The 5 inventory management mistakes small businesses often make
Our team regularly provides advice to micro-enterprises that are struggling to manage their inventory. Incorrect, expensive, or just room for improvement... There are a range of potential issues. While these may seem unique to each structure, some mistakes may be a regular occurrence. That’s why we have put together 5 of the most common mistakes. Bear these in mind when thinking about how to best manage your business!
Mistake #1: Inventory management with no strategic vision
The way you manage your inventory is closely linked to your sales and distribution strategies. Do you sell your products directly, or via a network of distributors? Are you a pure play or a brick-and-mortar company? Do you manage your inventory via a push, just-in-time or drop shipping method? Do you use a single channel, multichannel or omnichannel distribution method? Is your distribution method undergoing change? What is your outlook for your company over the next 5 years?
If you do not take these considerations into account, your inventory management method may not meet your micro-enterprise’s needs. As a result, your company will bear the costs of this mismanagement. To avoid these potential pitfalls, you need to clarify your strategic vision. Only then can you determine the optimal quantities you will need for each product. As a result, you can maximize your chances of streamlining storage costs.
Mistake #2: Non-optimized management
Working in a micro-enterprise often involves wearing many different hats and having a versatile skill set. If your inventory is not managed by an expert in the field, it may be managed reactively, rather than by planning ahead. This means that there will be too much of some products in your inventory, while others will quickly run out of stock. Overstocking results in much higher costs, while the latter situation will cause customer dissatisfaction and decreased loyalty. In both cases, your company will experience decreased performance.
Consider inventory optimization. Ensure that your product inventory is calcumated as tighly as possible, making sure that products are neither out of stock nor overstocked. Customers and colleagues should have access to the same information for your micro-enterprise to reach its full potential.
Mistake #3: Manual management
As a micro-enterprise, your first instinct may be to manage your inventory with Excel. A series of spreadsheets, well thought-out formulas and regular updates may therefore seem like a perfectly suitable system for a small business. In fact, manual management or management via a spreadsheet often leads to many mistakes. Managing the supply of your products using formulas is highly labor-intensive. Between collecting sales data, calculating optimal inventory quantities and ensuring that your inventory is up to date, it is difficult to fit everything into what is likely an already busy week. Increased inventory errors then heap further costs onto your micro-enterprise. Yes, Excel is free. However, the human error that results from its use can sometimes have a significant financial impact on your business.
Modern micro-enterprise sales and inventory management software solutions are thus designed to reduce human error as much as possible.
Mistake #4: Independant management of purchase orders
Your stock depends on your distribution method, of course, but it mostly depends on your purchase orders from suppliers. Yet, many micro-enterprises process their purchase orders independently from the sales cycle. They place orders at regular intervals to ensure they do not run out of stock. This method results in substantial economies of scale from suppliers, but suffers from a lack of flexibility when faced with fluctuating customer needs
Supply can also be calculated automatically using received orders. To do this, all of the supply chain data needs to be available and reliable. In practice, your inventory management solution needs to collect sales data directly from all sales channels to manage your supply as tightly as possible.
Mistake #5: Out of date stock records
With the new possibilities offered by modern technologies come increased consumer demand. Today, real-time management is the standard. Consumers want to know exactly how much stock you have to avoid disappointment after placing their order. Despite this, several companies still display incorrect inventories on their sales channels. This may be for several reasons; be it that inventories are not performed often enough, or that these are not updated properly or at all. Badly-equipped micro-enterprises are even more prone to this issue, even though customer satisfaction is a key part of their growth strategy.
However, real-time management is now a possibility for micro-enterprises. Software solutions customized to suit micro-enterprises help customers to check exactly how much stock is currently available (and some even display the product’s location). Erplain is perfectly suited to your needs. It’s ideal for closely monitoring your inventory levels in real time, to effectively carry out inventory checks, make your real time data more reliable and effectively manage your supply chain. Our teams are happy to help if you need any more information!