Avoiding Negative Effects of Poor Inventory Management Processes

Poor inventory management processes can negatively affect sales, revenue and something much, much more important.

Imagine driving through a Mcdonald’s and being told that fries are on backorder and should be arriving in six to eight weeks. Likely, that individual sale would be lost and also future sales would be reconsidered during the wait time. But more importantly, your trust in McDonald’s to consistently deliver exactly what they promise would be permanently eroded. You might even decide to go to Wendy’s and get their fries instead from now on.

So, it’s no mystery why poor inventory management techniques are among the top reasons businesses fail. You already know that basic inventory management is essentially balancing between having too little or too much. Moreover, how much inventory is “just right” is pretty much a moving target. Demand for different products can fluctuate significantly due to a change in trends, seasonality, or the latest headlines.

The reality is that when you can’t immediately fulfill an order because of a stock-out of the ordered item, the customer goes elsewhere to make his purchase. Now your customer is at risk for using that new vendor again (over you) for the foreseeable future. Needless to say, having sufficient stock is crucial. Your brand is your fingerprint on the world. The last thing you want to be known for is being a business with a reputation for running out of stock frequently or even occasionally.

The fact is customers rarely look back after they find a company that can promptly fulfill their orders at a competitive price. They will continue to give that company their business until they have a reason to do otherwise. If these customers were turned away because of a stock-out problem in your inventory, you have potentially lost their future business. Every one of these lost customers is a lost source of recurring profit for your company. Having a stock-out and losing customers can negatively impact your business, your revenue, and even more importantly, your hard-won brand reputation for good.

Conversely, inventory that doesn’t move is tied up money that could be put to better use as crucial cash flow. Shrink can occur when inventory often has a limited shelf life because of theft, spoilage, obsolescence, material degradation, or changing consumer trends. Excessive inventory can also be expensive to warehouse and manage (labor). Essentially, your business needs to determine with pinpoint precision how much inventory is enough without understocking or overstocking with the help of an inventory management process.

So the goal is also to keep an optimal inventory level by effectively forecasting demand based on historical information plus an outlook of external trends. This requires real-life, real-time inventory management from your portable device, no matter where you are. Enterprise Resource Planning (ERP) solutions like Oracle NetSuite enables organizations to manage IT costs, optimize accounting efficiency, streamline order management and procurement processes, eliminate manual spreadsheet-based reporting, and improve employee productivity from any device.

We understand the business of manufacturing and will lead you to solutions that will put you in a position of strength.

In addition to traditional audit, tax and advisory services, we provide a full range of industry-specific business advisory services designed to increase your profitability, improve your competitive position and reduce your operating costs.

In today’s world of progressive technologies and competitive business environments, maximizing operational efficiency, technology, data and business processes matter more than ever. Managing your growth requires a sharp focus on all aspects of your business and operations with inventory management tools.

Reach out to us for a no-obligation consultation and our team of specialists will work with you to see how we can help solve your business challenges, mitigate risk and position you for growth and success.

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