Inventory Management Challenges
Inventory management is not an easy task and any mistake in inventory can jeopardize your business. In today’s competitive market, every kind of business like start from a small store, or home business to a warehouse must be automated using an Inventory Management system like AlnicoSoft . So, it is highly important to manage the inventory in an organization in an effective way. There are a few common problems in managing the inventory irrespective of the type and size of the business which is listed below.
Demand Fluctuation
The demand for any product is changing every day. This is because manufacturing companies are bringing upgraded products to the market very frequently to satisfy their customer and cope with market competition. They are marketing so well to change the mindset of the customer. So demand fluctuation is a major concern to maintain the appropriate inventory of stores or warehouses.
The demand for the specific product can vary based on the season like during summer time there would more demand for outdoor decorations, trees, etc but in winter there will be more demand for indoor decorations, like an indoor tree, Christmas decorations, etc. The demand can also fluctuate due to the type of product you are storing. For example, Apple is bringing new products every two years so you can expect that the specific Apple product having high demand today will eventually will lose that demand gradually.
Too Much Stuff
Sometimes company stocks their item more than needed or beyond market demand. They take that decision because of unproven planning or misunderstanding of the market demand or because they do have a more allocated budget. This lead to companies not losing money but also time and space. The longer they keep the stock they will be holding the money which is the price of the product. Also, the extra stock is going to capture the space. The employee will be engaged to keep track of those extra volumes of stocks. Ultimately after waiting for a longer time the product needs to be either sold to the market at less price or it will be expired. Because of holding the extra unnecessary stock there could shortage of money to purchase other highly demanding items and that can make the end client unhappy and impact the company’s reputation.
Consequences of Poor Demand Forecasting
Poor demand forecasting is another challenge to maintaining correct inventory. Keeping the right inventory at the right time can improve the profitability of the company as well as the company’s reputation. On the other hand, it can jeopardize company profitability. Regularly keeping track of the item sold is the basic necessity to forecast the demand for any specific product. As mentioned above, the demand needs to be forecast considering multiple parameters like the past history of the sold items, the season, the types of products, etc.
The profitability may vary based on frequent small orders or infrequent large orders. So companies need to do their analysis based on price, market demand, and space available to stock appropriate products.
Shipping Time Estimate
Continuous analysis of the shipment and timing of the shipment should be mandatory steps to maintain the unbalanced inventory. If the item is ordered without considering shipment time then the item may be in transit when you need it most in your shop. In the same way, if the item is not delivered on time because of the transit delay that may impact the customer who is waiting for the items.
Human Mistake
If the company tries to maintain the stock inefficiently like maintaining the stock in a log handbook or spreadsheet. Then, there is a high possibility of occurring human error. The item may not be documented in detail or the real stock count may not be updated immediately. Human error can also be happened in the automated process but the percentage of error will be very minimal.
System Optimization
System optimization is very important nowadays to get the best result out of existing resources. This means, to manage the inventory effectively without impacting the cash flow of the business, the company must automate the inventory management software. AlnicoSoft is one of the best Inventory Management systems to manage the inventory of stores, and warehouses, it does come with an inbuilt POS system. If a company is looking for growth then there is no point to track the stock using a Microsoft excel spreadsheet.
Business Growth
The inability to handle business growth can cause irregular inventory. This may occur if the company is unable to anticipate the growth of the company and they didn’t upgrade its supporting system including the Inventory Management system and appropriate manpower to track the complete path of the inventory.
Inventory Management Solutions
Inventory Count
The inventory needs to be updated continuously and accurately. The inventory count must be kept up-to-date always. Automated software like Alnicosoft must be used to make it easy and comfortable for employees.
Supplier Risk Scorecard
All suppliers need to be rated based on their performance. In the end, the store/warehouse management needs to understand that they very much depend on their supplier to restock as needed on time. The company must evaluate the historical performance of its supplier and build the scorecard for future reference.
Automated Business Report
Enabling a system to generate an automated report on different phases of Inventory Management.
Increase the Visibility
The company should improve product transaction visibility in terms of a historical transaction of every product and how it is performing. The company should be agile and be ready to capitalize on any opportunity by taking action quickly whenever possible.
Analyze Trends
Continuous inventory trends analysis is one of the key factors to maintain the inventory successfully. The trend of inventory may be depending on the season, locality, and interest, or disinterest of the people at that point. The company needs to make sure that they stock the right item based on the actual demand, safety stock plan, and reorder points.
Categorized inventory based on Price and Volume models
The use of the space to store the item can be optimized by categorizing the inventory by volume. Also, it would be nice to categorize the inventory by price to enable easy cash flow.
References
- Inventory Management Challenges for B2C E-commerce Retailers ScienceDirect. www.sciencedirect.com/science/article/pii/S2212567114002214. Retrieved 01 December 2022.
- Inventory Management and Performance of SMEs in the Manufacturing Sector of Harare ScienceDirect. www.sciencedirect.com/science/article/pii/S2351978919305335. Retrieved 01 December 2022.
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