In the early 2000s, poor inventory management made Nike lose sales worth approximately $100 million.
After the debacle, Nike’s stock price tumbled by 20%, was hit by various class-action claims and became the embodiment of poor decisions.
Luckily, Nike was able to rebound by implementing a better inventory control management system.
If this can happen to Nike, one of the world’s biggest companies, it can also happen to you.
We’ve compiled 6 common inventory management blunders many companies make and the potential solutions.
Failure to Forecast Demand Accurately
Nike’s problem arose from an incorrect forecast demand. The bugs and errors in its software produced the wrong forecast, which they relied on in the manufacturing plan. Consequently, they had less of the items that their customers demanded and produced too many items that weren’t sold.
First and foremost, inventory management systems must be bug and error-free. Demand forecasts are crucial for producing the right quantity of products and if the figures are inaccurate, you’re doomed, especially if you’re operating a wholesale business.
The answer is pretty simple: you must get an inventory tracking software that produces accurate data.
You Aren’t Automated
If you’re currently tracking your stock with Excel or another manual process, you’re wasting valuable time and money by correcting errors one at a time or sifting through papers.
Mistakes are inevitable. Research indicates that even a skilled data entry worker will make one mistake for every 300 characters they enter.
That kind of inaccuracy may cause huge problems if your stock consists of thousands or hundreds of products.
Manual processes don’t allow many people to access them at once and don’t work in real time.
In contrast, an automated system allows several employees to track products across a number of locations, all while keeping tabs on shipments and orders for those products.
Your Employees Don’t Have Inventory Control Skills
No one has time to stop operations for whatever reason, never mind training. However, to have proper inventory control, you need employees you can trust to perform the task well.
While you prepare to set up a better inventory management system, consider these suggestions to prevent frustration for your workers and you.
- Hire the right staff: Your business probably has inventory worth several hundred thousand dollars. Shouldn’t you engage the services of experienced inventory managers or individuals with a solid track record in inventory for starters?
- Put emphasis on training from the beginning: Many inventory management system vendors will train your employees on-site. Make the most of this chance. The training is usually tailored to your business, and everybody will be learning about the best practices from day one.
- Hold your inventory managers to account: Do you know who manages inventory in your storehouse? It’s vital to have someone you trust and who knows and totally backs your strategic goals. Otherwise, you may never achieve your goals.
Less Frequent Inventory Inspections
Many companies halt operations for one day to inspect inventory. This can lead to loss of profit. It’s much worse for large companies with plenty of inventory; they may end up with loss of profit for several weeks.
This is a dated method that’s also not at all productive. You’re better off planning more frequent inventory checks to avoid halting operations and not making sales.
On top of that, even if you notice a discrepancy while checking your inventory, it’ll be hard to pinpoint the issue when you’ve got 3 to 12 months to remember.
With an online inventory control system, you won’t need to do that. A reliable system will keep you informed about the state of your stock in real time.
Apart from stopping the loss of profits, this will also enable company sales reps–with more clarity and visibility on inventory levels–to speak with more confidence and conviction to prospective customers.
Your Warehouse is Disorganized
Disorganization is the bane of efficiency and productivity. There’s a massive difference between a warehouse that performs optimally and one that just functions.
Warehouse management is often overlooked in the chain of distribution, and seemingly innocent mistakes–like badly labeled storage areas–may waste a lot of time.
Time is of the essence in the distribution process. If your employees have to constantly crisscross the warehouse looking for incorrectly stored and poorly labeled items, the losses accrued eventually can be punishing.
Use a simple, clearly-marked labeling and storage system. Put the most in-demand products and those picked most often in areas near the loading bays.
Foster effective data-based communication between departments to ensure that every process in your distribution chain (from buying and sales) is running from one page, using accurate, real-time data.
Although there’s no fail-safe protection against all the problems that can attack your inventory control system, avoiding the three main pitfalls mentioned above will ensure that you have proactive control of your inventory.
Selling More Products than Those in Stock
If you’re operating an online shop, you’ve probably sold more goods than those in stock at least once.
Customers have made orders and probably even paid for them. Come delivery time, it dawns on you that that specific item is out of stock and it’ll take some time to restock it.
You’re then left with the tricky task of letting the customer know that their order is going to delay and having to reimburse them in case they no longer want the product.
This wouldn’t have occurred if you were utilizing an online inventory management app to monitor incoming and outgoing inventory.
If it happens a few times, your previously devoted customers may decide to purchase from another online dealer that uses a better inventory management solution than yours. Therefore, your customers and revenue will shrink and you’ll have it all to do to restore your business to its glory days.
Inventory control can be quite a challenge–but there are certain things you need to do to make it easier.
Contact us right away for more information about ways to automate and modernize your inventory management.