5 Inventory Management Problems and How to Solve Them

Without proper management, inventory can go from practical necessity to detrimental expense. Excess inventory, among other things, can create unnecessary expenses and take up precious storage space. Managing inventory takes the right tools and more than a bit of determination. Here are five inventory management problems you’ve likely come across, complete with tips on how to properly solve them in the future.

1. Excess Inventory

One of the greatest challenges with managing inventory is having excess inventory, which can quickly turn into dead stock. Deadstock turns no profit, simply sitting on the shelves and gathering dust rather than customer attention. Why does excess inventory occur, to begin with?

Excess inventory can be due to several factors, including the wrong person ordering stock, incorrect stock counts to begin with, or ordering too much to meet an expected demand that never comes. All of these things can be avoided with simple inventory management software.

Inventory management software is sold as a stand-alone software program, but you can also find it in many POS systems. Monitoring your inventory in real-time and sending notifications when stock begins to run low, the software will keep you updated on your stock and let you know the correct time to order more.

POS systems also have tools to help monitor your sales numbers, so you’ll always be certain of how much inventory you need to have on time. Pay close attention to sales during particularly busy or not so busy times of the month or year, so you can order accordingly and avoid that dreaded dead stock filling up your shelves.

When you use POS software to manage your inventory, you’re setting your business up for success by ensuring inventory is only ordered when needed, and every item is properly accounted for.

2. Poor Inventory Tracking 

Poor inventory counts and tracking can lead to incorrect numbers which can affect ordering and lead to overstocking. Whether the person counting inventory makes a mistake, your software is not up to date, or you’re still counting via pen and paper, bad inventory counts are detrimental to any business.

Let’s be honest; for large businesses, tracking inventory manually is simply not a good idea. The amount of paperwork involved, as well as having to manually count what could be thousands of items is bound to lead to errors somewhere along the line.

Using software to manage your inventory can help you avoid bad counts and track your inventory accordingly. You’ll be able to compare how much stock you’ve ordered with how much arrives and track it all the way up to the final sale or production (if it’s an ingredient or component).

Another good practice is to only let those who are trained on the software and familiar with inventory tracking count your inventory. Untrained employees further the risk for mistakes, and can even become frustrated and not complete the task properly.

3. Supplier Counts are Wrong or Purposely Misrepresented

Another major challenge you’ll come across with inventory management is the supplier’s numbers. Whoever you’re purchasing your inventory from should have accurate counts upon delivery, or else it can throw off your entire count and require a total recount.

Unfortunately, not all businesses adhere to a standard of honesty and integrity, and you may even come across suppliers who purposely misrepresent how many items they’ve sent. If you order 10,000 units, you may only receive 9,500. Being such a high number, it would be easy to miss, and the supplier pockets the would-be cost of those 500 items they never shipped.

Be sure the businesses you order from are honest. Always require an invoice and packing slip from them, and keep close track of your own counts to be sure they match. If this becomes a continued issue, the solution is simple: find a different supplier.

4. Difficulty Determining Demand

The amount of stock you order will be based on customer demand. Depending on the time of year, you could need twice as much stock as normal, or half what you normally order. Many factors contribute to demand, making it vital for you to track sales and identify demand patterns.

Demand is a tricky thing, and not necessarily the same each year. Determining patterns can help you plan for higher demand, but your calculations probably won’t be 100% accurate all the time. Luckily, POS software can help you determine demand by tracking sales throughout the year.

When you have a better idea of when your greatest sales times are, you can accurately order the amount of stock you need and avoid overstock.

5. Low Turnover

Let’s say you’ve ordered a significant amount of a certain item because demand has been high, but suddenly demand drops off and the turnover rate on that item plummets. If you’re not turning over your stock, it quickly becomes dead stock.

Shopping trends come and go quickly, with only a select few sticking around for more than a few years. The nature of the retail business is constantly changing, so keeping up with trends is one way to avoid low turnover and keep that stock moving.

You can also gather customer feedback on your items to better understand what customers want to purchase. With this insight, you’ll be able to order the correct stock and be sure that customers will purchase it and keep those turnover rates high.