Inventory management problems can interfere with a company’s profits and customer service. They can cost a business more money and can lead to an excess of inventory overstock that is difficult to move. Most of these problems are usually due to poor inventory processes and out-of-date systems.
There are a number of problems that can cause havoc with inventory management. Some happen more frequently than others. Here are some of the more common problems with inventory systems.
7. Too much distressed stock in inventory. Distressed stock is products or materials in inventory that has or will soon pass the point where it can be sold at the normal price before it expires. This happens all the time in grocery stores. As a particular food product nears its expiration date, the business will discount the item in order to move it quickly before it expires.
8. Excessive inventory in stock and unable to move it quickly enough. This is probably the most common problem for most businesses. Cash-flow comes from moving inventory. If a company buys an amount of product for their inventory and they do not move it, the company ends up losing money.
9. Computer assessment of inventory items for sale is inaccurate. Nothing is more frustrating than going to a business that says it has a product but it turns out that they do not. The quantities are off and the actual items are not available. Too many people assume that the computer records are infallible. But the records have to be entered by a person and if the person responsible does not keep accurate records, it can turn into a real headache. Inaccurate inventory records can easily result in loss of money and strained customer service.
10. Computer inventory systems are too complicated. There are many inventory software programs available for business use. The problem is that many of these programs are not user-friendly. Computer software developers do not take into account that most of the people who will actually be using these systems are not tech savvy. A company does not always have the time and money to invest in training of personnel to use software effectively.
11. Items in-stock are misplaced. Even if the computer accurately shows the item as in stock, it may have been misplaced somewhere at the warehouse, or in the wrong location within a store. This can lead to a decrease in profits due to lost sales and higher inventory costs because the item must be re-ordered. Plus, the company must spend the time for employees to track down the misplaced item.
12. Not keeping up with the rising
price of raw materials. This falls more into the accounting end of inventory management. By
not keeping current with the rising price of raw materials, a company will lose
profits because they are not adjusting the price of their finished products.
Finished items in inventory must be relative to the cost of raw goods.
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Thanks for reading and please look for future articles that will provide tips and best practices designed to help you and your team manage your inventory.
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