Starting your business feels like overcoming a great obstacle. True as it may be, many more challenges are yet to unfold. The journey has just begun even if you have finances, staff, and the most critical asset, inventory. To meet customer demands and fulfil orders, it is imperative to handle inventory like a pro. All your other resources can go into vain if you drop the ball on this one. This guide will help you navigate some common challenges and pave the path to sustained success.
Common challenges of inventory management
When it comes to inventory management challenges, the ones that instantly spring to mind are:
Overstocking: Occurs when a company stocks goods than necessary which can use up resources, like capital and storage space, creating other challenges.
Understocking: Refers to the inadequate levels of inventory, failing to meet customer demands.
However, the challenges extend beyond these. Some of them include:
Limited visibility: It hampers the ability to track products in real-time, making it difficult to respond promptly to changes in demand and supply. It can lead to issues such as stockouts, overstocking, and inefficient decision-making.
Inaccurate data: If you use a manual process, you may face problems tracking and evaluating what inventory you have at any given moment. It can also be time-consuming and vulnerable to errors, making it difficult to have a clear picture of your stock levels.
Understanding demands: Customer demands shift a little too often. You may not be able to sell excess inventory that a customer is no longer keen about. On the contrary, understocking leads to unfulfilled orders.
Problem stock: While some products may end up being outdated, some can be perishable and fragile. Moreover, inventory high in value calls for specific loss-prevention strategies.
Inefficient space management: Space use is critical for avoiding overstocking, lowering holding costs, and streamlining processes. Proper organisation and layout planning are required to maximise storage space, make commodities retrieval easier, and improve overall warehouse efficiency.
Inventory loss: Businesses tend to lose items due to spoilage, damage, or theft. To fix this, it is important to find, track, and measure the areas where things go wrong.
Key approaches to managing inventory
|Set minimum stock levels as the primary step to knowing the minimum quality you must always have. So, when the inventory goes below this fixed level, it indicates that it’s time to place an order for more.
|Avoid overstocking as it costs money and increases the risk of obsolescence or deterioration.
|First in, first out (FIFO) is a common inventory principle that ensures efficiency, accuracy and saving. It states that the goods that were purchased first should be sold out first.
|Don’t underestimate the significance of tracking inventory turnover rate. Low inventory turnover may suggest surplus inventory or slow-moving items, while high turnover may indicate efficient inventory management.
|Conduct strict and regular quality checks on your inventory. Physical audits can make sure that the inventory in the records matches the physical count. Also, search for any indications of damage and double-check the product labels.
|Don’t follow outdated inventory policies and procedures. Keep an eye on the changing market conditions and update policies accordingly.
Cross-training is necessary to delegate inventory management tasks so that you have backup support at all times.
|Don’t ignore the power of communication. For smooth functionalities, establish a good communication channel between all departments.
|A risk management plan or a plan B can help handle potential future situations like running out of stock.
|Don’t rely on excess inventory, assuming that it will solve operational issues. Address the root cause to solve the problem effectively.
|With emerging technological solutions, like small business software, business management has become a breeze. In this digital age, they can transform business operations, offering cost-effective efficiency.
|Don’t rely solely on manual processes. They are time-consuming, prone to human errors, and difficult to track.
The role of small business software
Now that you’re familiar with the issues and common practices for inventory management, it’s time to look into how small business software can help. We have outlined some of the key features:
Real-time tracking: With real-time visibility into stock levels, you can monitor stock levels accurately and make informed decisions on the go.
Centralised data: Your important data is stored in one place, ensuring that there are no data discrepancies, and ensuring consistency across all levels of the organisation.
Detailed reports: You can use the reporting and analytics tool to generate reports about stock and other key metrics.
Demand forecasting: Use the available data to make informed decisions on how much inventory to stock, minimising the risk of overstocking or stockouts.
Barcode: The barcode scanning option makes the inventory management process more accurate. It also expedites order fulfilment, ensuring customer satisfaction.
Choosing the right software
When choosing software, consider compatibility with your business type, available tools, and cost. One such solution that meets all these criteria, and possesses all the above-mentioned features, is CaptainBiz. Tailored to meet the demands of MSMEs, it is an online billing software that also takes care of all your inventory tasks. Here are some other reasons why we recommend switching to CaptainBiz:
Auto-update: After every sale or purchase, the inventory gets automatically updated, making the process less time-consuming and more accurate.
Cloud-based: CaptainBiz is hosted on servers accessible through the internet, providing flexibility and convenience to multiple users.
Cost-effective: While you save on labour and paper costs, it is also possible to avoid potential financial losses that may surface due to human errors in manual processes.
User-friendly: It offers an easy-to-use solution with a navigable dashboard. You don’t need to be a technical expert to use it.
All-in-one solution: In addition to inventory, CaptainBiz can be used for quick billing, GST reports, purchase management, organising finances and more, allowing you to focus on business growth.
Inventory management demands a strategic and practical approach. Striking a perfect balance between understocking and overstocking is what every business strives for. CaptainBiz’s free billing software for retail shops and MSMEs emerges as a transformative force, offering a host of features, from real-time inventory tracking to quick billing. It will help you seamlessly transition into a digital process, helping you get rid of the tedious manual process. It can help businesses optimise their inventory processes and position themselves for growth and success.
FAQ (Frequently Asked Questions)
Q1: What is the inventory turnover ratio?
A1: The inventory turnover ratio is a metric used to evaluate how well a company handles its inventory. It is calculated by dividing the cost of goods sold (COGS) by the inventory. A higher ratio indicates management of inventory indicating sales and restocking while a lower ratio may suggest slower sales or excessive stock levels.
Q2: How beneficial is the mobile accessibility feature of inventory management software?
A2: It allows users to access important data in real-time while on the move. The increased flexibility empowers users to keep track of inventory levels and make informed decisions from a distance.
Q3: How does inventory management software help prevent stockouts and overstocking issues?
A3: Inventory management software offers by offering real-time visibility and control to avoid situations of running out of stock or having inventory. It relies on data and advanced algorithms to optimise inventory levels. Automated reminders prompt restocking to prevent stockouts while data analysis aids in adjusting order quantities reducing the likelihood of overstocking.
Q4: Is small business software cost-effective for inventory management?
A4: Yes, it helps with cost control by effectively managing inventory, which means there are no carrying costs and obsolescence. Use it to keep a check on excess stock, which can significantly improve cash flow.
Q5: What trends can we expect in the future of small business inventory management software?
A5: Certain technological advancements, like automation and Artificial Intelligence, are becoming increasingly popular to optimise and streamline operations, reducing the risk of human errors. Moreover, with the growing sustainability concern, businesses are also switching to environment-friendly solutions.