Not keeping a close eye on inventory management can bring about major issues for any business. Inventory is seemingly the most critical piece of your business. At the point when products are purchased and sold, they create the income you need to run your company. Be that as it may, inventory is a more convoluted subject than it might appear.
The reason is that sales numbers aren’t the only factor that affects your bottom line. Inventory cost reduction is also vital, and you may not do it right. Even Nike wasn’t immune. In the mid-2000s, the absence of inventory control resulted in the loss of $100 million in sales and saw their stock price fall by 20% because of an inventory slip-up.
Inventory Management System
Luckily, they bounced back by utilizing a superior inventory management system. If it can happen to one of the biggest organizations in the world, it can happen to you as well. On the off chance that you recognize the most common inventory mistakes, you can maintain a strategic distance from possibly going down the same path as Nike or at the very least be more prepared for potentially disastrous circumstances. Here are some of the most common inventory-related errors you should try and avoid.
Organizations used to close down for a day to a week every year to go into their warehouse and physically count everything to ensure that it matched the data in their software. This practice is generally obsolete because of the amount of time and money it takes. This can result in profit loss. It’s worse for big organizations that have so much stock; they can wind up profitless for quite a long time. Doing these checks in smaller, more regular cycles shields an organization from shutting down. This implies inventory checks are performed continuously during the year rather than annually. Likewise, with less time in between checks, firms can easily identify and rectify errors. On the off chance that you make inventory checks a part of your daily or weekly schedule, it feels less like a grueling task.
Data Analytics and Automation
If you’re still tracking inventory with Excel, or with pen and paper, there’s a chance you could be losing money. Manual tracking takes a lot of time and won’t get you results. You’re squandering resources, and that keeps you from concentrating your energy on different regions that can help develop your business. Inventory management systems are more accessible to update, and cloud storage can help to prevent loss of data. Automation additionally helps in more accurate forecasting and quickly making patterns apparent.
Organizations with a great deal of stock spend thousands of dollars on the software they require to oversee and track their items as they move all over the world. This software manages millions of dollars worth of assets. The individuals who utilize and implement the inventory system need adequate knowledge about it. There are real risks in giving a person with limited practical knowledge authority over the entire inventory system. This requires that anyone involved with stock ought to have appropriate training before starting to work with it to avoid facing future issues.
Inventory Data
Nike’s problem originated from an inaccurate forecast demand. Its software had bugs and errors and delivered a flawed forecast, which it utilized for its manufacturing plan. Accordingly, they didn’t have enough products their customers needed and overproduced unsold items. Not forecasting at all or doing so inaccurately can result in not having the capacity to address client issues and a potential drop in consumer satisfaction. Utilizing inventory data for proactive planning helps you to comprehend what’s in stock and what’s trending. Forecasting permits you to perceive what customers need and which items are not as popular. If you know what’s not selling, you can stay away from needlessly purchasing unwanted products and overstocking.
Inventory checks often appear to be more frustrating than they should be; it’s a direct result of messy storage habits. Sometimes individuals will simply put inventory wherever they can find a spot without thinking about whether that is indeed the ideal location. It’s normal for warehouse managers to fail in discovering more productive approaches to deal with business. Simply rearranging goods, so they’re easily taken out for shipment can save you thousands of dollars. Often, workers take too much time going through the facility, looking for an item.
Inventory management can be dull; however, utilizing a streamlined process. Ideally, one with a reliable device, will greatly decrease mistakes and enhance operations which can prompt more sales.
Written By: Rajiv Prasad
CIO – Xpandretail