Are you sick and tired of losing money on inventory errors?
We’ve all been there. Whether it’s losing sales on backorders, having your fast-selling products depleted within hours or, god forbid, that awful chaos and nightmare warehouse aisle. Whatever it is, inventory loss, it always costs you money.
Statistics don’t lie: inefficient inventory management makes businesses lose up to 11% of their annual revenue on logistics, handling and warehouse inefficiencies.
That’s right. The complete absence of an optimization process on your inventory management. And guess what, all of those errors are preventable!
Optimizing inventory management, though, doesn’t have to be a massive headache. I’m going to walk you through some of the advanced strategies and tactics that will help you prevent those mistakes that bleed your businesses dry. By the end of this article you should know exactly what differentiates your struggling business from the winners. Ready?
Here’s the breakdown:
- Why most inventory systems are way off
- The real costs of bad inventory management
- 5x winning strategies that actually work
- How to implement these today
Why Most Inventory Systems are Way Off
You won’t believe this…
43% of small businesses don’t track their inventory effectively. It’s either manual entries or not tracking at all.
Old-fashioned spreadsheets and endless hours of manual inventory counts. All of it primitive and ineffective by today’s standards.
There’s no malice in those business owners’ actions either. It’s all a question of perceived effort.
Inventory systems fail on small businesses because they focus on wrong metrics and get lost in unnecessary details.
You count numbers. Check the quantities. Don’t optimize your processes.
Yet modern inventory management is all about data, and real-time information. Modern solutions like Netsuite’s powerful inventory management provide access to actionable and real-time data visibility, which is crucial for timely informed decision-making and process optimization.
With real-time visibility into your supply chain and warehouse, a lot can change for your business.
The Real Costs of Bad Inventory Management
If you think you’re losing money, try and take a closer look at exactly how much.
In the whole world, inventory distortions result in around $1.6 trillion in business losses each year. In addition to shrinkage, stockout and overstock, there’s also failed demand planning.
1.6 trillion. Billions, with a ‘B’. That’s not some ‘nice to know’ number.
That’s how much money is getting sucked out of your business, every year.
Does that number put things in perspective?
Bad inventory management is a vicious circle. Think of a stockout, for example. It directly results in lost sales, disappointed customers and a negative impact on your brand image.
But stockouts and the inability to provide inventory visibility and tracking to your customers have another, less obvious consequence.
You need to work twice as hard to keep up with your competitors on sales, which also means overstocking and returns, which further means having insufficient time and resources to look into inventory accuracy, shrinkage or out-of-place items in your warehouse.
In the long term, it all eventually results in even more damage to your business.
5x Winning Strategies That Actually Work
Ok, I promised you 5x winning strategies for actually working inventory management system, so here they are.
5x strategies are as follows.
Strategy #1: Real-Time Inventory Tracking
Scrap spreadsheets, take it from me. Real-time inventory management software can literally save your business. Period.
Real-time tracking is the single most important strategy for optimizing your inventory management system. It gives you the freedom of real-time knowledge about exactly what you have and where and when you need to order more.
See also real-time capabilities for better inventory management.
That alone makes your businesses 30% more efficient in terms of order fulfillment.
But more importantly, there’s no guesswork involved with real-time inventory tracking.
You can make immediate data-backed decisions based on automated numbers instead of hoping for the best and going with your gut or, worst of all, a week-old report.
Inventory management software updates itself automatically. You sell a product and it’s automatically subtracted from your stocks. It gets low and your system will automatically alert you to act. Piece of cake, really.
Strategy #2: Predictive Analytics For Demand Forecasting
Let’s be honest here: very few businesses get demand forecasting right.
Demand forecasting is one of the most complex and time-consuming processes in inventory management.
At the same time, though, it’s one of the most crucial.
Successful businesses approach demand forecasting with an entirely different mindset.
For them, it’s not about magic crystal balls and calling the future. It’s about using past and current information about your business to make data-driven educated guesses.
Successful businesses that nail their demand forecasting have way less stockouts and overstocks, which means they spend less time, money, and resources on organizing, shipping, and restocking backorders and expired products.
Start with your sales history, look for the anomalies and big ups and downs. Adjust based on your insights and start forecasting your demand from there.
Strategy #3: Automation is Your New Best Friend
Manual reorder points are a recipe for self-destruction.
Too late, out of stock. Manual reorder — way too early, wasting all that extra capital unnecessarily.
Automation is a one-stop-shop solution to that problem.
With automated reorder levels, your system will know exactly when to place a purchase order for you automatically.
See also what is reorder point in inventory management
Set minimum levels for your stock. When it hits those levels, your system will automatically place a PO. No more manual ordering and emergency rush orders that suck up all your profits.
It’s just that easy! Your reorder point should factor in all of the different processes — lead times, demand variation, reordering rates and, of course, your safety stock.
Strategy #4: Time for a Little Spring Cleaning?
Organization matters more than it seems.
Warehouse layout and physical organization are the most important factors in your inventory efficiency.
Think of it this way: A well-organized warehouse means shorter picking time, lesser errors and a more motivated and productive team. Everything just works.
Fast-moving items need to be easy to access. Slow-moving products can go wherever.
Try zoning your warehouse or batch picking strategies for smaller and quicker order-fulfillment time.
If you’re serious about inventory organization, this is where those fancy barcode scanners and RFID tags become your best friends.
Strategy #5: Multi-Location is More Than Half the Battle
Multi-location inventory management? Check.
Say you have multiple warehouses or even smaller outposts for stores. In that case, multi-location visibility is what it’s all about.
Visibility across all of your locations. Inventory available at each warehouse and store. Ability to transfer products across multiple locations with just a few clicks.
You don’t want to have overstocked Warehouse A and depleted Warehouse B on the same SKU. Because that, my friend, is an inventory management system that doesn’t work.
Multi-location management strategies allow you to track all of your total inventory, keep location-based stock and even transfer inventory to any other location at the click of a button.
Bringing It All Together
Inventory management is no longer an afterthought.
Inventory optimization is not something you can choose to do or not to. It’s the difference between running a business and dying out.
The winners are the ones that get it. The ones that use real-time data and actionable data sets, predictive insights and, of course, inventory management automation.
Remember: Inventory management is a long and never-ending road, which means you can choose to start small and build upon your insights and successes, and scale up.
The last thing you should remember is that the price of inaction is far too high.
The longer you leave your inventory problems be, the more money you’re losing. Every minute, every hour, every single day that you leave it be.
Now would be a perfect time to take control of your inventory management.
