Indicators of a Problem in an Inventory System and How to Mend Them

Your inventory rose when your business grew, so the system you employed while you were only starting out is likely to fail at this point. You’ll notice the failure from the amount of lost and mishandled items, and possibly from customers complaining about delayed orders.

One solution to fix those problems is upgrading the technology in your inventory system. If you invest in advanced inventory management software, the warehouse efficiency will significantly improve, eliminating multiple issues.

That said, let’s point out each sign of a problematic inventory system, and find ways to fix them.

Lost Items

Items can still go missing even if they’re all dropped off in the same place. Even big companies like Best Buy have dealt with lost items, forcing them to cancel multiple customer orders due to “overwhelming demand.” If you find yourself dealing with the same problem, don’t wait until you’re also compelled to cancel what could’ve given your business a spike in revenue.

Inaccurate Counts

Inventory counts affect multiple departments in your company. If the warehouse team releases an inaccurate count, the purchasing department may fail to procure the right volume of materials needed to fill the inventory. Consequently, the planning department may end up implementing a faulty production schedule, because the data they based their plan on is inaccurate.

Outdated Inventory

Untouched inventory incur you losses, not to mention consume useful space in your warehouse.

Excess inventory generates additional storage costs and funds attributed to unused stock. Slow-moving inventory causes your business to lose money, and if the items are defective, it can take your team longer to discover the problem.

Misplaced or Found Inventory

If your inventory system doesn’t disclose all the locations of the warehouse, you’ll likely come across items in unusual places. They could be the ones reported as missing, which resulted in inaccuracies or order cancellations.

Complicated Processes

A well-optimized inventory system should provide your business with accurate production quantities and discarded materials information. If you find that your system doesn’t yield these results, then it’s probably the reason for the production issues you experience. Therefore, abandon spreadsheets and other manual methods, and shift to a centralized, computerized system.

Fixing an Ineffective Inventory System

Inventory system

Before adopting any new system, you must first understand what inventory exactly consists of, which are following:

  • Raw Materials
  • Unfinished Products
  • Finished Products
  • In-transit Items
  • Cycle Inventory
  • Anticipation Inventory
  • Decoupling Inventory
  • MRO Goods (Maintenance, repair, and operating goods)
  • Buffer Inventory

By sorting your inventory into these categories, you’ll be adequately prepared for a new system. Invest in a user-friendly technology known to effectively optimize inventory, and use it to input and track all product information.

Perform an audit periodically to spot variances in counts and address them immediately. Include your suppliers in your audits as well, because they can also cause problems in your inventory, such as late deliveries and erroneous product quantities, to name a few. Unreliable suppliers have to be weeded out to stop them from affecting your supply chain.

Track the movement and sales of every product, but prioritize managing the ones that perform best. And with regard to how you receive your goods, make it standardized. This minimizes discrepancies and inaccuracies during counts.

By employing such a system, your inventory management process will significantly improve, resulting in higher profits and lesser costs. And most importantly, your customer service will be unfailing.