3 Common Inventory Havocs That Drain Your Finances Without You Noticing
By Kelie Wong · 2nd August, 2023
Effective inventory management is crucial for any business, as it directly impacts sales and customer satisfaction.
However, various inventory disruptions can hinder your ability to meet customer demands, resulting in lost sales.
In this article, we will explore 3 common inventory disruptions and provide actionable strategies to overcome them.
1) Overstocking - when you have high inventory levels but there is low customer demand.
Overstocking occurs when you have stocked up more inventory than the market demands, which ties up your valuable capital and storage space.
Overstocking can lead to financial losses if the excess inventory remains unsold or becomes obsolete (deadstock).
Here are ways to address this issue:
- Reduce restocking for low-demand items: Identify low-demand items based on historical sales data, market research, and industry trends, and adjust stock levels accordingly to minimize restocking.
- Identify potential demands in other outlets: If a product doesn't sell well in one location but has better sales potential in another, consider transferring inventory to those outlets to meet customer demand.
- Create clearance bundle promotions: Encourage customers to purchase excess inventory by offering special bundle promotions, discounts, or incentives, minimizing losses and clearing out stock effectively.
2) Stockouts - when you have low inventory levels but there is high market demand.
Stockouts happen when popular products or high-demand items are unavailable, leading to missed sales opportunities and customer dissatisfaction.
Consider these strategies to combat stockouts:
- Automated low-stock monitoring system: Utilize inventory management software for real-time stock visibility and automated reminders to replenish low-stock items.
- Enable backorder feature: Allow customers to place orders for out-of-stock items and notify that the products will be delivered to them as soon as they are back in stock.
- Send restock reminders: Collect customers' details to send notifications when stock is replenished and provide incentives to drive purchases.
3) Inventory Shrinkage - when your inventory go missing unnnoticed.
Inventory shrinkage can occur due to untraceable inventory movements, which can stem from both internal and external factors.
Internally, factors such as damage to goods or inadequate inventory control procedures can lead to unaccounted inventory movements.
Externally, theft, whether it's by employees or external individuals, can contribute to inventory losses.
Overcome this challenge with the following strategies:
- Centralized inventory management system: Invest in a robust inventory management software that consolidates inventory data from all sales channels into one centralized system, providing better visibility and control over inventory movements.
- Utilise inventory tracking tools: Utilize inventory tracking tools that offer live inventory updates and integrated features for traceability, including records of stock transfers between locations.
- Integration with sales channels: Integrate your inventory management system with your sales channels to enable automatic deduction of inventory with each sale, facilitating real-time tracking of stock levels, orders, and shipments.
Effective inventory management is essential for businesses to avoid lost sales and unforeseen costs. By addressing common inventory disruptions like overstocking, stockouts, and inventory shrinkage, businesses can optimize their inventory levels and meet customer demands more efficiently.
Implementing strategies such as demand forecasting, real-time monitoring, and centralized inventory control systems can help businesses minimize financial losses and improve overall operational effectiveness.
At EasyStore, we equip your business for success.
Our Multiple Location Inventory (MLI) feature ensures you receive real-time updates on sales inventory across all your outlets, assists with inventory forecasting, and provides valuable insights on which products to stock up on or avoid based on data analysis.
Interested in discovering how MLI can prevent the inventory disruptions mentioned above and streamline your inventory management process?
Click here to contact our sales gurus today!
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