The Worst Inventory Control Mistakes and How to Fix Them

The Worst Inventory Control Mistakes and How to Fix Them

warehouse representing inventory control proceduresInadequate inventory control procedures are one of the top reasons small businesses fail, according to Chron. Even so, there’s still a high percentage of these same businesses that don’t see the need for a warehouse management system (WMS). The good news is that all of the inventory control mistakes made by businesses are completely avoidable once you know how to recognize them.

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1 | Failure to Forecast

This doesn’t mean checking your phone obsessively like I do for whether the chance of rain has changed a percentage in the last two hours. Forecasting is predicting future demand based on trends, past sales, and present inventory. To help prevent excessive or insufficient inventory, forecasting should be the guiding force in your inventory control procedures.

Needless to say, being out of stock of an item can cost you anywhere from sales to a key client. However, there’s also a cost in overstocking inventory, including additional overhead, insurance costs, loan interests, property taxes, space costs, and decreased liquidity. While it’s particularly important for products with a short shelf-life, like seasonal goods, product that’s sitting means it’s costing.

Dilemma: You Don’t Know Where to Start

Not even sure where to begin with even basic forecasting? Is your inventory control procedure based on back order reports? You may want to consider getting a warehouse management system. These have forecasting tools that can help you predict your inventory needs based on measures like sales history, incoming, and on-hand inventory.

A warehouse management system can help forecast what is trending, what your stock availability is of that product, what’s not selling, and show you what other changes need to be made to improve inventory control. With data in the palm of your hand, you can make executive decisions about your inventory from anywhere, which means less frustration for you and your employees and happier customers.

Dilemma: There’s No Leadership

If you’re not about software, or want some additional attention to your inventory control procedures, it would be a good idea to get yourself a manager, or two, in charge of forecasting. Someone should be accountable for forecasting accuracy, especially if you aren’t relying on a WMS. This means analyzing past sales, future trends, and your incoming and on-hand inventory.

If You Have Software, But Growth is Sluggish:

Maybe, if you’re not seeing expected results, you should consider restructuring. Collaboration and communication internally (with sales & executives) and externally (with clients & customers) are a huge benefit for these managers, so regular meetings should be a priority. Additionally, forecasting is so fundamental for a warehouse that if your budget allows for it, it could easily be (and should be) a full-time job.

A common mistake among these managers is an over-reliance in their “gut”.

Managers should only override suggested forecasts after analyzing the market and trends thoroughly. Overconfidence in one’s own forecasting abilities could result in a warehouse disaster. Removing an item from a forecast because of excessive on-hand stock, for instance, fails to consider future need and puts you at risk of an inability to meet demand if it occurs. The only time one should adjust the forecast is when you know something that the system doesn’t.

You also can’t wholly rely on software, however. Forecasting managers should make adjustments, review projections frequently, and discuss changes in regular meetings. Finally, there should be accuracy and accountability measures to ensure this is being done correctly for future forecasting purposes.

Dilemma: Debilitating Purchase Orders

Have you ever gotten a surprise order for 12,000 nuggets of Kryptonite and only had 5,000 in your warehouse? First off, Lex Luther: you leave Superman alone.

Second, your mistake here is not bolstering external communication. If you’re not already talking to your customers about what their needs are, I suggest you start… yesterday.

Your inventory should service your key customers’ demands — even unexpected ones. Purchase orders that force you to use overtime pay or expedite services cut into your bottom line. Failure to forecast means a hit to your inventory cost reduction and unhappy customers.

You should have a good working relationship with your best customers and speak with them regularly about their expected needs. If they’re able to alert you to changes in demand variability, promotion schedules, or marketing plans, it allows you forecasting power.

2 | Comprehensive Performance Measures

There’s no way to know how well you’re performing if there’s no way of measuring it. In fact, you need several ways of measuring it.

Dilemma: You Don’t Know Where You’re Falling Short

If your only means of measuring is by pulling out a ruler, it’s time to reevaluate. It seems obvious, but customer satisfaction is a metric that’s frequently overlooked.

Listen to what your customers are saying, and let that be a predictor of what changes you need to make. In order to remain competitive and sustainable, you need a base of reliable key customers to give you return business. Consider, again, keeping a good working relationship with customers to keep a pulse on whether their needs are met, then get a metric to measure and monitor it.

Sometimes forecasting managers are quick to adjust their forecast which trying to improve supply chain performance. This can be a problem when they fail to understand or search for the underlying forecasting errors. It’s like turning up the water on a hose to get more water, without realizing there’s a leak in the tube. So don’t have too narrow of a scope when there’re dozens of working parts.

