Inventory management is critical if you want your business to operate efficiently and transparently. However, far too many businesses still make fundamental mistakes that unnecessarily compromise their resources.
Fortunately, an awareness and understanding of these mistakes — coupled with a willingness to correct them before they become problems — can change the outcome. You might even be able to avoid these common mistakes entirely and thereby perfect the art of inventory management.
Inventory management is critical if you want your business to operate efficiently and transparently.
Common Mistakes in Inventory Management
Listed below are some of the biggest mistakes anyone can make with inventory management.
Relying on spreadsheets.
For a long time, spreadsheets were the gold standard when it came to effective inventory management. They were reliable, flexible, and could be used by almost any business. Today, they’ve been outclassed (for the most part) by inventory management software. These packages are more reliable, more flexible, and most are specifically designed for the job. If you’re still relying on spreadsheets, even if you’ve incorporated better automation, you’re falling behind.
Ordering too much.
Ordering a lot of a product at once can be good for fulfilling demand faster and possibly saving money with bulk orders. But overstocking can also prove problematic. With perishable goods, you run the risk of throwing away an excessive amount. Otherwise, you’re just taking up valuable storage space and rendering your inventory management system less flexible. Be cautious when ordering high volumes of specific products. Limit your order volumes when possible.
Listing too many product variants.
It’s natural to have some product variants — such as different colors or sizes — associated with different SKUs. However, it doesn’t take much to plunge your entire system into chaos. With too many categories and too many SKUs to manage, it becomes less intuitive and more difficult for individual employees to manage. As a result, you’re likely to run into more logistical problems. Keep things simple.
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Storage inefficiencies.
How are you storing your products? There are so many ways space planning can go wrong. If you’re not making use of vertical space, you’re missing out on the true potential of your warehouse. If you’re storing things in an inefficient pattern, you’ll be able to store fewer products total. Perhaps most importantly, if your warehouse is organized in an non-intuitive way, your employees will have a hard time finding what they need when they need it. The result will be costly delays and needless frustration. Strive for a system that makes intuitive sense while maximizing use of your physical space.
Management irregularities.
Your organization needs to take inventory on a regular basis and carefully track the flow of your products. It’s likely you already have rules and procedures for how to do this. But how consistently are those rules and procedures being followed? Including more checks and balances, and keeping things consistent, can help you here.
Hiring the wrong people.
Automation is great for reducing the need for manual effort and improving the consistency of your inventory management but, no matter what, you’re still going to rely on human employees. If you hire the wrong people, no inventory management system will be able to sustain itself. Make sure you interview your candidates carefully and choose candidates who are reliable, consistent, and diligent on the job.
Not measuring your results.
Which inventory management KPIs are you tracking for your organization? How can you tell whether your inventory management system is “working correctly?” What do you even mean by that? No matter what your inventory philosophy is or what type of business you run, it’s essential to measure and analyze your results.
You’ll need to track how you’re performing, how much time you’re spending, how much money you’re spending, and whether those investments make sense. The more consistent you are here, the more insights you’ll be able to glean — and the better you’ll be able to improve. If you’re not tracking these metrics, you’ll remain perpetually in the dark.
A Better Inventory Management Approach
If you want to get better results from your inventory management system, the best approach is a recursive, self-improving one. It’s impossible for even the most experienced inventory planners to design a system from scratch that both achieves peak efficiency and remains that productive indefinitely. Things change too fast, both in your business and in the realm of technology, to remain complacent.
Instead, it’s imperative that you set yourself up for continual self-improvement. Be willing to learn from your own mistakes and (better yet) the mistakes of others. Accept that inefficiencies are going to arise over time. Challenge yourself and your employees to be better.
If you maintain the mindset that this is a big, ongoing experiment, you’ll be much more likely to adapt in a way that favors your business’s chances of long-term survival. Ideally, you’ll achieve competitive dominance. At the very least, you’ll have fewer inventory management headaches.
