Inventory is among the integral parts of your retail business. Poor ability to manage it may result in out-of-stocks, shipping delays, and shattered customer relationships. In the worst-case scenario, you suffer financial loss.
According to the United States Census Bureau, retailers carried billions of dollars in inventory in mid-2018. And reportedly, only around 10% of a firm’s stocks is veritably in transit, and 90% stays stationary. That is why businesses cannot disregard inventory management’s importance.
Aside from taking best practices, you are better off preventing inventory losses by applying some proper measures. In this post, we put together a list of the most common mistakes associated with managing inventories in retail. We also suggest how you can avoid or handle them.
1. Store supplies in an unorganized way
Keeping your storage area untidy will reduce your business efficiency. A typical instance is, it decreases the picking and packing process speed, causing shipping delays. That is why tidying your warehouse and inventory is critical. There are of course Third-Party Logistic companies like One Warehousing 3PL Brisbane that can warehouse, manage and transport inventory for you, if you’re business requires it. 3PL is good for businesses that may need to scale stock, space, labor and transportation on short notice due to growth, sales fluctuation or are too small for to have a private warehouse.
More specifically, it is always advisable to make your products ready for access. We recommend attaching labels and stuff to compartments so that pickers can find the goods easily and quickly. Also, you may want to leverage suitable inventory control software to accelerate the whole inventory control process.
2. Take inadequate care of the product catalog
Another common mistake retailers make is not having a tool or a file that centralizes all of the enterprise’s products and covers every crucial info for managing inventories. All the products here mean active ones, new ones, and stocks at the end of their product life cycle.
This specific document should include product name, category, type, and photo, reference number, product status (new or not), and product end date. Also specify info about purchase price, catalog sale price, actual sale price, past sales (four weeks, one week, etc.) in amount and value, existing stock in amount and value, margin, MOQ (minimum order quantity), and supplier lead time. It will be best to add details about average past stock, the average stock coverage, and future sales forecasts in the document, too.
Please bear in mind that this catalog lays the foundation for streamlined inventory management. As far as we know, many firms have not paid attention to this initial point, suffering undesired aftermaths. Thus, we highly suggest spending time on it, monitoring and updating it routinely.
3. Have too many storage sites
Examples of storage points are reserved, stores, and warehouses. As you have more storage points for a particular product, you mechanically increase the inventory but likely fail to enhance the service level. For instance, aside from the shelf stock, having a reserve in your store can raise the total stock by ten to fifty percent.
Wonder why? The storage unit tends to be more than one piece (pallet, for example). It naturally adds to the stock coverage level on the whole storage points. Further, more storage points imply a more complicated process of managing inventory. The consequence is more management errors. Another reason for avoiding having too many storage sites is that stock distribution may not be correct if a shortage-related issue is present.
For the reasons mentioned above, we recommend centralizing your stock to the extent feasible. This approach is genuinely advisable for your low sales. Stock decentralization is more appropriate for super long lead times. It likewise suits items with high sales volatility (impossible to predict). We suggest decentralizing stocks also when the transport cost share in the final cost of goods, mainly for sizable items, is extra high.
4. Count inventories once a year
Counting your inventories every twelve months is not a wise move for efficiency. That way, you may have to spend plenty of time checking on your stock products. Instead, a surefire way to keep an eye on your resources is through checking inventories periodically.
To be more specific, do not perform a physical count but try cycle counting operations management. With this option, you count a small share of your inventory regularly. When going to what was listed beforehand in the database system, you can make a comparison. Do so monthly until everything gets covered and documented the right way.
In the end, keeping a consistent check on the number of items documented in the database system and the available items will assist in deciding what is in demand and what is not.
5. Neglect training staff
Please bear in mind that the human aspect always plays a crucial role in inventory management, no matter whether your system is an automated one or not. Employees who do not receive proper training about your inventory processing system can be a problem that needs solving as soon as possible.
It is advisable to have at least one staff with familiarity with your inventory software. This person in charge should train new employees and keep track of warehouse and shipping operations. We recommend taking the on-the-job training approach to make your staff get used to the system.
All in all
On the one hand, inventory management issues occur here and there. But on the other hand, it does not mean that your company cannot deal with them. Hopefully, the above guide gives you some ideas to avoid or solve the problems.