As a retail or e-commerce brand manager, you know how critical inventory management is to your operations. It would be challenging for your business to reach its full potential and operate seamlessly without a strong strategy.
Inventory management is not a topic many people get excited about. However, it’s something retailers and e-commerce experts need to prioritize on their to-do lists, as it plays a significant role in the overall success of the business and general performance of your brand.
Below are six examples of common inventory management mistakes that were prevalent in 2021. Here’s how to avoid making these mistakes to improve your operations as we get ready to enter 2022.
1. Ordering Too Much Inventory
Retailers must be careful to order enough products to meet demand but not end up with too much. Overstocking can prove problematic — trying to sell a large volume of items can negatively impact profit margins.
It’s important to be cautious when ordering products to fill up your shelves. Try to limit your volumes as much as possible to eliminate the need to sell overstocked goods in the future.
2. Failing to Use KPIs
A key to good inventory management is being able to review past performance accurately. Using narrow performance indicators is a mistake commonly made by retailers or anyone in charge of managing stock.
Here are some metrics you should be looking at while measuring inventory performance:
- Customer demand
- Inventory levels
- Fill rates
- Inventory turnover
While it’s vital to monitor your inventory performance continuously, it’s also important to note that you don’t want to use too many KPIs. It may become too difficult to understand, and the information may be too dense to draw conclusions from.
3. Relying on Spreadsheets
Many businesses have integrated their systems with inventory management software rather than use outdated Excel spreadsheets.
Inventory management software has proven to be more efficient and cost-effective than manually counting and filling out spreadsheets. This tool is specifically designed to make managing inventory easier for retailers and other small-business owners.
4. Manage Inventory Manually
The growing development of artificial intelligence (AI) allows retailers to automate many inventory management processes. For example, AI-powered systems can detect when stock is running low so management can make the necessary order adjustments.
Retailers should feel compelled to adopt new technologies to improve their inventory management, considering it takes extra time and effort to manage it manually.
5. Neglecting Forecasting
Forecasting plays an important role in adequate inventory management. Historical sales data, purchasing information and current demand planning help retailers forecast future sales and stock levels.
Both quantitative and qualitative forecasting methods can be used to avoid making this common inventory management mistake. Be sure to include forecasting in your management strategy, as it will better equip you with the information needed to order more products and meet customer demand.
6. Lack of Communication
Lack of communication in any organization has its fair share of negative implications. All businesses, regardless of industry, need to prioritize communication and keep all team members and executives informed about current inventory levels and management practices.
To avoid this mistake, ensure you have clear, tactful communication strategies in place to keep all departments on the same page. It will make your inventory management operate much smoother and prevent future instances of miscommunication in the future.
Avoid Common Inventory Management Mistakes
The past few years have been quite tumultuous for retailers and e-commerce companies. Customer expectations have changed after spending so much time at home, and these organizations need to employ strategic inventory management tactics to meet these expectations. Keep these tips in mind if you’re looking to level up your inventory management skills.