If you want to know when inventory issues are getting in the way of growth, you need to learn where to look for it. Fortunately, there are some telltale signs to watch for that will let you know you’re experiencing inventory inefficiencies

The 5 Warning Signs of Inventory Inefficiency
The 5 Warning Signs of Inventory Inefficiency

Article from | CIN7

Running a business with inventory inefficiency is like trying to sail a boat with holes in it. You get so busy trying to get rid of the water, you don’t have time to think about anything else, including where you want to go and the best way to get there.

For small and medium businesses (SMBs), inventory is closely connected to all other functions, which means inventory-related issues can appear in other departments, such as finance or customer success. As a result, it’s not always obvious when poor inventory management is the root of your challenges because you may be looking for problems elsewhere.

If you want to know when inventory issues are getting in the way of growth, you need to learn where to look for it. Fortunately, there are some telltale signs to watch for that will let you know you’re experiencing inventory inefficiencies, and you can fix these issues with Connected Inventory Performance.

 

What is inventory inefficiency?

Inventory inefficiency is an issue product sellers face when they aren’t effectively managing their supply. In most cases, poor inventory management happens because you don’t have real-time insights into your supply levels or the right tools to help you streamline operations.

A lack of real-time insights can cause issues that ripple across your entire business, from supplier relationships to your customer experience. Without the right tools in place, poor inventory control can lead to burnout, high costs, and lost customer trust, getting in the way of growth without you realizing it. 

That said, connected inventory solutions like Cin7 give you access to real-time stock levels and make connecting your inventory to the rest of your business easy. As a result, you can create a seamless experience and ensure customer satisfaction.

In short, you don’t want to get buried by an expensive problem that could have been solved earlier by taking steps to create inventory efficiency.

 

Symptoms of poor inventory management

Understanding the signs of inventory inefficiency is the first step in remedying the issue and creating a business you can scale seamlessly. 

Here are the top symptoms of poor inventory management that may be getting in the way of your company’s growth:

  • Stockouts and shortages
  • Excess inventory
  • No access to real-time inventory data
  • Highly manual processes
  • Lack of supply chain resilience

Let’s take a closer look at how each one impacts your business and what you can do to fix them.

 

Stockouts and shortages

Running out of products to sell is one of the first clear signs of inventory inefficiency, and it’s an issue that many businesses have faced. 

In one survey, 35% of procurement leaders shared that they’re concerned about supply shortages over the next 12 months, making it the most commonly anticipated supply chain issue.

Stockouts and product shortages can cause a host of other issues for your business, including: 

  • Customer churn
  • Damaged brand reputation
  • Lost revenue opportunities
  • Reduced growth
  • Dissatisfied customers
  • Lower profit margins

Not to mention, understocking products with the highest profit margins can be especially damaging to your bottom line. 

Stockouts can be caused by a lack of accurate inventory data, inaccurate demand forecasting, supply chain inefficiencies, excessive lead times, and insufficient safety stock. 

That said, there are several steps you can take to avoid shortages and improve your inventory efficiency. These include improving inventory visibility, carrying adequate safety stock, and creating more accurate demand forecasts. 

Cin7 helps you do this by giving you access to real-time inventory levels and data for your entire supply chain, from purchasing to sales. 

Having accurate past data and insights into your entire procurement process can be especially beneficial for adapting to seasonal demand, such as major sales and the holidays. 

 

Excess inventory

On the flip side of stockouts, excess inventory is also a symptom of poor inventory management. While you want to be sure to have enough products available to meet customer demand, too much can also be an issue.

Overstocking can lead to problems like:

  • Decreased profit margins if you have to discount prices to move stock
  • Higher inventory costs and warehousing expenses
  • Restricted cash flow and limited working capital
  • Increased risk of obsolete inventory

The negative financial impact of excess inventory increases if you overbuy items that already have a lower profit margin. You may need to incur losses just to free up storage space for better-moving products.

