As a business owner, inventory is one most important aspects of your company. Without enough stock, you could have unhappy customers and lose business. If you have too much, you could lose money in storing your excess capital. If there is one area that causes companies to succeed or fail, it is the way inventory is managed. While certainly not the most exciting or dynamic part of your business, it is essential. To help you get a handle on this vital area, here are five critical inventory mistakes to avoid.
One of the biggest mistakes business owners make is not forecasting to assess their inventory needs. When you take on a new client, you must determine how this will change your operating system. Will their account double your production levels, thereby increasing your need for inventory? Or did you lose a client and need to decrease production? These questions are essential to answer, and forecasting is critical in understanding your inventory needs.
Ordering Too Much Inventory
Ordering too much goes hand in hand with a lack of forecasting. If you aren’t aware of how much inventory you need on hand and you grossly over order, you’ll have thousands of dollars in stock sitting in your warehouse. This not only creates a deficit in your budget in the short run, but you could have thousands of dollars tied up in products that won’t net you a return for months. Too much inventory is the number one budget-killer for businesses.
Having Too Little Inventory
If you’re trying to scrimp and save by reducing inventory, you could create unhappy customers. No one likes a product on back order. In today’s economy of next day shipping and instant ordering, a lack of inventory all but guarantees a loss of business. If your product isn’t unique to you, your customers will go elsewhere if they need to order the item quickly. No one wants to wait. Updating a customer’s order status from arriving in one day to one week won’t net you repeat customers.
Lacking an Inventory System
While not every business is big enough to apply automation, every business needs a method for managing and reordering inventory. Whether you employ an inventory manager or invest in software, you’ll be sure to stay on top of stock and have needed products on hand. Without proper inventory management, you’ll end up with too much or too little, and neither option is beneficial for your business.
Infrequent Inventory Checks
Inventory checks are the bane of every business owner. It takes time to shut down your operations and manually check inventory, but it must be done. In addition to yearly physical checks, periodic checks should be conducted on a weekly or monthly basis. Having an inventory manager do this for you will save time and resources. An inventory manager’s job is to ensure you have adequate supplies on hand year-round. A manager can also help you set up a system for your business that provides reordering when products get low and infrequent ordering for products rarely needed.