Strategic Inventory Management: 5 Common Mistakes and How to Avoid Them
The summer of 2002 was not a good time for footwear sales giant, Nike. In June of that year, a computer glitch in Nike's inventory management system indicated the need for too many Air Garnet sneakers, and not nearly enough Air Jordans. The cost for Nike? A whopping $100 million, and no small amount of embarrassment within the industry. Nike, with about one third of global market share, was able to recover, but most businesses simply can’t afford this kind of inventory management snafu.
In fact, an inventory management mistake can end your business. The good news is that there are experienced professionals who can ensure that you avoid such mistakes to keep your business thriving. Here are 5 of the most common inventory management mistakes:
1. Software Bugs
You can’t accurately forecast demand if your software has bugs. Make sure you invest in software with a proven track record of accurately predicting demand, one which utilizes forecasting algorithms which begin at the micro-level of individual products and locations.
2. Manual Inventory Tracking
Using Excel to track your inventory is like using an abacus to track a missile launch. In the first place, manual tracking is slow and labor-intensive and keeps you from the more important priorities of running your business. More important, manual tracking is prone to making mistakes. You need effective software which automates key tasks and is less prone to errors.
3. Lack of Effective Training
When you’re not working with a company with deep expertise in inventory management, you are responsible for locally installed software, and for training your staff in how to use it. Often, that training is inadequate, which leads to mistakes, and that means disruption in fulfilling orders. You need to work with a company which will give you an effective cloud-based system and the training to use it properly. The software provider may have a thorough understanding of the functionality, but understanding how to utilize these functions to achieve your business goals is much different. To learn more view this whitepaper.
4. Warehousing Inefficiencies
The more time it takes your employees to locate products inside your warehouse, the slower your ability to fill orders. Your warehouse needs to be well-organized so that items can be quickly located. Your biggest sellers, for example, should be close to your shipping area. This of course means first knowing which items are your most popular, something you can learn from a smart analysis of sales reports.
5. Shutting Down Business to Check Inventory
Too often, companies shut down their businesses for a day, in some cases longer, to take stock of inventories. That means lost business. Your inventory should be online and inventory checks should be frequent and conducted in real-time.
Strategic inventory management requires experience, skill and commitment. The fact that a company as large and sophisticated as Nike can make a multi-million dollar mistake drives home the importance of enabling best practices to avoid such costly errors, and of working with recognized industry leaders who have the deep expertise to maximize inventory management efficiency.
To learn more about the ways you can build a state-of-the-art inventory management program for your business, contact us today.