For all the time you put into your business, achieving success takes more than just hard work. You also need smart planning for how you work so that your efforts are effective. And if your business involves keeping stock on hand, smart planning has to include how you handle inventory. With that in mind, make a plan that keeps inventory issues from holding your business back.
Issue: Stocking the Wrong Product or Quantity
According to The Balance, both overspending and underspending are two of the most common mistakes new businesses make. These mistakes can apply to all kinds of startup costs, but especially to stocking inventory. If you underinvest in inventory, you won’t see the sales you need to grow. If you overinvest, you could lose money by ending up with obsolete inventory you can’t sell.
The best way to avoid this mistake when you’re starting out is to do market research. For an established business, it’s just as important to continue using data to project what and how much to stock. At that point, though, it’s your own sales figures you want to analyze.
How can having these figures help? To avoid ordering the wrong items or wrong quantity, you need to be able to quickly access a count of what you have in stock and how fast items are selling. This way, you can determine the ideal amount of stock to keep on hand without overinvesting.
If this seems like a no-brainer, don’t forget that human error is a player, even on the part of the business owner. For example, Wealth Fit explains how easy it is for a business owner to be biased toward their products. It’s good to sell something you love, but if you have an inherent bias, failing to look at sales numbers may lead you to overstock an item and end up with obsolete inventory.
Issue: Customer Relationship Pitfalls
The two main pitfalls that happen with customer orders include accidentally shipping the wrong item and realizing you’ve oversold and can’t fulfill an order. When either of these mistakes happen, the most common causes are poor organization and human error.
As Camcode explains, accuracy starts with efficient organization and solid processes. After all, if you can’t find your items, you can’t sell them, and you’re right back to having obsolete inventory. One suggestion is to adopt a barcode system, since it’s straightforward, simple, low-cost, modern, and easy to learn. You can save your data to the cloud and integrate across platforms, too.
Outlined procedures should include not only receiving inventory but also shipping procedures. Again, we suggest making these procedures digitized, ideally through an app that all employees can use, because this will keep counts more accurate.
Issue: Vendor Relationship Pitfalls
While there’s always the potential to run into vendor issues that are out of your control, the best way to avoid these problems is to build strong vendor relationships. Having a good relationship with your partners means you’re less likely to be out of the loop when it comes to crucial information, such as lead times for shipment of inventory.
Along with maintaining these relationships, make sure you document crucial information about each company in your inventory management system. With reference information handy, you’ll be able to communicate well, come what may.
We know these strategies take extra effort, and your sweat equity is already at a premium. When poor planning leads to problems, though, it’s more than your time that’s wasted. Your business loses sales and possibly even good customers. That’s why it’s worth your time and money to keep these inventory issues from cutting into your bottom line.
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Article credit: Marcus Lansky