6 Most Common Stock Management Mistakes
So why does counting your food inventory regularly result in mistakes?
These are our general thoughts for stock management mistakes, although some of these mistakes are to do with a physical count, a lot of these rules still apply here when using a digital method such as the stocktaking software that DigiTally provides. While these rules are very general, you may get a nugget or two that may be of use to you in your organisation.
Improper stock control can ruin your business. Be aware that we’re all prone to making costly mistakes that can spell the end for your business, Even Nike wasn’t immune. In the early 2000’s, lack of stock control led to the loss of, hold your breath, approximately $100 million in sales – That is a big loss for any company, even a company the caliber of Nike.
After all of the hullabaloo, Nike’s stock price plummeted 20%, It was slapped by several class-action lawsuits, and became the poster child for inefficient implementations. Fortunately, they were able to bounce back by using a better stock control system. If it can happen to one of the biggest companies in the world, it can happen to you too.
We’ve compiled the Top 6 Stock Management mistakes businesses make when counting inventory and the possible solutions:
1. Human Error
The number one problem in stock management is us, humans. Data entry mistakes, poorly trained staff, lack of knowledge in the stocktaking process, product knowledge, multi-scanning a product of the same type, and lack of supervision, all are common mistakes and are understandable, but avoidable.
Avoid these possibilities from affecting your stock count by planning correctly. If a pre-stocktake plan is created, communicated, tested, and managed correctly, then these errors will be significantly reduced if not eliminated.
2. Failure To Accurately Forecast Demand
Nike’s problem, Like most stemmed from inaccurate forecast demand, Its software had bugs and errors and produced inaccurate forecast, which they used for their manufacturing plan. As a result, They did not have the products that were in demand and had too many of the products that were not selling. A perfect example of exactly what you do not want going wrong with your stock.
Stock control systems, first and foremost, must be free from bugs and data errors. Demand forecasts are critical to producing the right number of items and if the calculations are off, you’re in trouble, especially if you’re running a wholesale business. There are quick and easy ways to avoid this, use a cloud-based stock management app to keep on top of it all yourself. However, above all else, a livestock system gives you maximum trace-ability and would help contribute to lowering shrinkage.
Also, you can have the best ERP or inventory management system in the world but if you have the wrong person using it then it is a recipe for disaster. Analyse the reports, know your key metrics, make changes where necessary and always, always, (did I mention always…) know how the system operates. Sounds like common sense but we see it daily, expensive technology being under-utilised. Train your team.
3. Lack Of Automation
If you’re still tracking inventory with Excel, or with pen and paper, then you could be losing money. Manual tracking of stock in & out takes too much time and won’t get you accurate results. You’re wasting time and valuable resources that keep you from focusing your energy on other areas that can help grow your business. There’s also the fact that manual tracking means that you’re vulnerable to human error, as well as employee pilferage. And we’re all human!
There are many case studies for companies that have increased revenue through efficient stock control. Tasks can be automated, cutting down on staff hours & thus saving money which can then be put back into the company leading to increased growth.
If you have a manual, paper based system, you are an inefficient organisation and are subject to high levels of waste in your organisation. Make the change and automate. You can thank me later 🙂
4. Move to the Cloud
For companies who are using software that’s installed on local computers, issues are common because not everyone knows how to use it correctly. When there’s so much to do and only one person who’s familiar with the system, you can get left behind in orders. Lack of proper training can severely affect your ability to keep up with orders or worse, result in wrong products being sent out, which will cause both customer satisfaction and retention levels to drop.
Cloud-based stock management systems are beneficial in so many ways:
- Ease of use: They have easier learning curves and it shouldn’t take long to train employees properly
- Mobility: Easy access for those who need to count on the go, and multiple employees can log in remotely at once
- No data entry afterward: No need to have separate people process orders, check stock, or track inventory.
- Avoid using paper: Using paper results in waste, and I’m not just talking about the paper itself. I’m talking about the seven types of waste, ie: over-production, waiting, over-processing, transport, over-stocking, defects, or excess motion.
5. Inefficient System Implemented Inside The Warehouses
It’s not uncommon for warehouse managers to fail in finding more efficient ways to handle business as they are warehouse managers not business owners. Simply rearranging goods so they’re easily taken out for shipment can save you massively on your bottom line. Often times, employees take too much time looking for an item that may be misplaced or if your stock levels are incorrect may not even be there. Always remember that wasted time is money lost.
A simple solution is to figure out which items sell more and place them near the shipping area so they can easily be dispatched. Sales & demand reports should give you a good idea which items to put close to the door. Additionally, don’t randomly put stock where there’s available space just because it’s free. Allocate each product to a specific area based on popularity so they can be easily retrieved.
In order to make sure the flow of goods is optimized and minimize bottlenecks. Efficient time management spent on counting, picking, packing, and finally moving each shipment through the handling system. If you can’t figure out how to get the workflow right in order to minimize the amount of time spent here, consider investing in consultants who will be able to advise you on this.
6. More Frequent Stocktakes
Many companies cease operations for a period of time to check inventory, some even close their business completely. This can result in a loss in sales revenues and a loss in profits, not to mention the disruption to customers.
This is an outdated method and one that’s not productive at all. You’re better off scheduling more frequent regular stocktakes to keep the company from shutting down the operations and missing out on sales. Have smaller more frequent stock counts on a regular basis, we call this cycle-counting. Smaller mini stocktakes can be undertaken quicker with fewer resources. If you do this, the value is not in the count, it’s in the analysis afterward which should be used to follow up on specific discrepancies. In addition to this, even if you do find a discrepancy during your stocktake, it will be difficult to pinpoint the problem when you have the time-frame of an entire financial year or to look back on.
There are many ways to keep on top of your stock. Operating a live stock system and performing more frequent Stocktakes will help eliminate profit losses through more efficient management of your stock. Using live stock and performing regular Stocktakes gives you 100% accuracy and confidence in your numbers. This may even translate into converted sales as sales reps with more visibility and clarity on stock levels will be able to communicate more confidently knowing they have the product the prospective customer wants!
Inventory management can be tedious, However using a streamlined process with the correct tools, will greatly reduce mistakes and improve operations which can lead to more sales and overall better business.