Inventory Management is a common place for mistakes for most of the business out there. If we have good planning, full-time employment, and accurate forecasts will definitely help the business in a long run.
Similar to any other process, inventory management offers a lot of opportunities for improvement and that can only be done by avoiding mistakes so that the business does not get restricted.
Today, I will go through the inventory management mistakes that must be avoided for a proper functioning of the business. If done right, the companies profit will increase, clients will become happier and you can manage more with less effort.
So, why the wait? Let us start ...
1. Using Metrics that do not quantify the performance correctly
Metrics plays an important role in the business process -inventory management is no different. The idea of using narrow metrics or no metrics can really hinder the process of business.
But, using low metrics that do not forecast the inventory requirement can restrict the business. To solve the problem, there should be tracking of all the different workflows in an inventory management such as fill rate tracking or inventory turns. Also, real-time forecasting can help to improve chances of success.
2. Forecast Management
A well-organized approach can really improve the chances of making the inventory management more efficient. Without a proper methodology, the forecast is inaccurate ambiguous and overestimated.
Wrong forecasting can cause many problems for the organization.
To avoid this situation, the company needs to appoint experienced forecasters and also, it is a good idea to discuss forecast with management and rerun tests to confirm its accuracy. Having a team that ensures that forecast metrics is well managed ensures correct implementation.
3. Communication gap
The basic element of success in any business organization is communication. This is valid in the case of Inventory management. There are occasions when new product releases or promotional news do not reach everyone in the workflow. If there is a communication gap, which affects badly the overall process of the inventory management.
Also, there are situations where the organization management doesn't communicate with the forecast team and rely on their judgment. This is a worst case and hence the only solution is to keep both ways communication for proper implementation.
Systematic timely meetings can easily solve the communication problem. Also, sending notification for important events can really help everyone to work in together.
4. Budget Forcing
Not every scheme is same and forcing the budget can really affect the growth of the business. The different sectors of the business have to deal with different challenges, which can make them spend more. To overcome, there should not be a tight budget or budget forcing. Proper planning doesn't go well with the budget. The budget can sway here and there and it is a good idea to have a free flow budget with certain limits.
5. Where are the customers?
In the end, every business has one main goal customer satisfaction and creating more importance on customer feedback. But that might not be worked out in the case for the many organizations.
To keep customers happy, it is always best to take key customers head-on. Also, creating a pre-planned execution plan for sudden demands can really keep both systems and customers happy.
Also, it is always better to make the order patterns simple and absolutely powerful. Regular conversation with customers, implementing forecast with key clients in the equation can really improve the inventory management of any organization.
6. No strong ERP system to handle the inventory management
Manual working with inventory can spell disaster. It is also true that information transmission becomes tough and managing inventory can easily become much tougher. If you are planning to implement an ERP system in your business that could be the best decision you have ever taken in your business life.ERP solution can easily overcome any issues with communication, collaboration, and management.
7. Not being creative or innovative
Not all rules and workflow are written in the books. What works for you best can spell disaster on other and vice versa. The key to success, in this case, is to experiment and be creative.
To learn about your business process, proper documentation and taking expert advice is necessary. Also, having a talented and new employee can help you to improve as they are more bound to solve problems than the experienced ones. The reason is their elasticity and less expertise, enabling them to see the world differently.
Inventory Management is surely complex, but if you avoid the above mistakes, you can actually have full control over the different aspects of it.
8. Managing all items similarly
Inventory management is a complex process and that is why not all items are same and should not be treated like one. With bigger items require different handling and the same applies to the goals of the small items.
Flexibility is also important and correct item management can really improve your chances to gain control of your inventory management system.