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4 Signs Inventory Management System is Hurting Your Business

4 Signs Your Inventory Management System is Hurting Your Business

Is your inventory management system helping you or hurting your business? The purpose of inventory management is to have what you need when you need it. Customers placing an order will have the order fulfilled by going through an inventory management system that processes and ships the order. To start a new production run, a robust inventory management system will ensure that you have sufficient raw materials to start the run without delay. The same is true when your maintenance team needs a replacement part to get your manufacturing facility up and running. In manufacturing, the term Just-In-Time manufacturing or Lean Manufacturing is a well-known methodology aimed to optimise flow time between production system, between suppliers and to customers. When your inventory management system is sub-par, the effects are felt across your company in several ways. Here are four of them:

Poor Cash Flow

Having too much cash tied up in the wrong inventory such as slow-moving stock, leave less available for your fast-moving stock. This means that even though your warehouse is stuffed with inventory (of the wrong type), you’re stocking out of your bread and butter items. This happens when your inventory management system inaccurately tracks inventory quantities and turnover rates. Without accurate numbers, your purchasing team will not be able to forecast how much inventory you actually need and may result in overstocking or under stocking.

The Need to Physically Verify Inventory

When your sales or customer service people have to physically verify that there’s enough inventory to take an order because they don’t trust their spreadsheets, then you know that your inventory management system is failing. The need to physically count your inventory is clearly making your employees less efficient and will affect the overall operations of your organisation.

Constantly Backordering

Those customers willing to wait for back ordered items because you’ve stocked out, don’t have infinite patience. If any of these people are repeat customers, their loss will be costly. The cost of getting a new customer is seven time the cost keeping an existing customer, thus you don’t want to lose a customer because of a poor inventory management system.

Lack of Operational Direction

It is a challenge to develop an operational strategy because you don’t have accurate numbers you can trust, or don’t have good analytics to understand what your numbers mean, or don’t have adequate data presentation capability in the form of useful graphs and charts. This will cause inability to do a proper forecast which affects budget, forecast and revenue projections. If any of the above problems seem familiar to you, consider retiring your current inventory management system for something better. To learn more about a better way of doing things with a robust and reliable inventory management system, please contact us.

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