One of the most common causes of excess inventory is inaccurate demand forecasting for promotions or seasonal periods. As such, you can prevent overbuying by improving the quality of your inventory data and demand forecasts. 

Opting for smaller and more frequent orders can also reduce deadstock because you can adjust your purchasing strategy and only replenish items that sell.

Cin7’s inventory management software helps you get control over excess products by providing end-to-end supply chain visibility and up-to-date insights into your stock levels.

 

No access to real-time inventory data

If you don’t know how much inventory you have or where your products are at any given moment, chances are high that your business is dealing with inventory inefficiency. 

To have any chance of creating effective inventory management and growing your business, you need accurate data about your stock levels. 

When surveyed, 77% of supply chain leaders said visibility is essential for success. Still, only 25% of companies are using real-time trackers, which means this is an opportunity for you to create a competitive advantage with the right tools.

Lack of real-time insight can cause difficulty with accounting and financial reporting and a negative customer experience.

Without real-time stock levels, making accurate data-driven decisions and feeling like you’re in control of your business are impossible. Rather than focusing on your growth strategy, you spend all of your time on constant inventory pulls just to feel like you’re staying afloat.

Cin7 gives you accurate real-time inventory levels and visibility across your entire supply chain, from procurement and holding to point of sale and fulfillment. As a result, you can prevent shortages and excess stock. Not to mention, real-time data helps you improve your inventory turnover rate, optimize reordering, and decrease carrying costs.

 

Highly manual processes

Time-consuming manual inventory processes that rely on Excel spreadsheets and frequent data imports and exports can make it challenging to scale your business. Instead of seamless growth, an increase in sales can turn into an overwhelming operational burden on you and your team. 

Not to mention, manual inventory tracking and stocktaking can lead to such issues as:

  • Increased labor costs if you have to hire new team members to handle growth
  • Too much time spent working for your business instead of on it
  • Reduced profit margins as your costs go up
  • Inaccurate inventory information
  • Poor warehouse management
  • Data entry errors

When you don’t have access to effective, user-friendly technology, you must rely on manual workflows that can take all of the excitement and growth potential out of your business.

Cin7 allows product sellers to take advantage of automated inventory management, which saves you hours of work each week and improves the accuracy of your orders and inventory data. Features like automated order processing and seamless sales channel integrations make it possible to stop working for your business and start working on it. 

As your business grows and you expand into new channels and territories, you can also use Cin7’s inventory management system to automate more complex tasks, such as fulfillment, replenishment, and purchasing for multiple locations. 

 

Lack of supply chain resilience

Finally, if you have difficulty recovering from supply chain disruptions, that’s a strong symptom of poor inventory management. When your inventory isn’t running seamlessly, it’s easy for external disruptors to create large ripple effects across your entire business.

Many inventory factors are outside of your control, but successful inventory management should be able to get your business through both good and bad times. That said, supply chain resilience doesn’t happen by accident or by hoping that external disruptors will decrease. 

In 2022 alone, 76.6% of companies experienced externally caused supply chain disruptions, such as geopolitical conflicts and extreme weather events. If you wait until a disturbance arises to deal with your inventory problems, it’s already too late. 

Proactivity is vital to building supply chain resilience. Having the right tools and strategies in place to weather external events not only helps ensure your business’s survival but also can go a long way toward creating a competitive advantage for your brand.

With Cin7, you can have better supply chain visibility, make smarter decisions based on accurate data, and leverage automation to help you manage a more diverse group of suppliers. 

 

Achieve Connected Inventory Performance with Cin7

If any of these problems sound all too familiar to you, there’s a good chance your business is suffering from inventory inefficiency. The good news is that you aren’t the first or the last business owner to be in this position. Inventory challenges run rampant in SMBs — the key lies in how you respond to them.

By enabling Connected Inventory Performance, you eliminate inventory inefficiency and take back control of your business. Efficient inventory management is the foundation of building a scalable brand and freeing up time so you can start working on your business and not for it. 

 

The content & opinions in this article are the author’s and do not necessarily represent the views of ManufacturingTomorrow

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