Product-based businesses face many inventory management challenges that can impact all aspects of their business — from customer satisfaction to gross margin to return on investment. Whether it’s a lack of real-time visibility across locations or manual processes that result in lost time and increased errors, most businesses unfortunately deal with the pains of managing inventory at some point.
We recently polled more than 165 organizations during a NetSuite webinar to learn about their inventory management challenges. Here are the top inventory management pain points these organizations reported.
1. Short shipments or incorrect items from suppliers
For 10% of the audience polled, supplier errors resulting in short or incorrect items was reported as their biggest inventory management pain. Global supply chains shift daily, placing a burden on your inventory planning and management operations. The manufacturers and wholesale distributors that dictate when, where and how your inventory ships require flexibility and offer unpredictable lead times.
To alleviate this pain, continuously monitor and track supplier performance to prevent supply chain disruptions, reduce complexity and streamline logistics. Pay close attention to supplier consistency and order accuracy in order to monitor performance. When possible, maintain a few backup suppliers that can be tested over a period of time to determine which vendors should be retained. Some inventory management systems also provide vendor management functionality that can help businesses identify which suppliers can be relied upon, and those that cannot.
2. Lack of visibility and supply chain responsiveness
When your inventory is hard to identify or locate in the warehouse, it leads to incomplete, inaccurate or delayed shipments. For 22% of our respondents, this was the biggest source of inventory management pain for their business. Receiving and finding the right stock is vital to efficient warehouse operations, and supply chain models that prioritize responsiveness help with adapting quickly to change and delivering positive customer experiences. Software that can deliver comprehensive inventory visibility gives businesses insight into stock levels, demand and sell through by channel and location and links customer orders to items. Consider adding images with product descriptions in your inventory database to enhance accuracy and prevent misplaced inventory.
3. Inaccuracies caused by disconnected systems
The second most common challenge businesses cited is having multiple disparate systems where the data is not all in synch in real time. According to one report, 43% of small businesses either track inventory manually or don’t track it at all. It’s an all too common dilemma, as personal care company Fulton & Roark co-founders Allen Shafer and Kevin Keller experienced trying to manage inventory manually while the company grew. “We’d be fixing inventory data as well as entering the information into our accounting system,” Shafer said. “If we missed the double data entry, we’d have inaccuracies in tracking inventory dollars. This would cause discrepancies between dollar amounts in the inventory spreadsheet and our financial system.”
Consider tracking software that provides automated features for re-ordering and procurement. Inventory management platforms provide centralized, cloud-based databases for accurate, automatic inventory updates and real-time data backup.
4. Impacts of poor demand forecasting
The number one pain point our audience reported was stockouts, lost sales, excess inventory and other costs associated with poor demand forecasting. Determining the right levels of inventory can be difficult for many organizations even during more predictable economic times. Underestimating demand leads to customer dissatisfaction and lost sales when items aren’t available. Overestimations of demand can result in excess inventory that ties up cash and warehouse space. Organizations like Kali Audio use ERP to forecast how much inventory will be needed to fulfill upcoming orders. “If I don’t have inventory, I can’t sell. But if I have too much inventory, I can’t invest or buy more inventory where I need it,” John Malikyan, executive vice president of business development, said. “So [ERP] is extremely useful—it allows us to change and evolve with the situation of the world.”
Some inventory management platforms include demand forecasting tools. This feature integrates with accounting and sales data to help predict demand and schedule orders based on shifting customer preferences, material availability or seasonal trends.
Relief for the pain
While these pain points are all too common for product-based businesses, you don’t have to suffer. Read 20 Inventory Management Challenges and Solutions if you’d like to learn more. If your experiencing significant pain it may be time to consider upgrading your business systems. NetSuite offers many native tools and features to help you make this happen including tracking inventory in multiple locations, safety stock, re-order points, cycle counts, demand planning and distribution requirements planning.
Download the ebook, Inventory Management Fuels Supply Chain Optimization for more on the role of inventory management in your supply chain and best practices for how businesses can use inventory management to optimize operations.
Business Solution Partners will help you find the right tools to simplify your inventory management and reduce your pain points. Contact us to learn more about the latest solutions.
Article republished from Oracle NetSuite with permission.