The top three mistakes businesses make with Inventory Management and how to fix them!
A bad inventory management has a lot of negative consequences for your business. This includes having to pay costs to cover losses, not to mention the risk of losing clients whenever a much-needed or in-demand product is out of stock and you can't fulfill the order in time.
In fact, the damage can be so extensive, you they could easily run into hundreds of thousands of rands.
That's why today we're showing you the common mistakes people make when it comes to inventory tracking and how to correct them.
"Inventory management is not the sort of thing that gets most entrepreneurs' blood flowing--until their inventory manager leaves. That's exactly what happened to Marc Isaacson, the CEO of online integrative pharmacy Village Green Apothecary, in 2008. Isaacson filled the position by promoting a purchasing assistant. Before long, the company was running out of its most popular items. At the very least, we lost those particular sales and in some cases, we lost the customers," Isaacson says. He estimates the total loss at 2% to 3% of sales.
This example illustrates part of the damage an inefficient inventory management can cause:
Isaacson's first fix was to start using a "blue dot" system: putting a blue dot next to each of his approximately 1,000 best-selling items, making them easier to identify, and requiring three to four weeks' of stock for each. About 2% of Village Green's inventory used to be out of stock at any given time; after using blue dot, that number came down to just 0.5%.' - Entrepreneur.com.
In this case, a proper inventory management system actually helped them keep their clients happy and also boosted motivation among employees.
And that's what we're going to help yours do by ensuring you don't make the same mistakes companies so often make.
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Here are top three inventory management mistakes and how to fix them
1. Too Much Inventory
"Afraid of being caught short, it's easy to spend too much on inventory, which can eat up working capital and erode profits," the same source explains.
And too much inventory means you'll battle with costs as well as need to seek solutions such as selling to discounters or shipping it to overseas liquidators to get the money you need.
Here's what you can do to fix this issue
: Estimate how much of each item you'll need and when you'll need it. Make sure your projections are close to reality so look at your previous sales. Also, identify and quantify less obvious patterns such as month-end spikes.
2. Inaccurate inventory tracking
It's only human to make mistakes. That's why it's a good reason to have a back-up plan when it comes to inventory manangement. Mistakes in this area can happen during when you receive stock fulfill an order or through the all-too-common employee pilferage, writes Entrepreneur.com.
Use electronic data interchange (EDI) and bar code scanning to help eliminate data entry errors. You can also implement a system of so-called "cycle counting." This involves picking items every day and comparing your the inventory record to the actual count.
3. Lack of priorities
Investory tracking requires large amounts of information and mistakes can make their way throughout this process. At this point, you should focus on the items that matter most. According to Entrepreneur.com, as a general rule, 80% of demand will be generated by 20% of your items.
Solve this by
: Reviewing your in-stock position and reordering these more frequently.
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