Product-based businesses face several inventory management issues impacting all aspects of their business — from client satisfaction, to gross margin, to return on investment. Whether or not it’s a lack of real-time visibility across locations or manual processes that lead to lost time and increased errors, the impact on a manufacturing business can be substantial. Let's take a look at the top 5 inventory management issues and their solutions.
1. Short or Incorrect Deliveries from Suppliers
Supplier errors leading to short or wrong items were reported as the most vital inventory management pain. Suppliers are working with lots of different organisations, and this sadly means that human errors are going to happen. In a retail environment, inaccurate inventory records can lead to a revenue loss of more than 1% of sales and more than 3% of gross profit (1).
To relieve this pain, continuously monitor and track supplier performance to prevent supply chain disruptions, reduce complexity and streamline logistics. To monitor performance, pay close attention to supplier consistency and order accuracy. When possible, maintain some backup suppliers, which will be tested over time to determine which vendors should be maintained. Some inventory management systems additionally offer vendor management functionality that can help businesses determine which suppliers can be relied upon and which cannot.
2. Fluctuations in Global Markets
Global supply chains shift daily, and this can impact the level of stock that you receive. These shifts can be caused by social, political or environmental problems, and these things cannot be controlled.
In order to mitigate against these issues, keep in regular contact with suppliers, monitor the news to ensure you're aware of developing situations, and again, have back up suppliers if your primary supplier can no longer fill their obligation.
3. Lack of Visibility and Supply Chain Responsiveness
When your inventory is difficult to spot or find within the warehouse, it ends up in incomplete, inaccurate, or delayed shipments. Receiving and finding the right stock is crucial to efficient warehouse operations, and supply chain models prioritizing responsiveness helps adapt quickly to change and provide positive client experiences.
A software package like Oracle NetSuite delivers comprehensive inventory visibility and can provide businesses with insight into stock levels, demand, and sell-through by channel and location. They can link customer orders to items in stock, and ensure you know exactly where to find the product. Think about adding pictures with product descriptions in your inventory database to improve accuracy and prevent missing inventory.
4. Inaccuracies Caused by Disconnected Systems
Having to operate through multiple different systems, such as warehouse management, inventory management, and supply chain management, can make the entire process a nightmare. The data will not flow correctly and making important business decisions will become a nightmare. A study found that 70% of companies struggle with data inaccuracies due to disconnected systems, which complicates decision-making processes.
Consider implementing an ERP system like NetSuite that provides all of the necessary inventory management tools, alongside accounting, project management, supply chain management and more. This way you will have a centralised, cloud-based database that provides accurate, automatic inventory updates and real-time data backup.
5. Impacts of Poor Demand Forecasting
One of the most frequently reported problems are stockouts, lost sales, excess inventory, and other costs associated with poor demand forecasting. Determining the proper inventory levels can be challenging for many organizations, even during more predictable economic times. Underestimating demand leads to client dissatisfaction and lost sales when the items aren’t available. Overestimations of demand may result in excess inventory that ties up cash and warehouse space.
Some inventory management platforms include demand forecasting tools. NetSuite’s inventory management module includes advanced demand forecasting tools. Accounting and sales data can be integrated to predict demand and schedule orders based on shifting customer preferences, material availability, or seasonal trends. This helps businesses predict demand accurately, reducing the risk of stockouts and excess inventory.
Final Thoughts...
NetSuite equips tracking inventory in multiple locations, safety stock, re-order points, cycle counts, demand planning, and distribution requirements planning. Using NetSuite, you will have clear visibility and control of your business; it allows you to focus on what you do best and to react to new market opportunities swiftly and confidently.
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