour costs and spend more time focusing on the areas of your business that matter.

Lack of Software Training for Employees

Some businesses spend thousands of dollars on ERP software. Yes, this software might be used to track and manage millions of dollars of assets, but the company has skimped out on the training that people need, to use that software efficiently.

A lack of proper training can affect your ability to keep up with orders during a period of high demand. This can lead to frustration and substandard results. By committing to full training upfront, users will be able to get the most out of the software.

Inefficient Inventory Arrangements

It’s not uncommon to see large warehouses that are organised inefficiently. Businesses could save thousands of dollars, simply by making changes to where they place their inventory.

Items that you ship and sell the most should be placed near the shipping area so they can easily get sent out. This keeps your employees from spending too much time looking for the item whenever they are going to ship something out. You need to focus on efficiency, wasted time is money lost.

By using inventory management software, you should be able to get up-to-date data of your best selling items, allowing you to work out where the efficiencies are.