Owning a business requires you to deal with a seemingly never-ending array of challenges.
From dealing with finances, to managing employees, ensuring compliance with regulations, and everything in between, today’s business owners have a million and one things to worry about.
And when you’re dealing with something with this many moving parts, it’s easy to overlook things.
But while you can get away with overlooking some things, inventory management is something you just can’t afford to mess up, or you could end up dealing with some severe financial consequences.
For example, according to estimates from a Coresight Research survey, poor inventory management accounts for 53% of unplanned markdowns for retailers, and in 2018, markdowns cost U.S. non-grocery retailers approximately $300 billion.
What’s more, 50% of survey respondents said “inventory misjudgments” act as a barrier to selling their products at full price.
As you can see, this is not something you can afford to overlook. But trying to wrap your head around inventory management can also be incredibly overwhelming.
With that in mind, we want to offer some inventory management tips so you can stay on top of your stock and avoid the pitfalls of poor inventory management.
So, if you’re dealing with issues related to your inventory, and you’re looking for some inventory management tips and tricks, then you’re going to want to keep reading.
What Are Some Common Inventory Management Issues?
Before we start offering inventory management tips, we also want to explore some of the most common inventory management challenges.
This knowledge will help put things in perspective for you and offer even greater context for how you can apply the advice we’re about to give.
Having said that, here are some of the most common inventory management issues:
Inaccurate Inventory Tracking
One of the most common inventory management issues is inaccurate tracking of stock levels.
Errors in data entry, miscounts during stock audits, and discrepancies between physical stock and recorded inventory are all too common.
These inaccuracies can lead to stockouts, where items are unavailable when customers want them, or overstocking, where excess inventory takes up valuable space and ties up capital.
Both scenarios are detrimental, as they can result in lost sales, dissatisfied customers, and many other problems.
Overstocking and Stockouts
Overstocking occurs when a business orders more stock than necessary, which can lead to high storage costs and an increased risk of inventory becoming obsolete.
On the flip side, stockouts happen when inventory levels are too low to meet customer demand, and this can result in missed sales opportunities and damage to customer relationships.
Both of these situations are costly and highlight the importance of accurate demand forecasting and efficient inventory management practices.
Inefficient Supply Chain Management
As we’ve all learned over the last few years, supply chain disruptions can severely impact inventory management.
Things like delays in receiving goods and unreliable suppliers can all contribute to inventory shortages or excesses.
Inefficient communication between supply chain partners can further exacerbate these issues, making it difficult to forecast your inventory needs accurately.
This can lead to a situation where you either overstock to mitigate the risk of stockouts or understock due to uncertainty, both of which are certainly not ideal.
Poor Demand Forecasting
Poor demand forecasting can also lead to either overstocking or stockouts.
And without reliable demand forecasting, businesses risk either tying up too much capital in unsold inventory or losing sales due to insufficient stock.
That being said, accurately predicting consumer demand for the products you carry is vital for maintaining the right inventory levels.
But in order to do this, you’ve got to analyze historical sales data, market trends, and other relevant factors, otherwise you’ll be more likely to misjudge demand.
This issue is also particularly challenging in industries with seasonal fluctuations or rapidly changing consumer preferences.
Lack of Real-Time Data
The absence of real-time inventory data can leave businesses operating on outdated information, leading to poor decision-making when it comes to inventory management.
Without these real-time insights, businesses may struggle to respond quickly to changes in demand or supply chain disruptions, and this lag in information can result in missed opportunities for restocking or unnecessary purchases of slow-moving items.
With that in mind, implementing systems that provide real-time inventory tracking can help you make more informed decisions and improve your overall inventory management efficiency.
High Carrying Costs
Inventory carrying costs, which include expenses related to storage, insurance, and the risk of obsolescence, can significantly impact your business’ profitability.
For instance, if you overstock inventory or fail to move products quickly enough, you’ll face higher carrying costs, which are often compounded by the need to discount or write off obsolete inventory.
With that in mind, effective inventory management practices, such as just-in-time (JIT) inventory, can help minimize carrying costs by reducing the amount of inventory held at any given time.
Ineffective Inventory Management Systems
Many businesses today still rely on outdated or inadequate inventory management systems that lack the sophistication needed to handle modern inventory challenges.
These systems may not integrate well with other business processes or may require manual input, which increases the risk of errors.
In any case, a failure to modernize your inventory systems can lead to inefficiencies that hinder your business’ ability to compete.
Luckily, modern inventory management solutions, particularly those that leverage automation and real-time data, can significantly enhance your ability to efficiently manage your inventory.
Our Top Inventory Management Tips
As you can tell by now, there is no shortage of issues when it comes to inventory management.