Inventory turns (how quickly your warehouse goes from taking in product to delivering it to your customer) and fulfillment rates are key measures of performance for success. These are key in inventory cost reduction and will give you insight into measuring your performance.

A good way to measure some of these is the quality control and customer service reports, which are provided in some warehouse management systems, in.

3 | Qualified Employees

The most expensive expense for most businesses is their employees, so you should spend the extra time to make sure you get the most qualified and trustworthy. Employees can make or break your business, so it’s vital you hire the right people for every position.

Dilemma: Sluggish Inventory Control Progress

Warehouse management is a career field that requires skill-specific education. With a constant influx of new software, methods, and challenges, it’s important that managers come with experience and motivation.

Hire professional inventory managers. Without one, your stock will pile up (or will be lacking), and there will be no accountability and no progress towards meeting inventory planning goals.

A qualified warehouse manager should be able to recognize, for instance, an inefficient warehouse. It seems obvious that the products you use most should be closest to the shipping dock, but this may only come naturally to managers that are trained in warehouse efficiency.

Dilemma: Miss-ships, Miscommunication, and Mistrust

Mis-ships, pick mistakes, and all-around disorganized warehouses cause billions of dollars in loss every year. You should provide specialized training for software that is mission-critical to every warehouse employee. Intuitive software with built-in quality control measures minimizes some of these mistakes. An automated warehouse management system for your inventory control procedure also allows visibility and accountability which will minimize employee fraud.

4 | Inventory Checks

Depending on which expert you’re asking, you’re either doing way too many, or way too few inventory checks. So you may be asking, how’s a person to know how many you’re supposed to be doing? Too many means you’re wasting precious time and money checking inventory that’s already accurate. Too few inventory checks mean you’re likely coming up short, or with an unexpected surplus, of supplies.

Dilemma: The Annual Audit Apocalypse

The word “audit” is likely something that triggers the compulsion to arm yourself with a combat helmet, gas mask, and a gallon of ice cream. For some, an audit means shutting down for anywhere between a day to a week and ;zero sales. If you’re still doing cycle checks like this, you’re wasting time and money.

SkuVault recommends warehouses schedule pickers do small, sectional, daily audits that compare on-hand quantities to inventory. Even better, when executed properly, it adds up to about four audits every year, without the hassle and stress of an apocalypse-sized shutdown. This means less time spent on massive cycle counts and, theoretically, fewer oversells and other inventory-related problems. Additionally, depending on how accurate your audits are, SkuVault will recommend you scale back accordingly. With an automated WMS like SkuVault, you’ll have your inventory in real-time, which means fewer mistakes and improved operations.

5 | Automation

Your warehouse system can (and should be) automated, user-friendly, and intuitive. You don’t want to spend time and money on training and then fixing the mistakes of employees that can’t use your complicated software, and you don’t want to miss out on key software features because you don’t know how to use it yourself. You shouldn’t be working hard on your software; it should be working hard for you. So if you’re spending time fighting with your system, it’s probably impeding your ability to fulfill orders and frustrating you and your employees.

Dilemma: “I Don’t Even Know What You Mean by Automated”

Here are a few reasons to consider automation:

  • Reorder points (AKA min. and max. level) guarantee you have in stock exactly what you need. Additionally, having a reorder point will help manage your cash flow.
    • You’re notified by these reorder points to restock when you reach your set minimum.
  • With a WMS, you can limit customer fraud with built-in quality control reports.
    • You can see which of your employees picked and shipped the order, which also means visibility, accountability, and employee fraud protection.
  • Mistakes are inevitable with a manual inventory control program like Excel. Data entry operators are 99% accurate, but you’ll find that 1% mistake-rate could be costing you.
    • Once made, mistakes are also difficult to find. Automated inventory systems prevent the mistake to begin with.
  • Multiple users can access real-time inventory information from anywhere.
  • Holds allow you to set aside a block of inventory until a certain date, when it will automatically add the quantities back to your selling platforms.
  • Simplify your system with automated manipulation of your quantities across platforms using buffers.

Bottom line, if you’re still using programs like Excel to monitor your inventory, you’re not getting real-time answers. Excel doesn’t provide fail-safes to prevent mistakes like the quality control measures built into warehouse management systems. You should be able to use your inventory system to forecast your business.

Conclusion

Avoiding the most common mistakes in inventory control is easier when you know the symptoms of an underlying problem. Many of these problems can be remedied with the use of a warehouse management system, which provides automation, innovation, and guidance on your basic to advanced inventory control procedures. Businesses that use warehouse Management Systems like SkuVault have benefited from 10x fewer out of stocks and a 30% decrease in labor costs because their inventory is more manageable. It’s time to think about the benefits of automation.

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