When your business depends on inventory, any mishap can lead to trouble. From dissatisfied customers to wasted funds, problems can compound quickly as seemingly small errors turn into profit-eating catastrophes. Here’s how to stay ahead of issues so you can avoid an ugly snowball effect.
Missing stock leads to frustrations on many levels. Your employee wastes time looking for it, you can’t sell what can’t be found, and your customer’s order can’t be fulfilled. If you replace the missing stock before it’s found you can end up with a surplus, and if you don’t replace it you will lose more sales. This brings home the fact that tighter overall controls are necessary, and you need to have good forecasting measures in place.
Enough and not too much
The right amount of inventory is a must in a well-run operation. It’s easy to think that ordering or producing extra will put you ahead of the game, but in reality, holding too much stock is tying up space and money. Even if an item is a hot seller, if you don’t forecast well and end up retaining more than you sell, the money you invested would be better spent elsewhere, and the space holding the stock could be dedicated to other products with steady turnover.
On the other side of the coin, running out of stock is an equally unhealthy inventory situation. Repsly.com points out that stockouts are a quick way to drive your customers straight to your competitors’ stores. You reduce loyalty and could push them into choosing a brand perceived as more reliable.
It’s easy to see that properly forecasting customer demand is critical for an inventory-based business. To forecast the demand for a product, you need to analyze a number of metrics, like day-to-day sales, seasonal shifts, and what drives your customers’ selections. There is software available to help, but first, you need to examine the accuracy of the numbers you’ll be working with.
While proper forecasting is the key to avoiding overstocks and stockouts, you have to start with accurate counts that reflect not only how much stock you have, but also where it is. To reduce all these inventory issues, it’s important to examine what system you usually use for tracking. Moving to an automated, cloud-based system is a logical step in today’s tech-oriented world, as paper-based systems leave too much room for error and take too long to process.
As StitchLabs explains, an automated inventory system has other perks as well. It’s extremely scalable, and that versatility is a boon if you’re tracking across multiple locations—or if you hope to down the road. Once in place, the process of keeping everything on track is quicker than traditional methods, and most inventory management software systems offer a deluge of bells and whistles so you can customize reporting and tracking to meet your circumstances.
Revamping an inventory system is no small order, and once you go through all that trouble you need to make sure it functions properly with your sales system. One way to ensure you start off on the right foot is to hire a freelance inventory or e-Commerce specialist to build a web dashboard that integrates your new inventory system with your website. This side of things can get complex quickly, but you can find pre-vetted professionals through job boards like Upwork, which simplifies the hiring, collaboration and payment process for small business owners tremendously.
Small inventory errors can quickly snowball. Before missing, extra, or insufficient stock eats away at your profit margin, take measures to ensure you have a modern, accurate, efficient system in place. Ultimately, it’s an investment in your company that will protect your inventory and your bottom line.
Marcus Lansky is an abilitator: one who helps people with differing abilities start their own businesses through training and/or mentorship. He created his site, Abilitator, as a way to reach out to those who are disabled and show them that becoming an entrepreneur is a goal they too can achieve.