Managing inventory is the most important but at the same time a complicated task for any industry. Inventory management requires a range of data such as lot numbers, price of products, quantities, serial numbers, and the manufacturing dates to keep track of goods. A little mistake in recording these data can further add to the complexity of inventory management.Â
Moreover, the knowledge of where your inventories are, how much stock is left, how to get what’s needed at the real-time and efficient transfer of goods to where it needs to go can minimize operating costs, enhance customer satisfaction, and increase revenue. So, let’s look at some of the challenges that inventory management faces and ways to tackle them.
1 – Complexities in Supply Chain
Globalization has led to a rise in global markets, cheaper manufacturing costs, and sourcing activities that have led to the worldwide dissemination of supply chains and, as a side effect, made the chains more complex. Companies now have to rely on a broader network of suppliers, manufacturers, and distributors; this has led to several challenges:
- More comprehensive the network, less reliable lead time in a shipment of the product, and increased tracking issues.
- Difficulty in optimizing and tracking stocks among multiple warehouses.
- Updating and increasing stock levels to assure the availability; however, with the danger of investing more capital than required.
These challenges can be overcome by carrying out the following measures:
Account for the lead time when placing orders
The time it would take to get a shipment is essential, and therefore keeping track of supplier’s lead time is significant. Taking into account the lead time while reordering items allows us to prevent stockouts. Also, it’s good to account for other details like holidays, weather conditions, and other potential delays while preparing a reordering schedule.
Maintaining safety stocks
The extra stock of items held by businesses in their inventories to ensure that stockout doesn’t happen is referred to as safety stocks. It acts as a helping hand in situations such as the supplier’s inability to deliver the order at the right time or when sales of an item are more massive than forecasted. Maintaining these stocks is very important to ensure that work doesn’t cease due to the unavailability of materials.
Utilize multi-stock management software
This software suggests redistribution of inventory among various warehouses according to the demand. It also ensures that available stock is used correctly and fully before placing the new order. Cycle counting and, more specifically, ABC analysis cycle counting is a useful method for counting inventory amongst multiple warehouses.
Integrating automated inventory systems
Automated inventory management software helps in eliminating human errors and maintaining appropriate stock levels through automatic and real-time updates. By linking the barcode system with goods, the real-time data about every SKU(Stock keeping unit) in the storage can be accessed. This helps you maintain the correct stock level and safety stocks, thereby improving inventory management efficiency.
2 – Customer demand
The customer base is an essential thing for every business. Customers have a wide range of options for finding the right business to get services. Standing out amongst the competition is the only way a business can thrive in this competitive market. Customer demands and the requirements keep changing, and a business should be flexible enough to meet these fluctuating demands.
Therefore inventories should be restocked precisely according to the demand without the fear of overstocking or stockout. Understanding the needs of customers and thereby taking steps to reach those needs is a vital thing. It directly depends on how a business is managing its inventory and its flexibility.
3 – Inventory shrinkage
Inventory shrinkage comprises raw materials listed in records but no longer available or missing from the stock. This shrinkage may occur due to problems like theft, wrong counting, damage, etc. Another possible cause of shrinkage can be from the supplier’s side; it is possible that the supplier charges a company for a certain number of items or raw materials but doesn’t ship the correct amount of items ordered. Some strict and precautionary measures to be taken to tackle these challenges are:
- A separate enclosed area should be allotted for inventory, where only specific people, with precautions, are allowed to enter to reduce shrinkage due to theft.
- Employee background checks should be made for employees of every level to ensure that people working in the inventory are trustworthy.
- Before getting stocked in the warehouse, every item should be checked and analyzed for defects to prevent the supplier’s fraud. It can be done automatically via robots to save time and increase efficiency.
- Above all, a well-equipped security system should be installed in the inventory, including CCTV cameras, smart doors with smart locks, etc.
To avoid Inventory shrinkages, you could take the help of free and open-source inventory management software as well.
4 – Deadstock
Deadstock refers to the items present for a long time in the inventory and never sold or used. Therefore, this stock unnecessarily occupies space in the inventory and prevents other products from using the area, leading businesses to expand the warehouse to accommodate new products and consequently increasing spendings. You can solve this problem by taking help from the right inventory management tools and a team that can forecast demands for particular products accurately so that you only stock items that can be sold and as per the requirement. You can also try selling this stock or return it to the vendor, keeping in mind the losses you incur.
Wrapping up
Managing the inventory is an integral part of every business. At times it has proved to be complicated, tedious, and prone to errors, but as technology advances, inventory management is evolving and getting simplified to a large extent. Automation of inventory management processes is one of the best examples of advanced technology integration with the inventory.