These may not all apply to your business, but if you fail to address the challenges that do, it could have far-reaching consequences from which you may never recover.
Fortunately, below we’ve provided a comprehensive list of inventory management tips and tricks, so you can avoid falling prey to the pitfalls of poor inventory management.
1) Understand Your Inventory
One of the best inventory management tips we can offer is to make sure you have a solid understanding of your inventory.
This involves categorizing your inventory based on things like how quickly your company can sell a given item, along with its value, and how quickly people will be looking to replace that item.
Employing an ABC analysis is useful here, and this involves segmenting your inventory into A-items (high-value products with low sales frequency), B-items (moderate-value products with moderate sales frequency), and C-items (low-value products with high sales frequency).
This classification can help you evaluate your inventory and then concentrate your resources on the most impactful items.
2) Leverage Technology
Incorporating technology into your inventory management process through things like inventory management software can significantly streamline your operations.
These tools provide features like real-time tracking, automated reordering, and detailed analytics, among many other benefits.
What’s more, this kind of technology allows you to integrate your inventory system with other aspects of your business, like accounting, procurement, and sales, which helps to ensure the consistency of your data and the efficiency of your operations.
3) Optimize Your Inventory Levels
When it comes to inventory management, optimizing your inventory is arguably one of the toughest challenges you’ll face.
With that in mind, setting Periodic Automatic Replacement (PAR) levels is crucial for maintaining sufficient stock so you can meet demand without overstocking.
Setting PAR levels involves using software to set the minimum levels of inventory you need to fulfill demand for a specific product.
Once this is done, the software will then notify you of the need for the item to be reordered and can even be set to automatically reorder stock when the minimum level is reached.
Moreover, the Just-In-Time (JIT) inventory strategy can also be effective for optimizing your inventory levels, as it involves keeping minimal inventory on hand and ordering more only as needed.
However, while this strategy can help to reduce carrying costs, it requires accurate demand forecasting and reliable suppliers.
4) Improve Your Forecasting
Effective inventory management relies heavily on accurate forecasting, which you can do by using historical sales data and considering factors like seasonal fluctuations and market trends.
In any case, it’s essential to regularly update your forecasts based on new sales data and external factors, such as economic shifts or changes in consumer behaviour.
5) Manage Your Relationships
Developing strong relationships with your suppliers can help you negotiate better deals and help to improve the reliability of your supply chain.
And if you’re able to successfully negotiate better terms by leveraging volume, loyalty, and payment history, it can yield significant benefits, including discounts and priority delivery schedules.
6) Monitor and Audit
Regular audits can help you verify that your physical inventory matches your inventory records, allowing you to promptly address any discrepancies.
Making use of cycle counting, for instance, which involves counting a subset of inventory on a rotating schedule, may help you pinpoint issues more efficiently than a full inventory count.
7) Properly Train Your Staff
Properly and regularly training your staff in the best inventory management practices and how to operate the systems you’re using is crucial.
What’s more, encouraging accountability by implementing performance metrics and involving your staff in planning and decision-making processes can also help to improve your inventory management.
8) Optimize Your Storage
Designing an efficient warehouse layout allows you to easily access frequently picked items, ensuring smooth and unobstructed movement of goods.
Utilizing vertical space for storage by implementing a racking system, for instance, can also help by more efficiently using your space and decreasing rental costs.
Not all businesses can afford to rent out warehouse space, but even if you’re storing your inventory in your garage, the same rules apply.
Whatever space you have should be used as efficiently as possible, and should allow for an easy flow of goods, particularly for your most popular items.
But if you are running out of room and you’re looking to scale without heavy investment in warehousing and distribution, outsourcing inventory management to a third-party logistics (3PL) provider can be advantageous, as it can help to reduce costs and improve operational efficiency.
9) Pick the Right Platform
Unfortunately, a lot of companies in our industry are still offering older payment terminals, most of which have no inventory management capabilities.
And if your device doesn’t offer these features, then you’re either going to have to have someone manage your inventory manually, which costs time and money, and can be subject to human error, or you’ll have to pay a third-party to take care of it for you, neither of which is ideal.
Fortunately, our platform offers online inventory management through an all-in-one, easy-to-use, centralized system that syncs with all your devices.
For example, if you do ten sales on your physical terminal, and five sales using your point-of-sale system, and then you log into our online platform, you’ll see all those sales in one place, and the products in question will immediately be deducted from your inventory.
So, ask yourself, when it comes to inventory management, is your payment processing platform working for you, or are you working for it?
Because if you are the one doing most of the work, then maybe it’s time for a change.
Searching for a payment processing platform that works as hard as you do? Why not contact us today and find out how we can help?
